Page 15 - Unlicensed Digital Investment Schemes (UDIS)

Serious Fraud Investigation Office, the Reserve Bank of monitoring the Internet or social media for these
India was considering 486 cases of unauthorized de- schemes.
posit collection, and the Central Bureau of Investiga- In Bangladesh, for example, the Financial Intelligence
tion had registered 115 cases for such scams from Jan- Unit of the Bank of Bangladesh indicated that they do
uary of 2014 to June of 2017. And, the Directorate of check the internet for the existence of UDIS, but report
Enforcement had investigated 36 cases in the last that more resources are needed and that the use of ar-
three years. Also, the Securities and Exchange Board tificial intelligence to scan the web for UDIS using key
of India, which regulates collective investment words could indeed be helpful.
schemes issued final orders against 65 entities for See Box 2 for more on a recent Ponzi prosecution in
carrying out investment activities without a certificate Bangladesh.
of registration in the three years leading up to Febru-
ary of 2017.
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SEBI also passed interim orders to halt activities of
76 schemes and final orders against 65 entities for unli- BOX 2
censed investment activities. And, what result did these
investigations, or prosecutions deliver for the consum- BANGLADESH: USING ANTI MONEY
ers affected by the scams and not reimbursed for their LAUNDERING LEGISLATION TO SEIZE
losses? PONZI SCHEME PROCEEDS
While, there have been reimbursements of victims
ordered by tribunals, and reported in the media as be- The Destiny Group was a multi-level marketing
ing underway (for example for Indian chit fund frauds), pyramid scheme, which operated for 12 years
we can find no forthcoming articles, nor evidence of ac- in Bangladesh. At its peak, it claimed to have
tual reimbursement paid to the victims. 4.5 million distributors of its products, and to
See also, box 2 on Kenya where the proceeds of a be engaged in an array of industries from or-
large Ponzi were actually frozen by Central Bank Kenya ganic fertilizer production and renewable en-
but victims remain uncompensated more than a decade ergy to having a cooperative society. Destiny
later, but the money is apparently gone. promoters also claimed to have subsidized
This is a challenge in all the countries reviewed. rice farmers and to have a thriving corporate
social responsibility program.
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In reality, Destiny was making money off
6 OUTREACH AND AWARENESS RAISING the constant recruits lured in by charismatic
EFFORTS WITH CONSUMERS promoters; its high profile promoters hailed
from Parliament, Dhaka University and includ-
Prevention through outreach and awareness raising ed an ex-army general.
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efforts with consumers is limited and ineffective. Ken- It is unclear what specific events lead to
ya is the only country reporting that financial services Destiny’s demise, but per the Bangladesh
providers, as well as a government authority regular- Bank’s report for the Anti-Corruption Com-
ly conduct awareness raising campaigns. It is unclear mission (ACC), Destiny illegally laundered
whether telecoms are similarly conducting anti-fraud some 5,000 Crore depositing funds in some
campaigns. 722 bank accounts in the names of 30 related
In India, regulators have also engaged civil society to companies.
communicate with consumers. The frequency of the The ACC was able to seize a small amount
messaging, framing of the content and efficacy of the of the Destiny crime proceeds due to modifi-
campaigns is heretofore unknown. cations in the country’s anti money laundering
Further, usage of multiple channels/voices by regu- legislation of 2015, which allow for emergency
lators to communicate with consumers does not seem seizures. Prior to this modification, relevant
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to be happening. Furthermore, it is necessary to en- authorities had to wait for a final court sen-
gage the financial services providers, including tele- tence to act, which allowed for funds to dis-
coms in messaging campaigns. Financial institutions appear.
generally have 1) the legal obligation to track and report Though laudable, these efforts come after
suspicious transactions and patterns of transactions, as the fraud was operational for over a decade
well as 2) access to data on potential UDIS operating on and the millions of Bangladeshis who lost
their platforms. their hard-earned taka have not yet received
To date, technology has helped criminals, but it could compensation.
also be a tool for regulators for combatting UDIS.
Technology can likewise be used to monitor the web
for the existence of these schemes using natural lan-
guage searches. Yet, no regulator reported regularly

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