South African investors have been the target of myriad dubious online trading platforms and Ponzi schemes. As tough financial times press down hard, vulnerability to these scams rises.
But our financial watchdogs are failing us. These are the Financial Service Conduct Authority (FSCA) — which is supposed to regulate the industry and protect investors — and the Financial Intelligence Centre, which has been set up specifically to combat organised crime by tracing the financial proceeds of terrorism, drugs, arms, tobacco smuggling and the like through money laundering.
If this were not true the International Financial Action Task Force would not have greylisted South Africa in February 2023. We are now languishing under this dark cloud. Hopefully, we are also working hard on the jointly agreed (by South Africa and the task force) “action plan” to fix 22 factors linked to our strategic deficiencies that mean we fall short of the International Monetary Fund’s Anti-Money Laundering and the Combating of the Financing of Terrorism policy regime.
According to the International Monetary Fund, “These policies and measures are designed to prevent and combat these crimes and are essential to protect the integrity and stability of financial markets and the global financial system.”
This failure has created holes in the fences of our financial markets, allowing people to prey on investors,who trustingly sink their funds into dodgy trading platforms and hand their life savings over to brokers in the hope of making incredible returns.
South Africa’s largest Ponzi scheme, Mirror Trading International (MTI) was one such online trading platform that cost investors dearly. Another is the BHI Trust, which allegedly was on the radar of the FSCA several years ago but was allowed to operate, leading to many losing their life savings when the pyramid scheme crashed last October.
MTI founder Johann Steynberg fled South Africa for Brazil shortly after the scheme’s collapse in late 2020, where he was arrested on an Interpol warrant but is now believed to have died while under house arrest on a farm. Craig Warriner was convicted of fraud earlier this year and is serving 30 years for his involvement in the BHI Trust scandal.
Usually, victims come from the most vulnerable, but professionals such as IT experts and advocates have fallen for these online trading scams. They bleed out financially and most never recoup their losses.South Africa’s fall on the Transparency International Corruption Perception Index, in which it ranked 72 out of 180 countries in 2023, further raises the concern that we are facing economic lawlessness.