corporate crime economic offence…

Publication:

The Hindu

Date Of Publication:

29-04-13

Objecting to the use of word ’Chit Fund’ in multi-crore Saradha Group financial fraud, industry body CFAI on Monday said none of the entities of the Kolkata-based Group was operating as a registered chit fund.

“The failure of some Multi-level Marketing (MLM) or a ponzi scheme is explained as failure of a Chit Fund company. This is totally unfair,” All India Association of Chit Funds General Secretary T S Sivaramakrishnan said.

Saradha Group have got about 160 registered activities including realty and resort but not even one activity was registered as Chit Fund in the State, he said, while addressing a press conference.

“Our grievance is on failure of some other activity, why is it branded as failure of Chit Fund?,” he added.

The association also demanded that the government come out and clear the air over Chit Funds.

There are about 10,000 Chit Funds registered in India with annual subscription of Rs 30,000 crore per annum.

“We are governed by the Chit Fund Act 1982 and implementations by the respective states. This Act is notified in entire India,” he said.

“The principal regulator is the Reserve Bank of India, Act is made by Central Government and rules are made by respective State Governments,” Mr. Sivaramakrishnan added.

The regulator of chit funds is the Registrar of Chits appointed by respective state governments under Section 61 of Chit Funds Act.

Powers of adjudication vest in the Registrar and the state government concerned is the Appellate authority. In case of failure of a chit fund business, the responsibility for winding up such a business also vests with the respective State Governments.

As per the law, a Chit Fund company is not allowed to accept deposit from the public and can only accept subscription amount from the members.

However, Saradha Group accepted deposits from investors and worked as Multi-Level Marketing.

Meanwhile, the government has said several of its investigating wings like SEBI, RBI, IT department and Enforcement Directorate have begun crackdowns on Ponzi schemes and have initiated action against Saradha Group under various laws including the Prevention of Money Laundering Act (PMLA).

Source Link:http://www.thehindu.com/news/national/saradha-group-has-nothing-to-do-wi…

Facing the heat in the aftermath…

Publication:

The Pioneer

Date Of Publication:

30-04-13

Facing the heat in the aftermath of the Saradha Group multi-crore fraud, the pan India body of chit fund companies on Monday chose to distance itself from the controversy by claiming that the entity under cloud cannot be associated with them as it was not functioning as an authorised chit fund company and that due to all this, the entire industry should not be maligned.

The industry body claimed that their sector was “over-regulated”, yet they could not come out with a clear response when asked that despite being regulated by the Chit Fund Act 1982, ambiguities regarding a clear demarcation between chit fund companies, ponzi groups and companies involved in multi level marketing (MLM) operations prevail.

Rather they chose to put the onus on the Government and the media to clear the air and “educate” the common investors about the operations of chit fund companies.

In what turned out to be a press conference where passions ran high, the All India Association of Chit Funds (AIACF) went blue in the face explaining that chit fund business has been one of the longest surviving business model in the world and it provides people with modest income groups to generate funds for themselves.

“Moreover any company which has to enter this segment, has to carry the nomenclature ‘chit fund’, or ‘kurrie’ in its name at the time of registration,” the association’s General Secretary T S Sivaramakrishnan told reporters.

He added that just because some entities (referring to Saradha Group) ventured into multi-level marketing (MLM) operations, it does not mean that the chit fund model is not trustworthy. When asked whether the association scrutinised the developments in West Bengal arising out of the Saradha scam, Sivaramakrishnan replied in an off the cuff manner that they were wary of Mamata Banerjee (the state Chief Minister).

They added that chit fund companies are governed by the Chit Fund Act 1982, while the principle regulator is the Reserve Bank of India (RBI), after it the state governments are the next level regulators. There are about 10,000 Chit Funds registered in India with annual subscription of Rs 30,000 crore per annum.

“We are governed by the Chit Fund Act 1982. This Act is notified in entire India. The principal regulator is the RBI, the Act is made by Central Government and rules are made by respective State Governments,” Sivaramakrishnan added.

The regulator of chit funds is the Registrar of Chits appointed by respective state governments under Section 61 of Chit Funds Act.

Powers of adjudication vests with the Registrar and the state government concerned is the Appellate authority. In case of failure of a chit fund business, the responsibility for winding up such a business also vests with the respective State Governments.

As per the law, a Chit Fund company is not allowed to accept deposit from the public and can only accept subscription amount from the members, the office bearers said.

“In fact we would like to clarify that MLM operations cannot be termed as chit fund operations and similarly Ponzi operations too cannot be compared with chit funds,” the association’s Joint Secretary Kamal Bhambani.

The office bearers took pains to clarify that genuine chit fund companies which are registered with the Registrar of Companies (RoC), don’t dupe investors or run away with their hard earned money. “Unfortunately though, unregistered entities outnumber registered chit fund companies,” said Sivaramakrishnan.

The association added that due to the danger of chit fund companies getting maligned in the light of the Saradha controversy, they were forced to come out and “clear the air about the reality”.

