The patterns that keep recurring
- An upfront fee. Trade-fraud warnings describe fake documents, a small fee and a rushed payment as the usual route to a loss.
- Fake buyers. They ask the seller to pay for a laboratory or an inspection, offer fake letters of credit, standby letters of credit or copies of bank messages, and take the product without paying.
- A fraction now and the balance later. A Ugandan gold trader warns that a genuine transaction in a high-value commodity does not start with a request for a fraction of the price.
- Fake certificates. Kenya's mining secretary has warned of dealers issuing certificates purporting to come from the ministry to show that their material has been tested and graded.
- Intermediaries who will not produce the principal. An industry alert advises avoiding any broker who will not bring forward the seller for verification.
- Prices that are too good to be true, in either direction.
Checks that work for a buyer
- Pay only against a letter of credit issued by a bank you can verify, or against independent inspection, never in advance to a party you have not met.
- Have an independent inspector sample, weigh and assay the cargo at the load port, and name the umpire laboratory in the contract.
- Ask for proof that the seller owns the material or holds a written mandate from the owner, and for the export licence.
- Check the company's registration, its named directors and its bank, and call numbers you found yourself.
Checks that work for a seller
- Do not pay a buyer's laboratory fee, inspection fee or bond before the buyer has opened a letter of credit.
- Check that the credit is issued by a real bank, and ask your own bank to authenticate it. A copy of a bank message is not a credit.
- Agree the documents the credit requires before signing, since amendments later cost money and time.
- Let the buyer inspect the cargo through an independent inspector, and be wary of buyers who refuse.
Why the structure protects you
A letter of credit pays against documents, so it only protects a buyer if it requires independent certificates, and it only protects a seller if the issuing bank is genuine. Independent inspection fixes the quality and the weight before money moves. The ore deal checklist on this site sets out what each side should have in place, and the letters of credit guide explains how credits work.
Frequently asked questions
What are the warning signs of an ore trading scam?
An upfront fee, an unverifiable letter of credit or bank message, a buyer or seller who will not be named, refusal of independent inspection, mismatched documents, and prices far from the benchmark.
Is a copy of a SWIFT message proof of payment?
No. Fake letters of credit and copies of bank messages are common tactics. Ask your own bank to authenticate any credit or payment before you ship.
Should a buyer pay in advance for ore?
No, not to a party it has not verified. Pay against a letter of credit issued by a bank you can identify, or against independent inspection.
How can I check an ore seller is genuine?
Check the company's registration, named directors and bank, ask for proof of ownership or a mandate and the export licence, and use independent inspection before payment.
Sources
- Nile Post: if a deal is too good to be true, it is a scam
- Nation Africa: beware of gold scams, Mining CS warns
- Hedrick Consulting: alleged scammers and joker brokers
- Sierra Leone National Minerals Agency: fraud alert
- Chamber International: how to work with letters of credit
Specifications published by index providers are revised over time. Where a figure comes from a pricing notice, confirm the version currently in force with the publisher before you use it in a contract. Corrections are welcome.