Never Get Scammed in the Philippines

How’s that for a guarantee?  Think it will hold up?

Well I’m not sure, and it’s not a guarantee … I don’t offer them … it’s advice only from a lay person.

But I will say this. It’s informed advice and it will go a long, long way to insuring you don’t get scammed … ever … in the Philippines or in any other country for that matter.

Sounds like a good deal, no?  What’s the catch?  Well, truthfully there isn’t a catch.  But what may seem like a ‘catch’ is that my advice is too simplistic for many people who absolutely know they are smarter than me.  And and there are so many of you out there who just ‘know’ you’re smarter than me.  (some of you are, actually,  my talent lies in knowing my shortcomings, not in being the smartest guy in the group.’

The advice?  Simple.  If it isn’t yours, honestly earned you have no business trying to take it.

Where’s the rest of the advice?  There isn’t any.  That’s it.  Most of us learned this at out mother’s knee, but oh how many every year forget about it and decide that some particular ‘easy way’ is for them.  They’re smarter than the average guy and so they can take advantage of a ‘good thing’ and the rest of the world can just lag behind.

This is what’s behind every scam here in the Philippines I have ever learned about.  In fact it’s right behind every scam I know about ion any other country, for that matter.

photo credit: mike_hcg

Nigeria: Here’s one most of you are familiar with. It’s officially titled the Nigerian Advance Fee Scheme or commonly known on line as the 419 scam …with “419? referring to the article of the Nigerian Criminal Code dealing with fraud. You’ve probably gotten a few of these ridiculously worded offers yourself. You’d never fall for them, right? Well the US Secret Service which is in charge of combating these schemes in the US reports US losses alone are well over $100,000,000 per years 9and the Secret Service only pursues cases reported to them, and cases that involve loss of more than #50,000 USD, so one can reasonably expect the official figure is well understated). In Great Britain the losses are in the 150,000,000 GPB range. I read a report last year where more than 1,000 practicing attorneys in Australia had fallen victim … imagine that these are people who not only have advanced degrees in the law, but are licensed to practice law in the public trust. Amazing. How did all these otherwise smart folks get suckered in? The promise of money that is not theirs and/or not legally earned Greed and lack of simple business sense.

Stock Market: A few months ago the US investment industry was forced to r4ecveal a lot of very unfavorable profit data and (to the surprise of no one) these forms who donate huge amounts of political campaign funds got a staggering bail out, administered, almost without supervision, by a former member of their exclusive ‘club’, Secretary of the Treasury Paulson. Just one example of Paulson’s ’special friends’ that you and I are bailing out, regardless of whether or not we have a job is a fellow named Bernie Madoff. Now Bernie isn’t just any Wall Street sophisticate, he’s along-time president of the NASDAQ. A man of great intellect and experience Here’s how he operates:

….As the market got worse this year, Madoff continued to report to investors that his funds were up — as much as 5.6% through the end of November. That would have been a remarkable performance. During the same time, the stocks of the Standard & Poor’s 500, where Madoff supposedly did most of his trading, had dropped a weighted average of 37.7%. … read more on Bernie Ripoff here.

But Dave you’re saying, those people whom Bernie ‘burned’ aren’t stupid, some of them are long established experts in the investment business. You can’t fault them for investing when it appears this is just a case of one man ‘going rogue’.

I can’t blame the victims you say? Well I beg to differ. I think I very well can blame them, especially because of their es tensive experience and market knowledge.

Madoff’s company invested in common stocks. The market went down more than 37%. But Bernie’s victims were promised more than 5% increases … 43% more than any rational, intelligent and moral person had any right to expect., So even in the face of world-wide market contractions and well-documented adjustments, Bernie’s “smarter than dumbshits like you or I” friends jumped on a good thing and stayed aboard until the train crashed. Notice a pattern here? Money that was not ‘theirs’ and not legitimately earned. There’s no magic way to make 42% more than the rest of the market … unless you somehow think you’re so ’smart’ that you deserve what the rest of the people in thee world don’t have a chance to get. This whole scam falls under the category of greed, not deception, in my view.

