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Pyramid scheme law 'too little, too late'
Experts want stiffer penalties to tackle fraud
- ucanews.com reporter, Dhaka
- September 19, 2012
On Monday the government said it aims to put before parliament a Multi-level Marketing Control Bill, aimed specifically at controlling how these financial services operate.
The move comes amid a growing number of cases where people say they have been cheated out of their life savings with bogus promises by pyramid scheme companies that have sprung up in Bangladesh in recent years, promising investors quick and lucrative returns.
Destiny, the countryâ€™s largest multi-level marketing (MLM) company with over 4.3 million customers, is currently being probed by the Central Bank and National Board of Revenue over allegations of fraud, money laundering and tax evasion.
A lack of regulation and legal safeguards has made it difficult for authorities to prosecute fraudsters under existing laws.
â€śOver the past few years there have been many allegations of irregularities, tax evasion and corruption, leveled against companies, largely because there was no specific and effective law to regulate them,â€ť said cabinet secretary Mosharraf Hossain.
These businesses are comparatively new to the country and some have cheated millions of people, he added.
The bill announced on Monday will prohibit companies like Destiny from doing business without a license and demand greater transparency. It will also impose what the government callsÂ stiff penalties in the event of fraud, money laundering or tax evasion.
Offenders could face jail terms of 3-5 years and a 5 million taka (US$61,000) fine for any irregularities.
Victims who fall prey to fraudsters can expect double the compensation they get now, according to the proposed legislation.
While welcoming the move, many financial experts and economists say the proposed law should be even tougher.
â€śThe proposed law is welcome but the penalties for irregularities seem too low. Directors of companies that amass billions of takaÂ by cheating people should face 14 years jail and a one billion taka fine,â€ť said Shafique-uz-Zaman, professor of Economics at Dhaka University.
Aminul Islam, aÂ spokesman for the Bangladesh Direct Selling Association, a forum of 30 MLM companies, said a few rotten apples have tarnished the reputations of many others.
â€śWe have pressed the government for ages to introduce laws to regulate the MLM business. Itâ€™s being done, but too late. Because some companies were accused of cheating, people now think the whole sector is bad,â€ť Â he said.
Pyramid schemes start to collapse