BOU warns public against Ponzi schemes

INVESTMENT

The Bank of Uganda has released a statement cautioning the public against investing in Businesses which sound too good to be true, saying they could be a Ponzi or pyramid schemes.

BOU defines Ponzi schemes as fraudulent investing scams promising high rates of return with little risk to investors.

In the statement released on Monday this week, BOU says that if a business guarantees you high returns with little risks of losing your investment, it is false.

"If the investment opportunity promises you consistent returns regardless of the market conditions, legitimate businesses usually experience times of profit and times of loss. If the investment strategy or business activities are described as too complex for investors to understand, or top secret and cannot be explained, it is suspicious," reads the statement.

The statement further states that if the company or proprietor running the business focuses all their energy into attracting new clients to make investments without a constant flow of new investments to continue to provide returns to the scheme owners and older investors, the scheme will fall apart.

The statement warns that fake investment opportunities always collapse as it becomes unsustainable for those running it to deliver on the promises they have made to investors.

"If both old and new clients face difficulties trying to remove their money from the scheme, many times it has already been spent on paying the proprietors or other investors," reads the statement.

The public is urged to trust their investments with licensed investment firms regulated by Capital Markets Authority and licensed deposit taking institutions which are regulated by Bank of Uganda and for which there is a clear recourse mechanism.

A full list of these is available on Bank of Uganda website.