The Head of Policy Research and IT Department at the Securities and Exchange Commission (SEC), Mr Emmanuel Ashong-Katai, has called for a comprehensive legislation on Ponzi/pyramid schemes in the country.
“There is the need for a comprehensive legislation on Ponzi/pyramid schemes. This is because provisions in the Criminal Offences Act do not go far enough to deal with perpetrators of the scheme.
“We must learn from countries such as south Africa, Singapore, Malaysia and Mauritius, which have enacted separate legislations to deal with the scheme,” he emphasised.
Mr Ashong-Katai was speaking at the 2019 Institute of Chartered Accountants Ghana (ICAG) public lecture in Accra last Friday.
It was on the theme ‘Addressing the threats of Ponzi schemes in Ghana: a shared responsibility’.
The other speakers were a Lecturer at the Central University College, Dr Benjamin Amoah; and the Head of Payment Systems at the Bank of Ghana (BoG), Dr Settor Amediku.
A Ponzi scheme is a fraudulent investment scam promising high rates of return with little risk to investors.
The scheme generates returns for older investors by acquiring new ones. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay those who entered first.
For both Ponzi and pyramid schemes, the company is not able to generate enough money when they are caught and made to halt their operations.
In Ghana, the scheme has assumed different dimensions, from financial service companies to Tilapia company, real estate, susu collections, fun clubs, gold coins, and now cryptocurrency.
Ponzi schemes elimination
Since humans are rational beings, Mr Ashong-Katai said the scheme had been designed as a socio-psychological engineering attack on them and could not be completely eliminated from the system.
It was for that reason that he stated that apart from the educational campaigns on the various media platforms, there was the need for the country to redefine its financial regulatory architecture such that all the regulators could work in tandem to track down the schemers early in their business.
How Ponzi schemes operate
Dr Amoah also pointed out that Ponzi schemers usually took advantage of the loose and unregulated financial market and added his voice to the call on stakeholders to tighten the system.
He noted that some of the operators of the scheme had now ventured into the network marketing sector where they employed people to bring a lot of investors on board and end up duping them.
They usually present themselves as benevolent organisations which thrived on influential people in society as they endorse their products.
“The larger the lifespan of the Ponzi scheme, the greater the damage it causes to people’s investment and the financial sector as a whole,” he added.
Falling for Ponzi scheme
On why people usually fall for Ponzi schemes, Dr Amediku identified greed, ignorance and herding behaviour of investors as some of the reasons.
“If any business put out a juicy deal to attract the public into investing in their business, first check the existing Treasury Bill rate and the percentage the scheme is giving out to ensure that you’re not taken advantage of,” he said.
Citing the recent Menzgold saga, he said the scammers were able to outsmart even the educated elites in society, including lawyers, accountants, medical doctors, nurses, and university professors.
“You can easily spot a Ponzi/pyramid scheme by asking whether the organisation or business is licensed, whether the investment is registered, how the risk is compared to the potential reward and as an investor where to report if the investment fails,” he advised.
Dr Amediku further called for collaboration among all the regulatory bodies, including SEC, BoG, BNI, National Insurance Commission (NIC) and the Economic and Organised Crime Office (EOCO) to address the issue which was becoming a national canker.
Public watchdog role
In his closing remarks, the President of the ICAG, Professor Kwame Adom-Frimpong, said the onus lied on the public to be vigilant and play a watchdog role by reporting the activities of Ponzi/pyramid schemes to the appropriate authorities as soon as possible.