Aletta Shikololo
WINDHOEK – The central bank, the Bank of Namibia, on Friday dropped the hammer on yet another online financial scheme operating in the country, this time declaring popular Longrich Bioscience an illegal financial scheme.
Online schemes such as Longrich have become quite the rage, as vulnerable and perhaps gullible Namibians flock to them in tough times spurred by two years of negative economic growth, high unemployment and a steady but inevitable increase in the cost of living.
Less than two years ago, the central bank also shut down a similar peer-to-peer operator, MyLife Change247, saying it resembled a pyramid scheme, which is illegal in Namibia.
The decision of the Bank of Namibia (BoN) has, as usual, upset a multitude of Longrich members who had put their money in the scheme promising unbelievable weekly returns that are well above market-related interest rates. While Longrich members consistently report receiving dividends on their ‘investments’, BoN has cautioned that the scheme, and others like it, are ultimately unsustainable and will eventually result in the loss of funds for members, particularly those who joined later in the scheme.
“Should Longrich and its promoters wish to continue with the sale of Longrich products, then such products should be sold directly to customers. Products for sale should also be the primary source of income, which means the commission should be paid based on the products sold and the business practice should be sustainable without the recruitment of new promoters in the manner herein,” cautioned BoN Deputy Director of Corporate Communications, Kazembire Zemburuka.
BoN determined Longrich was illegal in line with section 55A of the Banking Institutions Act, 1998 (ACT No. 2 of 1998), as amended.
According to Zemburuka, the central bank’s investigation follows constant public queries seeking information on the legitimacy of the business activities of Longrich.
The outcome of the assessment BoN carried out revealed that Longrich contravenes Section 55A of the Banking Institution Act, which states: “A person or banking institution may not conduct, permit or become involved in the conducting of, or the acceptance or obtaining of money, directly or indirectly from members of the public, as a regular feature of a business practice, with the prospect of any of such members receiving payments or other money related benefits directly or indirectly.”
“Typically, illegal financial schemes put in place an elaborate recruitment drive where a person is offered a chance to join a group, programme, team or scheme in which he/she needs to recruit new members to make money and not necessarily through the sales of products to consumers,” Zemburuka explained.
He added that considering the investigations into the affairs of the scheme, the Bank declares Longrich as an illegal financial scheme “exhibiting undesirable practices in terms of the Act because of the characteristics of the Longrich business model.”
BoN has therefore directed promoters of Longrich to cease their operations immediately and failure to do so will result in the bank taking further appropriate action against any promoters, as stipulated in the Act.
BoN also cautioned members of the public not to engage in business activities of Longrich and further those who have joined with the aim of earning profits through the recruitment of new members are urged to stop their membership with immediate effect.
One of the issues the central bank takes with schemes such as Longrich is that they do not seem to sell any products, and if they do, it is not the main feature of the business. In most cases the principle feature of the business is a financial scheme and the referral system, which involves attracting and encouraging members to invest and recruit more members with the possibilities of making commission. Zemburuka further reminded the public to remain vigilant when participating or investing in online financial schemes.