Wednesday, November 29, 2006

The Pyramid Banking Schemes
Copyright © Obinna Heche

Recently South Africa announced the latest of its country?s pyramid schemes. One of the local banks in Namibia put out a strenuous warning to illegal money makers who were running the new pyramid schemes.

The bank called on the help of the public to aid in enforcing the country?s law by reporting these pyramid schemes to the bank. The announcement also asked the country?s leaders and other influential civilians to aid in teaching others the detrimental effects of these pyramid schemes on its victims, especially those who lived in poverty-ridden areas.

The illegality of the pyramid banking schemes, according to the bank announcement, was a violation of its Banking Institutions Act?s Section 5 which says that no one can receive, accept, advertise, take or solicit public deposits without being a registered banking institution

What makes these scams qualify as pyramid schemes is that the primary money making activity of them is the successful hiring of others to pay for the opportunity to join the pyramid. In investigating the work at home schemes, bank officers and other government officials found many of the perpetrators were from other neighboring countries. Some had been closed down in prior years but were beginning to crop back up again in newspaper ads. Some were direct marketed, though, while others were solicited face to face by those already in the pyramid scheme and trying to build their own pyramid under them to make their money.

What the bank and the country officials determined is that people were making money in the pyramid schemes until and unless someone doesn?t deposit the required money or recruit new people. Then the pyramid doesn?t support everyone in it and begins to crumble.

The bank blamed the success and prevalence of pyramid schemes in the country partly on its high unemployment rate. The consequence, unfortunately, they said, was to make poor people poorer and reward only the few that started the pyramid. The fine in South Africa for these schemes, besides financial penalty, is up to ten years in prison.

Obinna Heche: Los Angeles- California

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