Practice Over Theory DataPro Ltd S ince 1995 1920 March 2021 2021 ACCOBIN RETREAT OUTLINE 2 INTRODUCTION A Ponzi Scheme is an investment product where an individual or entity pays returns on contribution by members not from profit earned through economic activities but from ID: 1028247
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1. PONZI SCHEME & COMPLIANCE MANAGEMENTPractice Over Theory DataPro Ltd Since 1995 19-20 March, 20212021 ACCOBIN RETREAT
2. OUTLINE2
3. INTRODUCTIONA Ponzi Scheme is an investment product where an individual or entity pays returns on contribution by members not from profit earned through economic activities but from payments by new patrons.The scheme is named after Charles Ponzi an Italian immigrant American who became notorious for using the technique in 1920 to defraud investorsCharles Ponzi spent 10years in jail for his scheme that defrauded about 40,000 people.
4. NEWS FROM THE PASTThree million Nigerians lost N18 billion to MMM
5. TALKING POINTS1. How can Regulators especially SEC be more proactive?2. What is SEC doing on Customer Awareness?3. What roles for LEAs?4. What roles for the Judiciary?5. What roles for the CBN?6. What are the new trends and patterns associated with the Scheme in Nigeria?7. What are the breaking point Redflags?8. How can banks recognize the Redflags?9. How can compliance manage the risk?10. How does the bank prevent an abuse of its system through Ponzi Schemes?11. What are the internal control measures to prevent Ponzi fraud?12. Are there transaction monitoring systems for Ponzi schemes?13. What level of SAR/STR is needed for Ponzi Schemes in Banks?14. How can intels be gotten and shared with LEAs/Regulators?
6. PONZI : FEATURESWell above-average constant profits/returns are promised with little to no riskRequires a constant flow of funds to sustain itselfCharacterized by a breaking point when the scheme eventually collapsesBusiness/Investment model based on complex or vague premiseInformation AsymmetrySometimes could start as legitimate investment scheme but soon degenerate to Ponzi Scheme due to, mismanagement, non compliance and poor governance ( i.e Maddof)Externalities such as Government Intervention or Market/Financial crises could trigger a run and eventual collapse ( i.e MMM)
7. PONZI : RED FLAGSPromise of supernormal profits/returns with little to nor riskHuge and disproportionate Advertisement for new patrons and contributorsOutlandish Marketing Schemes Vague Nature of BusinessFinancial Misstatement of activitiesReluctance to disclose Financial ResultsImproper KYC/CCD/EDD ProcessNo economic basis for ROIROI higher than market or realistic rateNetworking/Pyramid Scheme as Marketing StrategyNo legal framework for operationNo legal/Regulatory permit, authorization or license Shadowy PromotersLack of Corporate Governance in operationDiversion of Investment FundsTax EvasionCapital FlightMoney Laundering/Terrorist Financing Techniques & MethodsPromoters sometimes live ostentatious lifestyle
8. PREVENTIVE MEASURESTraining & Awareness Program for Business UnitsAscertaining UBO and historical backgroundObtaining EDD on Promoters Obtaining periodic Credit Rating Agency ReportMonitoring Roll-over PlanInsisting on mandatory Financial Results Monitoring Investment PlanMonitoring Financial StatementWatching Regulatory TrendsUnderstanding Demand & Supply ConditionsMonitoring Government ActionUsing Behavioral Monitoring Solutions for red-flagsShutting down accounts opened in the bank after intel sharing with front line officers and management File STR/SAR to the NFIUShare intel with LEAs/Regulators/Industry
9. CONCLUSIONDo not introduce customers of the bank to Ponzi SchemeDo not collect money from Customers of the bank to invest in Ponzi SchemeDo not participate in Ponzi SchemeReport any staff involved in Ponzi Scheme through the Whistle Blowing processSanction (Sack) any Staff InvolvedFile STR/SAR to NFIUHave a policy statement on Ponzi SchemesShare intel with Regulators/LEAs/Industry
10. THANK YOU
11. Q & A
12. KEEP IN TOUCH