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Sofia
Tuesday, January 18, 2022

Bringing pyramid schemes down

Business


Newsday

A poster placed on the wall of the PTSC City Gate compound in 2020 invites people to join a money-making venture for an initial payment of $100. – FILE PHOTO/ROGER JACOB

The government’s introduction of legislation to tighten financial regulations by targeting illicit schemes is welcomed.

But the move raises questions about past enforcement efforts as well as the perennial issue of the State’s capacity to keep up to date with white collar crime.

In speaking about the Finance Bill (No 2) 2021, which was passed in the House of Representatives on Monday, government officials said some of the provisions of the law addressed potential gaps in regulations.

“This is to ensure there is no ambiguity or any loophole or lacuna in the law that would allow people in the future to establish and operate one of these schemes,” said Finance Minister Colm Imbert. He suggested some schemes in the past appeared to be designed to exploit grey areas in the law.

“Some of these operators are quite clever and clearly familiar with some of the grey areas in the law and therefore have attempted – I’m not saying they’re going to get away – to get around the areas of the law with their Ponzi schemes and pyramid schemes.”

Attorney General Faris Al-Rawi said the measures would make it harder for fraudsters, noting current legal definitions might give them too much leeway.

Finance Minister Colm Imbert – Photo courtesy Office of the Parliament

Among the provisions are million-dollar fines, stiff jail terms, administrative penalties and tighter definitions.

All of this is an important intervention at a time when people are liable to be taken advantage of given the economic stresses of the moment. Measures to counteract Ponzi and pyramid schemes are also long overdue.

But the Government’s move raises questions about why such matters have not been addressed before now legislatively?

Do these amendments also suggest gaps in previous efforts to combat these schemes through enforcement action by law authorities?

The introduction of fines and penalties are relatively straightforward matters. But the challenge, when it comes to white collar crime, is the fact that criminals are often fully aware of the law and are sophisticated enough to bypass it. By the time the law is changed, such criminals have moved on to newer ways to defraud.

All of the law in the world will also not guarantee prosecutorial authorities will have enough resources to address the larger, more complex schemes that might escape detection. The State has to address the full range of activity that occurs, whether perpetuated by the big fish or small.

There remains the perception that in this country more serious white-collar crime is difficult to tackle. Serious attention must be paid to the reasons for this.

But new fines and criminalising conduct that might have not been an offence may, at least, be a start. Existing regulators need to be supported so that they can adequately enforce the law.

One concern that has arisen in recent years has also been cultural practices which have remained relevant for some members of the national community, such as the sou sou.

It is for legislators to ensure adequate sensitivity is shown to ensure legitimate iterations of such practices are not unnecessarily captured within the crosshairs of the law.

Kaylie Pferten
A pilot of submersible crafts in a former life, now married to my husband David and writing about investment advice.

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