Zimbabwe: RBZ, Police Probe Ponzi Schemes

14 August 2020

Police and the Reserve Bank of Zimbabwe (RBZ) have launched a countrywide probe on companies operating suspected Ponzi schemes in urban centres in breach of the Banking Act.

The firms, which are operating without banking licences, are offering unbelievable interests of up to 100 percent within a few weeks.

Some disguise as marketing firms for the purposes of registration, but go on to take money from people, offering banking services illegally.

This follows last week's raid of KWD Digital Marketing in Harare with the central bank's Financial Intelligence Unit confirming the firm had no banking licence as required by law.

The company was offering to double deposits in a month, attracting scores of people who swamped the premises at 147 Freedom Legacy Way in Gunhill.

Police also arrested 65 potential investors for crowding the premises in breach of social distancing regulations.

Some were not wearing face masks, while others had no documents allowing them to travel during the lockdown.

Further investigations also resulted in the company's employees being picked up for questioning.

Police are now hunting down the company's directors whom they want to interview regarding the legality of the company's operations.

National police spokesperson Assistant Commissioner Paul Nyathi said the schemes were now widespread and investigations had widened.

"In consultation with the RBZ, we are also looking into statuses of other schemes dotted around the country.

"We have information that some are operating in Bulawayo, Gweru, Kwekwe, Mutare, Masvingo and other urban centres.

"They approach a number of people claiming to be registered with the RBZ, taking money in the process," said Asst Comm Nyathi.

Last week, the central bank warned people against such schemes saying they were illegal and most likely to collapse in no time.

"In the past, the Bank has issued press statements warning the public not to fall prey to pyramid and Ponzi schemes that come in various forms and guises, luring people to invest their hard-earned money, promising unrealistic and unsustainable investment returns.

"These are fraudulent investment schemes under which existing investors are paid returns, not from genuine market investment of their funds, but from contributions made by new investors, until a point when the scheme can no longer attract new investors and collapses.

"Members of the public should always do basic due diligence before they are hoodwinked to part with their hard-earned money. No one should ever conduct financial business with an institution until they have confirmed its regulatory status," reads a statement by the central bank.

The RBZ said all institutions offering financial services must be issued with licences before operations commence.

"When someone promises you unrealistically lucrative financial returns within a short period of time, it is likely to be a fraudulent scheme and further due diligence is always advisable, including checking with the authorities.

"Such entities are carrying out banking activities (taking deposits from the public) in breach of the Banking Act (Chapter 24:20).

"Section 5 of the Banking Act prohibits any person from conducting banking business unless such person is licensed as a banking institution in terms of the Act."

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