The operations of shady multi-level
marketing (MLM) companies — which operate what are popularly known as pyramid
or Ponzi schemes — have come under the regulatory scanner with shady MLM
companies mushrooming across the country and duping investors. Many firms
posing as MLM agencies for consumer goods and services have been actually mobilizing
large amounts of deposits from the public with promises of ridiculous returns
of 120 per cent and repayment of principal within a year.
In a circular, the Reserve Bank of
India has alerted banks that in cases where accounts have already been opened
in the names of the marketing agencies, retail traders and investment firms,
the banks should undertake quick reviews. “Wherever large number of cheque
books has been issued to such firms, the relative decision may be reviewed,” it
said.
With many MLM companies recently
using the banking technology to dupe investors, the RBI said, “banks should be
careful in opening accounts of the marketing/trading agencies etc. Especially,
strict compliance with KYC (know your customer) and AML (anti-money laundering)
guidelines issued by the RBI should be ensured in the matter.”
The banking regulator also named
seven MLM companies (Fine India Sales Pvt Ltd, Lakshya Levels Marketing, Eve
Industries, Trident Advertising & Trade Links Pvt. Ltd, Super Life Link
Distributors, Lue Brain Education Society and Manya Mantra Marketing). “These
firms and their agents had reportedly promised very high returns on deposits and
lured common people to part with funds in the name of certain
investment/deposit schemes,” the RBI said.
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