Proliferation Of Unlicensed Investment Schemes: A National Security Threat (1)

By Kwabena Adu Koranteng
Opinion Proliferation Of Unlicensed Investment Schemes: A National Security Threat 1
MAY 9, 2022 LISTEN

IT IS interesting to note that after the emergence and collapse of the infamous MENZGOLD investment schemes, several other unlicensed investment schemes have emerged and are still mushrooming with the latest one being Sidicoin.

The Bank of Ghana has sent a stern warning to the general public and registered its displeasure about the operations of Sidicoin, and thus, warned Ghanaians to desist from investing in the scheme. Interestingly, some Ghanaians with a desire for quick profit have disregarded and ignored the warning from the central bank and the pending danger and are investing in it.

The central bank said neither the scheme nor its promoters had obtained the required approval to operate in the banking and payment services sector.

“The general public is advised to exercise caution with regards to trading in crypto-currencies and other unregulated investment schemes,” the bank said in a statement.

The statement said the central bank had taken note of the impending launch of a crypto-currency investment scheme named “SIDICOIN.”

“Further to previous notices issued by Bank of Ghana on such schemes, in particular Notice NO. BG/GOV/SEC/2018/02, Bank of Ghana underscores the fact that such schemes are not regulated under any law in Ghana,” it said.

The bank further cautioned all regulated institutions including banks, specialised deposit-taking institutions, dedicated electronic money issuers and payment service providers to desist from facilitating crypto-currency transactions and unlicensed investment schemes, through their platforms or agent outlets.

Sometime last year, a very good friend of mine persuaded me to invest in an online currency platform which he said was giving him some returns of GH¢800 a week after an initial investment of GH¢5,000.

He did his best to convince me, but with my expert knowledge of financial risk management and risk mitigation measures, I declined though I thought of the high returns constantly.

Two months later, I met him and asked about how his investment was doing and the increasing returns, for him to tell me that the guys had bolted with his money and closed the online platform and website, “Charley, don't mind the people, they have taken my money.

“Even if I call their number, it doesn't go through.” He regretted investing, and I reminded him about our discussions about the risks involved.

An official of the Ghana Stock Exchange recently explained that no proper investment in Ghana and even in Africa can give a return on investment or an interest rate above 5% monthly.

He said anything above 5% a month is a hidden scam waiting to explode. Ghana's financial sector has experienced a lot of Ponzi schemes, and revocation of licences of insolvent savings and loans companies, finance house companies, microfinance and banking institutions between 2015 and 2019 (Bank of Ghana, 2019b).

In 2015, DKM Diamond Microfinance Company Limited, Little Drops Financial Services, God is Love Fun Club, Jaster Motors and Investment Limited, and Care for Humanity Fun Club, which were located in most parts of Bono Region, Bono East Region, Upper West Region and Upper East Region of Ghana were involved in Ponzi schemes (GBN, 2016).

Ponzi schemes are fraudulent investment opportunities that promise high rates of return with low risk to investors but fail in the long run (Chen, 2019). These institutions created investment instruments with a high-interest return of over 40 per cent for a two or three month period.

These institutions offered interest rates higher than the base rate of 24 or 25 per cent per annum offered by risk-free government securities (Larbi, 2016).

These unsustainable investment instruments attracted some users of financial services in Ghana to invest in them. These financial service users were interested in allowing their assets to work for them rather than working with their assets. Bank of Ghana shut down these institutions in 2015, as their activities contravene the rules of the Bank of Ghana, and some were unlicensed (Owusu, 2018).

Affected victims of DKM Diamond Microfinance Company Limited who officially applied to the official liquidator for their invested funds were 99,858, and Little Drops Financial Services, God is Love Fun Club, Jaster Motors and Investment Limited and Care for Humanity Fun Club were also more than 21,000 (Ofori-Atta, 2018).

In the year 2016, the Bank of Ghana again revoked the licences of 70 microfinance and money lending companies in Ghana after the companies failed to complete the necessary documentation for the final approval of their licences after the expiration of their provisional licences (The Financial Intelligence Centre, 2016). GCB Bank Limited took over UT Bank Limited and Capital Bank Limited in 2017, after GCB Bank purchased these two banks due to the severe impairment of the banks' capital.

The takeover resulted in the revocation of the banking licences of UT Bank Limited and Capital Bank Limited in 2017 (Joy Business, 2017). Menzgold Ghana Limited was a gold dealership and investment firm in Ghana. Menzgold Ghana Limited ceased operations in 2018 after its licence was revoked by the Minerals Commission of Ghana. This company was involved in gold trading and export (Securities and Exchange Commission Ghana, 2018).

Bank of Ghana created Consolidated Bank Ghana in 2018 to takeover Sovereign Bank, Royal Bank, The Beige Bank, Construction Bank and UniBank, as these banks were facing liquidity challenges (Frimpong, 2018). In 2019, the Bank of Ghana again revoked the licences of 23 insolvent savings and loans companies and finance house companies (Bank of Ghana, 2019b).

Again in 2019, Ghana's Securities and Exchange Commission revoked the licences of 53 securities, and fund management companies in Ghana (Securities and Exchange Commission Ghana, 2019). These 53 fund management companies served as an indirect channel for Ghanaian investors to invest their funds.

These Ponzi schemes and revocation of licences of some financial institutions in Ghana have affected the emotions of Ghanaians. Ghanaians are emotionally affected because of the creation of unemployment, loss of invested funds, the collapse of businesses and other economic hardships created by the scandals and revocation of licences of some financial institutions in Ghana.

BY Kwabena Adu Koranteng

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