They were speaking at a Financial Supervision Commission seminar on money laundering and financial fraud held at the Hilton Hotel last week. Mr Holder, an ex-Scotland Yard detective, said that fraudsters played on the two emotions of greed and fear when conducting investment scams, allaying fears and provoking greed. He said high-yield investment programmes (HYIP) were the most common form of financial fraud at the moment and the majority of victims were highly qualified professionals.

'You might say how can anybody believe that people can make that sort of interest, how do they fall into these frauds? The fraudster allays your fears and provokes your greed, they entrap you by befriending you, they say the investment is riskless then they talk about returns. The majority of victims are professional business people — lawyers, doctors and charities because they are intelligent, they think they should understand what they are being told and don't want to shout out that they don't, so they go along with it. High-value corporate bonds offer 6, 7 or 8 per cent interest, HYIPs talk about 20/40/50 or 100 per cent returns,' he said.

Mr Holder added that most of the modern schemes are versions of old frauds, first committed more than 100 years ago. They are known as Ponzi Schemes after a 19th century fraudster named Charles Ponzi who was offering a 50 per cent return on investment in just 45 days. He said the fraudster draws victims in by honouring the agreed interest for the first few instalments, then drawing more and more money from them as they start to believe they are on to a sure thing. He confirmed that it was a case of 'robbing Peter to pay Paul' as the fraudster meets the initial interest payments by taking investments from other victims who have heard about the scheme.

Mr Holder believes that much modern day hi-tech fraud originates from old scams. He cited the example of William F. Miller who operated in the early 1800s and was known as Mr 520 per cent, because of the rates of interest he was offering.

Financial instrument fraud is another area of crime likely to affect residents and businesses in the Isle of Man. Mr Renner, special adviser to the International Chamber of Commerce, said fake letters of credit, bank guarantees and other instruments are routinely used in advance fee fraud. He added that the fraudsters copy a guarantee from an international bank such as Deutsche Bank and customise it for the victim. They then display the guarantee on a fake version of a securities settlement website such as Euroclear and convince the victim to pay an advance fee of between a quarter and 3 per cent of the guarantee's value, which is often several hundred million dollars.

Mr Renner runs a website (www.diligizer.com) that tracks fraudsters and holds details of scams, he also recommended several other websites for anybody worried about falling victim to financial fraud.

www.quatloos.com

www.treasuryscams.gov

www.metpolice.uk/fraudnet

www.c6-intelligence.com.