Event Report- Financial crimes & frauds: When and how to approach the EOW

“Greed is the main reason for people becoming victims of financial frauds or cheating. In fact, I was aghast to see people from all parts of the society falling prey to such schemes just because someone has promised them huge returns,” says S Jayakumar, the Deputy Commissioner of Police in the Economic Offences Wing in Mumbai. He was speaking at the eighth session under the “Police & You” series.
Moneylife Foundation with Police Reforms Watch and support from Saraswat Bank have launched the 12-week program (every Wednesday) that aims to spread knowledge about protecting yourself, your rights, the Indian Penal Code (IPC), cybercrime and economic offences. This was the eighth such session.
Mr Jayakumar, who has a commendable track record with postings at Malegaon as Assistant Commissioner of Police (ACP) after the bomb blast and Naxal-infested Gadchiroli as Superintendent of Police (SP) during the elections, says, “Irrespective of their reputation and achievements, people put their money into fraudulent schemes. I agree we are lagging behind in alerting people. However, since we have to deal with people from across the strata, it becomes difficult to reach out to everyone. But we are doing our best and would do more to create awareness about these financial scams”.
The event was held in the well-appointed auditorium of Saraswat Bank headquarters, Eknath Thakur Bhavan.
The eighth session of the 12-week series on “The Police & You- Economic Offences: When to approach the EOW” was conducted by Mr Jayakumar and Mahesh Aathavale, a former officer from Mumbai Police.
The former police officer shared details of action taken or being taken on MLM companies, like QNet across the globe. He told the audience, how in 2002 the Australian government named QNet, GoldQuest and QuestNet as pyramid schemes. Similar action was taken by the governments of Nepal, Sri Lanka, Iran, Rwanda, Sudan, Syria, and Turkey.
“In 2010 the Saudi Arabian Ministry of Commerce and Industry banned QNet, accusing the company of theft, falsification, and failure to register, and warned citizens to avoid involvement in fraudulent schemes, mentioning QNet specifically. In 2012, the Dar Al-Iftaa issued a Fatwa against QNet stating the MLM Company’s business in Egypt is haram (forbidden under Islamic law) and could harm the country’s economy,” Mr Aathavale informed the audience.
He also informed about several action taken by enforcement agencies, like the Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Mumbai Police and Delhi EOW against QNet. (Read: Noose Tightens around QNet after 12 Long Years)
Mr Aathavale then highlighted selling techniques used by such MLM and Ponzi schemes under the pretext of product sale. He said, “Many of the products sold by MLMs are virtual products. Even if the products are physical, there is no quality control by states on its production, there are no regulations followed and all the company or its agents or distributors sell is golden dream under the pretext of product.”
He explained roles played by promoters, financiers, web designers, chartered accounts, leaders or agents and subscribers in establishing and promoting such schemes.
Mr Aathavale, who was instrumental in probing Speak Asia, the online survey company that duped lakhs of people using the money circulation scheme, shared the modus operandi of the company and its promoters.
“Speak Asia successfully enrolled 23 lakh panellists across the country in just 18 months and collected over Rs2,300 crore. There were doctors, engineers, bankers, police officers, lawyers vis-a-vis handcart puller, domestic help, and small shop owners were among the gullible investors or victims of this scheme. Panellists were portrayed as role model via aggressive marketing and advertising by the Company through their advertisements for earning extra income or for generating jobs for lakhs of people. When the scheme was subsequently closed, it had an assured payout of over Rs30,000 crore,” he said.
Moneylife was the first publication to expose Speak Asia way back in 2010. On 8 October 2010, Moneylife exposed Speak Asia and its modus operandi. (Read: Another MLM scam in the happening, this time under the pretext of an online survey)
Mr Aathavale then touched upon various provisions under the law to act against MLM, Ponzi or money circulation scheme and its promoters and agents. He said Section 2 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCS Act) defines money circulation scheme in clear wordings.
Sec 2 (c) “money circulation scheme” means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions
He also explained section 3 and section 4 of the PCMCS Act that deals with banning of prize chit and money circulation schemes and penalty for contravening the provisions of the section. Mr Aathavale also highlighted Section 8 of the Act that allows forfeiture of newspaper and publication for helping in promoting such schemes.
Section 8 of the PCMCS Act says, “Where any newspaper or other publication contains any material connected with any prize chit or money circulation scheme promoted or conducted in contravention of the provisions of this Act or any advertisement in relation thereto, the State Government may, by notification in the Official Gazette, declare every copy of the newspaper and every copy of the publication containing such material or the advertisement to be forfeited to the State Government.”
Mr Aathavale also explained in details, the Maharashtra Protection of Interest of Depositors (MPID) Act, which takes care of the criminal aspect of MLM, Ponzi and money circulation schemes. Among important features of the MPID Act, there is a provision to convict every person responsible for the management of the establishment including the promoter, partner, director, manager or an employee of a company for fraudulent default by a financial establishment. Also, the government on a complaint or otherwise, can order the attachment of money or property of a financial establishment and appointment of a competent authority to control the same, he added.
“There are some frauds so well conducted that it would be stupidity not to be deceived by them,” Mr Aathavale concluded.

Date: 07 Sep 2016
Time: 5:00pm to 7:00pm
Venue: Moneylife Foundation, 304, 3rd Floor, Hind Service Industries Premises, Off. Veer Savarkar Marg, Dadar (W), Mumbai - 400028.

You can watch Moneylife TV on YouTube of previous events