CBK Lists Most Common Pyramid Schemes in Kenya

  • File image of Kenyan banknotes held in a hand on January 25, 2020.
    File image of Kenyan banknotes held in a hand on January 25, 2020.
    Simon Kiragu
    Kenyans.co.ke
  • Fraudsters are continuously coming up with new tactics to swindle unsuspecting Kenyans feeding on the vulnerability of most Kenyans struggling to make ends meet during these unprecedented times. 

    Among the effects of the Covid-19 pandemic, the country has seen a rise in the number of fraudsters and con artists.

    Kenya has witnessed countless stories of victims losing billions to con artists posing as investors.

    Central Bank of Kenya (CBK) building in Nairobi.
    A file image of the Central Bank of Kenya (CBK) building in Nairobi.
    Simon Kiragu
    Kenyans.co.ke

    In a bid to mitigate this, the Central Bank of Kenya (CBK) published a detailed document highlighting the most common scam jobs in the country, including steps Kenyans should take to steer clear of fraudsters.

    What are the warning signs? 

    Being promised a high return at no risk whatsoever if you invest in a particular scheme.

    Being asked to invest in an institution or scheme which is neither regulated by, nor registered with, a regulatory body.

    A promise of higher returns the more people you recruit into your investment scheme.

    An investment scheme with extraordinarily high returns.

    The pressure to make an investment decision because the opportunity will close, or because the first investors made much higher returns than later investors.

    Being asked to invest in a scheme whose details of the owners are murky, or unclear.

    A guarantee of high returns, regardless of circumstances.

    Being bombarded with testimonials, especially from people who have made a lot of money, or who constantly seem to be on holiday, or surrounded by expensive cars and houses.

    An example shared by the DCI as a work of scammers luring Kenyans before stealing their data.
    An example shared by the DCI as a work of scammers luring Kenyans before stealing their data.
    Twitter

    Additionally, the advances in the field of technology have seen con artists move into that field as well.

    You may be about to lose your money to fraudsters if have encountered any of the following: 

    Received an email or mobile phone text message informing you that you have won a certain amount of money, yet you did not enroll in any competition.

    Being asked to act immediately to avoid losing the opportunity to get a particular prize.

    Being asked to pay some money or fee for a free gift or access to some unclaimed money.

    Received an email requesting you to assist someone (usually a foreigner) access funds in an account that someone inherited.

    Received a call from someone purporting to be from a particular company, and who asks you for personal information such as your PIN, password, bank account details, credit card number.

    Some examples of financial scams and fraud are listed below:

    Pyramid Schemes 

    These are fraudulent schemes that promise high returns/profits to investors. However, this is pegged on the ability of the recruit to enroll more people to join the scheme. 

    The next level of recruits is also expected to recruit more investors, and it thus becomes a chain of recruitment. 

    However, the profits from these schemes are not based on a product but rather the money that recruits ‘invest’ in, which is then used to pay earlier investors. 

    Some schemes may indicate that they have a product they are selling, but this is usually a front to entice consumers and hide the pyramid nature of the scheme. 

    Ponzi Schemes 

    These are investment schemes that promise high short-term rates of return or dividends to investors. 

    Investors pay money to a portfolio manager with the understanding that they will receive payment at a later date. The victims are usually under the mistaken belief that they are investing in a product or service.

    Unlike a pyramid scheme, however, the investor in a Ponzi scheme is not expected to enroll new recruits in order to get paid. 

    When an investor wants their money back or a dividend is due, they are paid using the money received from new investors.

    The cycle continues until the organizer flees with the money, which normally happens when there are no new investors being brought on board to generate enough capital to facilitate the payment of dividends.

    File image of Kenyan bank notes
    File image of Kenyan bank notes
    File

    Bank Card Fraud 

    Fraudsters may send email or text messages that appear to come from your bank or a reputable financial institution in what is known as phishing. 

    They use various tactics to get you to share confidential information such as your PIN, account number, Log In details, and passwords.

    Advance Fee Scam

    A scammer will send an email, letter, or make a phone call to a potential victim offering them a large sum of money, service, or goods. 

    The catch, however, is that one is expected to part with a fee before you can access whatever is being promised. 

    The scammer may indicate that the fee is for taxes, shipping costs. You will then be requested to wire the money or send it through a mobile payment platform.

    However, once the payment is made, the scammer disappears.

    How to protect yourself against being scammed or defrauded

    Do not respond to unsolicited emails, letters or calls promising you some form of benefit.

    Do not share personal information online (website, social media), email or on the phone.

    Create a strong unique password for your online accounts. Do not use the same password for various accounts.

    Where possible, have multifactor authentication for sensitive accounts.

    Do not include too much personal information in your social media profile.

    If someone you know requests monetary assistance through email or text, call them first to confirm if it’s a genuine request. It may be someone impersonating them.

    Exercise caution when making online payments with your bank card. Countercheck if the person or company is genuine before providing details or making payments.

    Do not click on email and text message links or attachments that request you to log in or verify your password. You should go to the official/legitimate website and log in from there.

    When in doubt about an issue, person, company, investment, etc., seek a second or third opinion from someone else who is not associated with whoever is corresponding with you.

    What you should do in case you are a victim of fraud

    In the unfortunate case that you fall victim to a fraudster, ensure you do the following:

    If you shared personal banking details, inform your bank immediately. Change the passwords to your online accounts immediately.

    Report the fraud to the police.

    Central Bank of Kenya Governor Patrick Njoroge during a press conference after the Monetary Policy Committee meeting that reviewed the outcome of its policy decisions and recent economic developments on January 28, 2020.
    Central Bank of Kenya Governor Patrick Njoroge during a press conference after the Monetary Policy Committee meeting that reviewed the outcome of its policy decisions and recent economic developments on January 28, 2020.
    Daily Nation
    steal suspect scam