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Central Bank Denounces Proliferation of Illegal Deposit-Takers

Central Bank Denounces Proliferation of Illegal Deposit-Takers

The Bank of Mozambique this week revealed that it has been following, with concern, the proliferation of entities in the national market that take deposits from individuals without being licensed to do so.

“Generally, the institutions that act illegally in the financial area adhere to the financial pyramid scheme. Financial pyramids are fraudulent business schemes, which are characterised by the promise of making money in the short term, usually in the form of interest on deposited amounts. This interest is often much higher than the average practiced in the market and increases with the attraction of more depositors by the people involved,” reads an alert from the bank.

According to the Bank of Mozambique, the entry of new people to make deposits appears to offer income to older people. However, the institution found that as the pyramid grows, as a result of the trust of depositors in the scheme, there is a lack of money to pay everyone and in the end most are left in the loss.

“Therefore, recourse to these entities represents a high risk and can result in serious losses for those involved, since they are not subject to information duties and prudential limits that safeguard the interests of the consumer and the stability of the financial system,” warns the Central Bank.

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However, so that citizens do not fall for these schemes, the Bank of Mozambique warns of illegal entities that can be detected through characteristics such as lack of licensing; demand for money without exchange of a financial asset, product or provision of services; promise of payment of excessively high interest, in a short period of time and apparently with low risk adoption, by the promoters of the entity, of fictitious names such as “investor”, “winner’, “millionaire”, among others; and offering high commissions or other goods for recruiting new customers.

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