Rural Banks: OK, Philippine Rural banks … what I really meant to write about. Are Rural Banks subject to a lot of scam activity in the Philippines?

Well I don’t know how to quantify the term ‘a lot’ but I do know this…. Rural Banks are a special category of public banks that can not or will not qualify themselves to be a registered bank under Philippine banking regulations Originally they were dreamed up mainly as ways for farmers and other rural businesses to get banking services when the major “Imperial Manila” banks didn’t provide adequate service.

Many of these banks are likely honest as the day is long and perfectly safe to do business with. They are now all under the supervision of the BSP (Bangko Sentral ng Pilipinas), the Philippine Central Bank. They also offer PDIC (Philippine Depositor Insurance Corporation) coverage. So you don’t need to turn and walk the other way if you see that the town you plan to live in is only served by a Rural Bank. But Dave’s personal view is, you do need to turn and walk the other way very quickly if you come across a popular current Rural Bank scam that is unfortunately being heavily promoted by some foreigners in the Philippines. It’s bad business and again, easily predictable if you remember Mamma’s teaching … money for nothing is not yours to begin with.

The last baking day before the Christmas Holiday the BSP announced that at least 12 Rural banks were being forced to close and about 6 or 8 more have been added to the list since. The magnitude of the scam won’t really be known for some time now, but the gist of it is simple.

Banks make money by loaning money. They don’t make money because you deposit money in your account, they make money because for every say 100 pesos you deposit the bank can lend out perhaps 80 Pesos …and the difference on what they collect versus what they pay you pays the light bill, the rent, the people’s salary, buy shiny bullets for the guards guns and any left over provides profit to the stockholders Sounds simplistic but even some well educated foreign friends I have had this discussion with just can’t seem to figure this business model out.

As of the last day before the holiday break, here in the Manila area the ‘going rate’ for commercial loans is somewhere between a low of 9 or 10% and a high of 15 or 16%. That’s what banks charge borrowers. From that they have to pay the interest to depositors (5% or less) plus all their other costs of doing business Simple enough.

But thee are a number of people ‘hawking’ investment vehicles (often certificates of Deposit”) from certain Rural Banks that pay as much as 25% when held to their 5 year maturity. Sound good?

Go back to the earlier examples, please, if you think it does. How can a bank legitimately pay out as much as trice or more the legal rate they charge for the money being lent? It;s upside down, backwards, and when all the smoke settles it is likely to be just another Bernie Madpoff Ponzi Scheme. It can’t be real, legal and above board … and the actions of the BSP prove me out … they have been chasing some of these scam perpetrators for some years and now the ‘jog is up’ in some cases.

Legal and intelligently supportable investment vehicles (such as dollar denominated bonds for the Philippine government pay 10% or less. Bonds from Pag-Ibig, the Philippine low-cost housing agency are currently in the 8& range.

You already know what CD’s and other legitimate investment vehicles cost in your home country. So what, on earth, could prompt an otherwise well-educated and intelligent Brit or American or Aussie or whatever to buy certificates that pay 2 or 3 times what any legal and stab;e investment device does/

Sounds one hell of a lot like greed to me. Sometimes coupled with the very common foreigner attitude of arrogance. I’m from a first world country, I’ll show these Filipinos how we do things back in a ‘real’ country … and while I am at it, I’ll earn myself a whole bunch of money that wasn’t mine to begin with and wasn’t earned by any legitimate business practice … because I’m so smart, you see.

Be as smart as you wish, folks, it’s really no sin off my nose. But do remember one thing … that lesson your momma tried to teach you when you were little. If it isn’t yours and you didn’t earn it, best to leave it alone … or you might wind up just as smart as Bernie Madoff.

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1. Not Getting Scammed in the Philippines — Update 2
2. Not Getting Scammed in the Philippines — Update 1
3. Investing In the Philippines — RTB’s
4. Not Getting Scammed In The Philippines — Update 3

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