The Rise Of Financial Scams In Ghana

Investments that promise extraordinary returns with very little or nonexistent risks are most people`s taste and preference. These investment schemes take different shades and ruses but the commonality is that they promise unsustainable returns or profits that outpace average market returns without commensurate risks.

The pursue of money isn’t just a bad thing, after all, we need money to pay for food , water, shelter, education and other basic necessities of life. However, the greedy and irresistible love for money without circumspection can lead us to growing the nest egg of fraudsters at our own expense.

These tricksters sniff around like desperate hawks searching for carcasses. If well- lettered financial gurus fell prey to the subterfuge of these swindlers, how much more the poor uneducated farmer in the hinterlands. The experience would be awful and akin to your guess.

A typical example of a financial scam is the Ponzi scheme. It is a fraudulent investment scheme that accepts money from new investors, and uses it to pay the obligations of early investors. (Simply, robbing Peter to pay Paul). It is named after Charles Ponzi, an Italian born immigrant who duped thousands of investors through a fraudulent business model that promise to double the money of investors in just 90 days in Boston, around 1920. His business model was to buy and sell international postal reply (IPR) coupons, but there was little to show for this plan. In seven months, he amassed more than $8million from about 30,000 investors before the scheme collapsed. He was later convicted and sentenced by the US Federal Courts for using the mail to swindle people.

One would have taught that the stench associated with the Charles Ponzi scheme that operated in the 20th century had been extinct, but no, the tsunami of recent financial scams in Ghana and other Africa countries reminds us of the bad memories of Charles Ponzi schemes. On May 13, 2013, the Bank of Ghana through its Secretary, Andrew Boye-Doe, issued a Public Notice that withdrew the licenses of CB Net Marketing Concepts, E Finance and More, and Diamond Investment Limited of ‘‘engaging in unauthorized and illegal deposit-taking from the general public without licensing by the Bank of Ghana as required under the Banking Act, 2004, Act 673 as amended nor the Non-Bank Financial Institution Act, 2008 (Act 774)’’. Diamond Investment Ltd was operating in Sunyani and its vicinities, and promises a monthly interest rate of 25% on deposits. (This was an outrageous cumulative interest rate of 300% per annum). Another company that was recently investigated on grounds of engaging in unauthorized operation and deposit Collection from the public is the DKM Micro-financing company. This company is being liquidated by the Registrar General and its proceeds being distributed to clients of the company.

The financial sector has been dented with the havoc occasioned by these scandals and yet to recover fully from this financial blemish.

Hedge fund manager, Bernie Madoff who seems to have taken inspirations from Parma born Charles Ponzi killer swindling instincts, operated a Ponzi scheme and defrauded investors of more than US$50 billion. He was convicted and sentenced to 150 years in prison by the U.S. Federal Courts in 2008.

Another shade of financial ruse is the Pyramid scheme. The business model is usually presented to investors illusively as a legal business, albeit, it is a fraudulent investment scheme veiled in a disguised fashion. In the scheme of events, investors are persuaded to invest a specified amount, which is used to pay the owners. For one to recoup his investment and reap profit, investors are required to recruit additional clients from whose investments you are promised a small profit. This process continues until there are no further investments to finance the obligations of early investors, and hence, the scheme eventually collapses.

However, we do have legitimate Multi-Level Marketing (MLM) that uses a legal and viable business model to market products and services. Sales persons are recruited to sell, say, a health improving drug, and make a profit from price differential and sales made by their recruits.

Likewise, genuine stokvels that pool funds from family, friends, church members and schoolmates who share a common bond, to meet a social goal, isn’t near a financial scam. They are unlikely to reap 15-30% interest per month. Stokvels serve as rotating credit unions or saving schemes where members contribute fixed sums t an interest earning pool and shared among members at the end of a fixed period.

The operations of CBNet Marketing Concepts in Ghana mimic that of a pyramid scheme. It was operating under the veil of selling Top-up credits to the public using E-Zwich cards. Investors were required to recruit additional clients on board or lose their deposits and any expected profit.

Of course, one is not startled that clients’ investments are not being used for wealth creation and any viable business activity. Most friends, family members and the general public are still nursing their investment bruises. While others are yet to recover fully from their losses; others are cursing themselves for having been the victims of these fraudsters. Never again as they say, but, it is only a source of consolation of this thievery.

In as much as we want to grow our savings to achieve our financial objectives – be it education, retirement and so on, we must endeavor to do due care and diligence of the potential investment firms before committing our resources into these schemes. Circumspection is the key bellwether for potential investors.

As the adage says, ‘If it is too good to be true, it is probably is’ and we must not just accept any fancy investment schemes with above market dividends hook, line and sinker. We must do further checks either by ourselves or hire the services of a financial advisor. It may be too late to recoup our investments by the time we see the mugshot of the bad guy on the front page of the print and electronic media.

Our regulatory institutions must take proactive steps to fish out and close down these swindlers operating illegal financial schemes before they dupe innocent citizens of their livelihoods. The BOG, SEC and other regulatory bodies must zip all possible regulatory loopholes to curtail these fraudsters from taking advantage of the legal and regulatory system.

Again, there is no free lunch anywhere not even the Wanaa`s place in Wa, Ghana. If there is any investment that promises fanciful yields without commensurate risks, one ought to smell a rat and ask the right questions: How will your money be invested? Who are those charged with governance? What are the products and services of the company? Is the company duly registered and licensed? The list isn’t exhaustive. My friend, on this earth, there is no just miracles any more. The Billy Gates and the Mark Z. weren’t rich out of the blue but through toil of hardwork and dedication.

I also join the call for more financial education to conscientize the general public about the bolts and nuts of this trend of financial scams and how to look beyond the veil and fish them out. The mere fact that your friend or family member or a person you trust enlists in the scheme does not necessarily legitimize it. You must vet the scheme and take it through a ‘laundry process’ in order to be sure it is clean of fraudulent stains.