Ponzi Schemes spook mobile networks

Schemes move to mobile money

Lemohang Rakotsoane

MASERU

MOBILE money transfer platforms have become the latest conduits for pyramid schemes to move monies between depositors, entangling telecommunication companies in a war they have been losing for the past six months.

Several local Ponzi schemes have mushroomed in recent weeks, touting people to make deposits through M-pesa and Eco-Cash.

Like MMM which has taken Lesotho by storm, founders of the local Ponzi schemes promise mouth-watering profits to depositors into the mobile money platforms. One promises as much as 50 percent return in week.

Another offers a 100 percent return in a month.

Until recently the Central Bank of Lesotho (CBL)’s battle against pyramid schemes has been centred on commercial banks, which have been used to transfer monies between depositors.

The CBL has urged banks to be vigilant so their services are not used to participate in pyramid schemes like MMM.

Although banks have heeded the central bank’s warning they have not been able to stop the Ponzi schemes because they don’t operate through a central account.

In the case of MMM the money is moved through ‘investors’ accounts. In a way it is just like people transferring money to each other, seemingly innocent transactions banks are finding difficult to police.

The emergence of M-pesa and Eco-Cash as new ways to move money between pyramid scheme investors creates a new headache for the central bank.

On Monday CBL, Vodacom Lesotho, Econet Telecom Lesotho (ETL) and the police launched an anti-money laundering campaign.

“It is the mandate of CBL to make activities concerning payments safer, so that the consumer can have confidence in their money services,” ’Mankaba Thabane, Acting National Payments Systems Director at the CBL.

“Hence we are embarking on a nationwide campaign to sensitise the nation about such activities.”

Palesa Mphunyetsane, Head of M-pesa Operations at Vodacom Lesotho, said the company was aware of Ponzi schemes using M-pesa.

“We have also realised that our logos are being used by some pyramid schemes that have emerged in the market and we want people to know that we are in no way involved with those schemes,” Mphunyatsane said.

“Let it be known that when those schemes collapse Vodacom Lesotho will in no way be accountable, no one will be assisted by being given their money back because we do not take anyone’s money,” she said.

ETL Chief Executive Leon de Fleuriot said a concerted effort was required to stop the inappropriate use of Eco-Cash.

“We are caretakers of the money that our customers have entrusted in our hands and to avoid our services from being used inappropriately we should work together,” de Fleuriot said.

“Agents, report to us when there are any suspicious transactions so that we can also report to CBL and the matter can be dealt with.”

“Our people should understand that we do not support pyramid schemes at all and should understand that if anything is too good to be true then it is really not true.”

He added that sharing of information between stakeholders will make it easier to deal with the abuse of the money transfer platforms.

Senior Inspector Bothata ’Nei from the police’s Serious Crimes Unit lamented the use of money transfer platforms for illegal activities.

“It is a serious challenge because criminals can buy 50 sim cards to deposit their money until it reaches the amount of money they want to launder,” ’Nei said.

“We are also not able to trace or retrieve money if it has been sent to the wrong number”.

He stated that what is infuriating is that Basotho do not want to listen when they are being warned “but when those schemes collapse they come running to us seeking help and usually by then it is too late”.

Speaking on the CBL Governor’s behalf Seabata Ntelo, director of operations,said while technology has brought convenience the challenge now is to find ways to guard against its abuse by criminals.

“These (Eco-Cash and M-pesa) created a much needed avenue for extending financial services to the majority of the country’s population who would otherwise have no access to such services due to lack of banking infrastructure in their vicinity,” Ntelo said.

“However, while we celebrate these mobile money achievements there are unfortunate emerging trends by criminals who want to use mobile money to undertake mischievous criminal activities,” he said.

“The first group of these criminals takes counterfeit currency, deposit it into their Eco-Cash and/or M-pesa wallets and subsequently withdraw it from such wallets at different agents’ stores”.

“By so doing the criminals are actually deceiving the agents who cannot distinguish between counterfeit and genuine currency. At the end these agents lose their money as they cannot use counterfeit currency anywhere”.

“The second group of criminals uses Eco-Cash and M-pesa platforms to promote and carry-out their pyramid schemes transactions,” he said.

“These activities are illegal and classified as money laundering and negatively affect the economy. In addition, they destroy the reputation of Eco-Cash and M-pesa platforms, which are legal, safe and efficient services that are not intended for use in pursuing criminal activities.”

Despite the central bank’s public awareness campaigns Basotho continue to invest in pyramid schemes, some attracted by the lure of quick returns and some pushed by poverty.

One MMM member who identified himself only as Motsamai said he did not understand why the central bank is fighting MMM.

“It’s considered as throwing away of money by some but to me it is an investment,” he said as he stood in a queue at a local bank.

“If the money gets lost, I’m the one losing my own money and nobody should get worried because it is not their money,” Motsamai said.

Defending the pyramid scheme, he said it is“where we are just making a stokvel and we are a community of generous people donating money to those who need it”.

“How are we supposed to survive with no jobs in this country? Now when we are trying to make money for ourselves we are threatened by being told that we are engaging in money laundering.”