Financial scammers elude the law- experts
Isaac Pinielo | Friday June 12, 2015 14:37
Speaking at a breakfast seminar hosted by the Association of Botswana Financial Advisers (ABFA), Richard Harriman of Consumer Watchdog said without proper laws in the country, consumers continue to be exposed to fraudsters on the prowl.
Harriman said that many gullible Batswana are being hoodwinked into joining scams that promise them high returns while in actual fact they are fraudulent schemes.
“Well-known brand names are also dubious investment operations since they promise high rates of return with little risk to investors,” he said.
Harriman noted that one of the companies was targeted specifically for Botswana, noting that it was registered in Panama and was operated by organised criminals who deal in guns.
Wikipedia describes a Ponzi scheme as a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. The Ponzi scam is named after Charles Ponzi, a clerk in Boston who first orchestrated such a scheme in 1919.
Harriman warned people to avoid joining pyramid schemes and multi-level marketing since they put them at the risk of losing their hard-earned money. “You will never get rich through pyramid schemes as they have the potential of putting consumers’ money in danger,” he said.
According to Harriman, all scams have few things in common, adding that the clues are quite clear and the claims they make are “too good to be true”.
“There is no legitimate investment scheme that consistently makes the sort of profit that they claim. If there was such a scheme don’t you think the banks would be doing it as well?” he questioned.
The expert also called on consumers to avoid store credits and hire purchases, stating that they are “wicked and evil”, adding that it makes people poor.
“It is better to get a bank loan than buy on hire purchase. These stores usually insist on customer signing contracts in the shop, without giving them the chance to thoroughly read it,” he said.
Harriman said the Hire Purchase Act, which was passed in 1961, does not protect consumers from being swindled by credit stores hire purchase. He said the only regulator that has the power to stop Ponzi schemes is the Bank of Botswana (BoB).
Chairman of ABFA, James Fern said the only solution that could help consumers to protect themselves against financial scams is education. He said many people who get cheated or swindled by scammers are embarrassed to come out and say it, adding that most of them suffer in silence for fear of being humiliated.
“The role of ABFA is to protect consumers by promoting professionalism in the financial community,” he explained.
Fern went on to urge people to never take advice from anyone who is not a member of the ABFA, noting that all members of the association can be found on ABFA website.
“We want to encourage people to deal with qualified financial advisers. We also want people to know that any person who does not have ABFA identity card is suspect,” he advised.
Information from the Internet shows that a pyramid scheme is described as an unsustainable business model, usually considered illegal, that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.
On the other hand, multi level marketing is a form of direct sales in which independent distributors sell products, usually in their customers’ home or by telephone.
In theory, distributors can make money not only from their own sales, but also from those of the people they recruit.