Advance fee frauds ask investors to pay a fee up front—in advance of receiving any proceeds, money, stock, or warrants—in order for the deal to go through. The advance payment may be described as a fee, tax, commission, or incidental expense that will be repaid later.

Some advance fee schemes target investors who already purchased underperforming securities and will offer to sell those securities if an advance fee is paid—or target investors who have already lost money in investment schemes. Fraudsters often direct investors to wire advance fees to escrow agents or lawyers to give investors comfort and to lend an air of legitimacy to their schemes. Fraudsters may also try to fool investors with official-sounding websites and e-mail addresses.

Advance fee frauds may involve the sale of products or services, the offering of investments, lottery winnings, found money, or many other so-called opportunities. Fraudsters carrying out advance fee schemes may:

• Offer common financial instruments such as bank guarantees, old government or corporate bonds, medium or long term notes, stand-by letters of credit, blocked funds programs, fresh cut or seasoned paper, and proofs of funds;

• Offer to find financing arrangements for clients who pay a finder’s fee in advance; or

• Pose as legitimate U.S. brokers or firms and offer to help investors recover their stock market losses by exchanging worthless stock—but requiring investors to pay an upfront security deposit or post an insurance or performance bond.

In New Mexico, advance fee frauds are illegal and are considered a form of white-collar crime. These schemes violate various state statutes that prohibit deceptive business practices and fraud. Under the New Mexico Unfair Practices Act (NMSA 1978, Sections 57-12-1 to 57-12-26), it is unlawful to engage in deceptive trade practices, which would include advance fee schemes. Additionally, the New Mexico Securities Act (NMSA 1978, Sections 58-13-1 to 58-13-48) regulates securities transactions in the state and prohibits fraudulent activities related to the offer, sale, or purchase of securities. Victims of such schemes can file a complaint with the New Mexico Regulation and Licensing Department's Securities Division, which enforces securities laws and can take action against individuals or entities engaging in securities fraud. At the federal level, advance fee frauds may also violate the Federal Trade Commission Act and other federal securities laws enforced by the Securities and Exchange Commission (SEC). Perpetrators of advance fee frauds can face both civil and criminal penalties, including fines and imprisonment.