Fraud Alert: Kyrgyzstan’s Banking Sector Under Threat from Foreign Investors

May 3, 2021

The National Bank of Kyrgyzstan has issued a warning about an alarming trend of fraud cases in the banking sector, where foreign investors are deceiving local entrepreneurs with false promises of millions of dollars and euros in investments.

How the Scam Works

• A foreign investor contacts a potential partner in Kyrgyzstan with an offer to invest in a joint project.
• The investor sends copies of documents allegedly confirming the transfer of funds, but fails to deliver the actual money.
• When the local businessperson discovers the scam, they are told that there were difficulties with the transfer or that the money got stuck on the way.

Warning Signs

• The fraudsters may ask for additional information such as IBAN numbers or require the use of alternative payment systems like TELEX or RTGS, claiming that the SWIFT system is unreliable.
• They may demand a small amount of money to be transferred in order to facilitate the payment process.
• Any unknown fund, company, or businessman offering to invest millions of dollars and euros in the economy of Kyrgyzstan should be considered suspicious.

Prevention is Key

• The National Bank urges local entrepreneurs to be cautious when dealing with potential partners and to thoroughly research their business reputation and financial reporting before making any agreements.
• The bank emphasizes that the lack of Alliance Lite2 interface or SWIFT gpi service should not serve as an obstacle to implementing transactions through SWIFT, and that any contractual obligations must be preceded by a thorough due diligence process.

Consequences

• Several cases have been identified where local companies and their representatives applied for assistance from the bank after being deceived by pseudo-investors.
• However, the bank was powerless to help as there was no actual transfer made.

Recommendations

• Be more vigilant in choosing partners, especially when dealing with large amounts.
• Conduct thorough research on potential partners before making any agreements.
• If there are problems with transfer on the way, only the sender and sending bank can investigate the issues, and Kyrgyz banks and the National Bank will not be able to help in any way.

By being more attentive to the process of studying and choosing partners, especially in cases of agreements on large amounts of “investments,” local businesses can protect themselves from falling victim to these fraudulent schemes.