The South African Reserve Bank (SARB) has launched a national campaign to raise public awareness of illegal deposit-taking and advance-fee schemes. The campaign, themed ‘Easy come. Easy go’, aims to provide South Africans with steps on protecting themselves against illegal schemes.
Illegal deposit-taking includes the sending of documents, which seem to be official, and promises individuals money if they pay a ‘fee’.
This also includes Ponzi schemes, pyramid and related schemes which offer a business opportunity where profits rely on recruiting other individuals. An ‘advance-fee’ scheme is the luring of people by ‘investors’ who offer ‘guaranteed’ profits for little or no financial risk. Scammers therefore obtain money from unsuspecting individuals or entities by enticing them to hand over large amounts of cash in the belief that they will receive large returns.
The SARB investigates these schemes as only registered banks are authorised to take deposits from the general public. The SARB is therefore empowered to investigate activities of unregistered persons suspected of taking deposits from members of the public.
The ‘Easy Come. Easy Go’ campaign aims to provide South Africans with practical tips to check that they are not scammed and to exercise extensive caution when investing in new and promising investment opportunities. ‘Easy Come. Easy Go’ highlights 3 basic steps:
- STOP: for a moment and ask yourself some basic questions. If it sounds too good to be true, it probably is.
- CHECK: to see if you are being targeted and avoid becoming a victim.
- REPORT: spread the word and help others stay vigilant
The campaign will therefore assist all persons, including financial advisors and their clients in identifying whether any scheme which guarantees excessively high returns is legitimised and to approach with caution. Financial advisors can use this campaign to educate themselves and their clients. If clients understand the different types of schemes and the associated risks, they will be more likely to first approach their financial advisor for advice before making a decision on their own. As part of the due diligence process, an advisor is required to ensure that a financial product is regulated and that the provider is licenced. Advisors must also understand how a product works and the risks involved before recommending it to clients, and even more so where it is a “new and exciting” investment scheme which promises high returns. More than 50% of the determinations made by the FAIS Ombud in 2016 related to property syndications which promised very high returns. In many cases, these property syndications are now defunct, bankrupt and liquidated. Unregulated and “new” types of investment structures require far greater levels of due diligence. A red light for advisors is also when a new investment opportunity is completely unsolicited and states that money will be paid to the client, but only when the client pays a ‘fee’ to have the money transferred or where documents seem official and promises high returns once a ‘fee’ is paid by clients.
The campaign aims to provide basic and practical steps to assist individuals from being scammed. For more information on illegal schemes, visit the website at: www.easycomeeasygo.co.za