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People fall for scams because they are greedy, says SA Reserve Bank governor Lesetja Kganyago.
The Reserve Bank held a media event in Pretoria this week to launch a new campaign against scams, called Stop Check Report.
The focus is on so-called 419 scams, as well as pyramid and Ponzi schemes.
“People are greedy and think you can make money easily,” said Kganyago when asked why people were constantly falling for the implausible promises made by scam artists.
The answer is a “cultural shift towards hard work instead of quick riches”, said Kganyago.
The campaign will focus on unveiling the telltale signs of scams, including unrealistic promises of profits.
Apart from raising awareness about these scams, the Reserve Bank hopes to see more cooperation with other regulators, specifically the Financial Services Board (FSB).
Various types of scams are illegal for different reasons, meaning they fall under the jurisdiction of different regulators.
Eckhard Volker, managing director of Integrated Forensic Accounting Services, said the Reserve Bank could act against pyramid and Ponzi schemes thanks to a “wonderful technicality” in the Banks Act.
Volker has acted for the Reserve Bank as an investigator into schemes.
The Reserve Bank regulated all “deposit-taking” institutions and any scheme that claimed to guarantee the safety of your money was technically taking a deposit, said Volker.
To do that, you need a banking licence from the Reserve Bank, otherwise you are operating an illegal deposit-taking scheme.
The Reserve Bank can freeze the assets of such a scheme, and offences under the Banks Act can lead to up to 10 years in jail plus a fine.
In reality, the people running these schemes often get off lightly because the Reserve Bank’s investigations begin and end with the identification of illegal deposit-taking.
Convictions rarely resulted in severe punishment, said Volker.
Prosecutors often fail to pursue the offenders for the fraud and money laundering that is part of the scam operation.
Schemes that call themselves investments and don’t explicitly promise the full safety of the money you put in fall outside this mandate, and the Reserve Bank can’t do much about them.
Product-based pyramid schemes can easily duck the law because they can claim to be selling products, not taking deposits, said Kganyago.
Kuben Naidoo, the registrar of banks, added: “We have a legal mandate for a very small number of these schemes. Fraud is a criminal offence and has nothing to do with the Reserve Bank.”
The Reserve Bank spent about R50 million investigating schemes last year. Its banking supervision department looked into 41 schemes in the year and finalised 22 of those.
The FSB can, however, penalise people who provide financial services without a licence, which encompasses schemes that do not fall under the Reserve Bank’s purview.
“I wish there was better communication between regulators. I would love to see that,” said Volker.
