Advance Fee Fraud
FC-10.1.7
In a number of jurisdictions, there have been a number of recent incidents whereby insurance entities have either been the victims of, or have inadvertently provided assistance to, advance fee frauds. Advance fee fraud consists of setting up a fraudulent and almost certainly non-existent financial or banking transaction, the aim of which is to defraud an innocent third party of an up front payment or deposit which is intended by the third party to be consideration for their involvement in that financial transaction, the receipt of a low interest or interest fee loan or the receipt of some other financial benefit. The types of transactions used as the façade for the frauds vary in detail, some of the most common are investment in financial instruments, self liquidating loans and loans or other financial benefits. Although these transactions are generally based around banking or securities transactions, it is occasionally the case that the transaction will purport to be guaranteed by insurers.
FC-10.1.8
The most common type of advance fee fraud is for a fraudster to approach a company or sovereign state which has a poor credit rating or which is in some financial difficulty and offer to obtain funding at beneficial rates. Likewise, a potential investor may be approached and offered the opportunity to invest in a transaction with a very high rate of return. In each instance, the borrower or investor will be asked to provide some funds up front to cover the costs of setting up the transaction or by way of a deposit or down payment on fees. Once the fee has been paid, the fraudster will disappear and the transaction will, on further investigation, prove to be fictitious.
FC-10.1.9
Insurance licensees are encouraged to promote the exchange of information amongst themselves with respect to fraud and those committing fraud including, as appropriate, through the use of databases. Licensees should also consider the need to exchange information with the police and other external bodies.FC-10.1.10
Insurance claims fraud is an offence punishable under the provision of Section 391 of the Penal Code, Decree Act No. (15), of 1976 of the Kingdom of Bahrain.
