The Financial Instrument “Hostage Situation”

You probably have heard about “Sellers” requesting financial instruments to sell their diamonds. The problem is that 99% of such so called sellers are scammers.

How are these scams ran? Well, it is pretty simple, this is how most of these scams are set up. The alleged seller will request a financial instrument from the buyer in order to send out his stones, most likely an MT760. Which is an extremely dangerous instrument, as the alleged buyer will borrow against it to find and purchase the stones, or just borrow against it and run away.

Once the instrument is open and activated, the alleged seller will take the buyer hostage, and require the buyer to pay a “release fee” between $50,000 and $200,000 in order to release the instrument from the seller’s bank. See, this is the problem, if a buyer issues an instrument, the only way they can have this instrument cancelled, is only if the seller agrees to release such instrument with his bank in Africa, otherwise, the instrument can possibly remain in effect for month.

If this is the case, the buyer can possible be charged millions of dollars in fees from his bank in bank charges, which can easily put him on his knees. The scammers know this, thus they will require a “hostage fee” in order to release the instrument from their end.

The alleged seller may also request an MT103/23, which is a conditional wire, such wires are now illegal in the USA or most of Europe. Most Banks today will also require proof of product before they agree to release any types of instruments, in order to cut down on the frauds, and reduce their clients liability.

As a general rule, no real diamond buyers in the world will issue an instrument. Some may agree to some type of proof of funds, but most will only issue a POF AFTER they have done at least one deal with the seller. The most intelligent and common thing to do is to start with a small transaction between 100 and 500CT, than once buyer and seller build confidence, to simply increase the quantities for each deliveries after each closings.