Insulate the vulnerable from ponzi schemes

Wednesday May 26 2021
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Rwandans are increasingly losing money to fraudulent investment scams which promise higher returns using money taken from later investors. PHOTO | CYRIL NDEGEYA


Law enforcement agencies have dismantled several fake investment schemes across the country though it is not clear if any of the money the victims lost has been recovered.

This week, the Rwanda Investigations Bureau (RIB) announced that it was investigating several individuals involved in recruitment for ponzi schemes which typically operate by using new investors’ money to pay earlier investors.

The rate of return is suspiciously high. Someone you trust tries to recruit you. It could be a trustworthy neighbor or someone in your church or community group.

The recruiter has already invested in the scheme and received great dividends.

Unfortunately, the tricksters typically target the most vulnerable in society who have no capacity to do due diligence, and inadvertently help such investment scams to thrive by recruiting their families and friends.

While illegal pyramid schemes have always existed, the current trend shows a direct link between unemployment and the huge appetite to join pyramid schemes which promise quick returns on investment. In particular, many Rwandans who lost a permanent source of income during the pandemic, suddenly find such pyramid schemes attractive hoping that such investments will improve their economic prospects. That nobody knows when the pandemic will end poses a challenge for law enforcement agencies as more people might still find these illegal schemes attractive.


The problem begins at registration of these pyramid schemes as many operate as formal businesses. Many unsuspecting victims believe ( perhaps rightly so) that an investment certificate is sufficient proof that the business is legal. Therefore, more needs to be done to improve the process of registration - due diligence to minimise the risk of registering fraudulent investors.

Law enforcement agencies need to up their game; catch the tricksters before they recruit many victims.

Perhaps more importantly, there is a need to raise awareness about how these investment scams operate as they are likely to continue to operate underground targeting unsuspecting victims.

Needless to say, we need a nationwide campaign, just like Rwanda National Police’s successful road safety campaign - ‘Gerayo Amahoro’ or simply put ‘Get home safe’ which heightened vigilance and reduced road accidents.

At a personal level, we all have the responsibility to be vigilant and be suspicious of anyone oering easy money.

Scammers are skilled at convincing you that the investment is real, the returns are high and the risks are low. But there's always a catch. For instance, one of the ways to spot a scam is that the money paid to the trickster doesn’t go towards the investment they claim to offer.

In any case, the money you "invest" goes straight into the scammer's bank account and not towards any real investment.

Anyone can be scammed and every scam is different. Scams are oft­en very hard to spot and can feel legitimate in the moment.