CON GAME

Kenyans warned of fraudulent financial schemes

They are taking advantage of Covid-19

In Summary

•These rogue entities include online pyramid schemes, unlicensed credit and savings schemes, and unlicensed online forex brokers and traders.

•The entities seek to exploit Kenyans and pose money laundering and financing of terrorism risks, CBK warns.

Kenya's new bank notes.
Kenya's new bank notes.
Image: ENOS TECHE

Financial sector regulators have warned the public of the re-emergence of fraudulent and unlicensed financial schemes seeking to take advantage of Kenyans during the Covid-19 period.

These rogue entities include online pyramid schemes, unlicensed credit and savings schemes, and unlicensed online forex brokers and traders.

In a joint notice on Tuesday, the Central Bank of Kenya (CBK), Capital Markets Authority (CMA), Insurance Regulatory Authority (IRA), Sacco Societies Regulatory Authority (SASRA), Retirement Benefits Authority and the Industrialization Ministry, warned Kenyans to be cautious.

“As the coronavirus pandemic continues to unfold, we warn the public of the re-emergence of fraudulent and unlicensed financial schemes seeking to take advantage of Kenyans during these challenging times,” the notice reads in part.

According to the regulators, some of the fraudulent entities have styled themselves as ‘online global networking companies’, that seek to recruit members of the public to join and make cash deposits, purportedly to buy shares in the company.

“The encouragement to recruit new members in order to receive more benefits is a characteristic of a fraudulent pyramid scheme,” the regulators warn.

Other fraudulent unregulated entities styling themselves as online foreign exchange (forex) brokers and traders have also emerged.

“These entities promise customers huge returns and are not licensed as required, either as online forex brokers or traders by the Capital Markets Authority (CMA) or as forex dealers by the Central Bank of Kenya(CBK),” the notice says.

CMA licenses and regulates online forex brokerage and trading, and other capital market products while CBK licenses and regulates all forex dealers and the Kenya Shilling component of any online forex trading and brokerage.

The regulators had in July 2018 issued a public notice warning against such unlicensed financial services and products.

According to CBK, these rogue entities seek to exploit Kenyans and pose money laundering and financing of terrorism risks to the financial sector.

CBK had previously issued a public notice in August 2019, warning the public against unlicensed forex dealers.

In addition to a business permit, regulated financial institutions are required to have a valid license issued by a financial sector regulator.

“The public should only deal with licensed financial institutions and entities in order to protect themselves from being defrauded and losing their money,” the regulators cautioned on Tuesday.

They have vowed to take action against fraudulent and unlicensed financial entities in the country, even as they call on members of the public to blow the whistle on them.