 

Source Link:http://www.dailypioneer.com/business/need-to-clear-air-on-model-says-chi…

NEW DELHI: The corporate affairs ministry…

Publication:

The Economic Times

Date Of Publication:

30-04-13

NEW DELHI: The corporate affairs ministry is working with the West Bengal government to help small investors recover their savings they had invested in the bust Saradha group, in the news for duping investors, minister Sachin Pilot said on Monday.

The announcement comes a few days after his ministry set up a special task force within the Serious Fraud Investigation Office to unravel the money trail in the 15 companies of the Saradha group. The task force is also investigating the operations of three more deposit taking companies in West Bengal. These are Rose Valley, Sunshine India Land Developers, Icore-E services and their affiliates. In all, a total of 53 companies are under SFIO’s probe.

Source Link:http://articles.economictimes.indiatimes.com/2013-04-30/news/38930150_1_…

Mumbai, April 30: The Saradha Group…

Publication:Business Line

Date Of Publication:30-04-13

The Saradha Group, which comprises over 100 entities, does not have one registered chit fund company in its fold.

However, the financial irregularities attributed to the group have been labeled ‘chit fund operations’, said T.S Sivaramakrishnan, General-Secretary, All-India Association of Chit Funds.

CHIT Fund Act

The association has over 10,000 registered member-companies across the country, of which over 80 per cent are in the southern States, mainly Tamil Nadu, Kerala and Andhra Pradesh.

Sivaramakrishnan told Business Line, that it has almost become a practice to blame chit funds for any financial scam that surfaces.

On the Saradha Group, he said it had 100-plus companies with business interests spread across realty, construction, tours and travels, exports, agro, livestock, foods, advertisement agencies and a presence in the media.

However, when the market regulator cracked down on the group, the root cause was said to be its chit funds.

On some jewelers floating schemes similar to chit funds, he said if the prize money was a component of the scheme, it does not come under the Chit Fund Act.

Sivaramakrishan said chit funds were not allowed to accept deposits from the public. Such funds are governed by the Chit Funds Act, 1982 and administered by the State Governments. There is an office of ‘Registrar of Chit Funds ‘in every State to monitor the business.

Further, chit fund regulations were more stringent than other deposit accepting companies. Utilization and appropriation of subscribers’ money was strictly prohibited.

Besides, the fund had to provide for capital adequacy and other prudential norms.

Importantly, chit funds, as of now, are not allowed to carry on other businesses without the permission of the Registrar/State Governments.

Asked what the association was doing to curb unregistered chit fund operations, which are rampant in many States, he said it was for the authorities to initiate proceedings and bring the offenders to book.

Strict rules

The police are empowered to take action, but unfortunately, little has been done so far, he said.

On the practice of many chit funds offering loans as an allied business activity, he said the rules were strict and it was not possible for registered members to carry on financing as part of their business.

 

Source Link:http://www.thehindubusinessline.com/industry-and-economy/banking/chit-fu…

Ponzi exploited the investor market by…

Publication:Meri News

Date Of Publication:01-05-13

In 1919, Carlo Ponzi started this scheme and instantly became famous; he paid off early investors with
money was taken in by later investors by creating a consumer stampede with the hype of phenomenal returns within
a very short period of time.

Ponzi exploited the investor market by approaching people most likely to trust him- his family and friends,
his Catholic priest, and some neighbors from whom he collected a total of about $1250. Ninety days later,
he returned $750 in “interest”. His ecstatic original investors unwittingly did his marketing for him
– they told everyone they knew about this “bonanza,” and investments snowballed.

The party did not last. Within a year, a suspicious Boston Post’s front page questioned the legitimacy of
the enterprise. Investors panicked and demanded their money back. It’s a bit difficult to give it back once it’s spent! Without the false hype to induce new participants, Ponzi’s scheme folded. Most of his 40,000 investors lost everything they had invested

Fast forward to 2013, the scene hasn’t changed much; only the operators, victims have new faces. Ponzi changed
name to MLM- Multi Level Marketing. Of course, the magnitude has undergone a sea-change, heading north.
One of the most unsavory aspects of globalization and a growing economy is that this aspect of white-collar
crime has gained wings.

Fraudulent mass-marketers reach victims via all modes of communication—postal service, telephone, e-mail,
Internet sites, television, radio, and even in person. Viable multi-level marketing fraud groups require a variety of resources to operate, including the means to target and communicate with prospective victims,
obtain and launder illicit proceeds, and evade law enforcement detection and investigation. These include
legitimate business services, communications tools, payment processors, fraudulent identification documents,
and even counterfeit financial instruments.

As a whole, nowadays, fraudulent multi-level marketing operations are increasingly transnational, interconnected,
and fluid, with groups shifting alliances according to the particular needs of a scheme.

The results are unbearable, tragic. For some victims, the risks extend well beyond loss of personal savings
or funds to include physical threats or risks, loss of their homes, depression, and even contemplated,
attempted, or actual suicide.

Multi-level marketing fraud has a substantial impact on economies and markets by undermining consumer trust
and confidence in legitimate businesses.

Operators of MLM fraud schemes are highly adaptive, rapidly changing their methods and techniques to reduce
the risks of law enforcement detection and investigation and to respond to consumer and business awareness
of their current methods.

But what all these scams, one after another, reveal is we haven’t learned any lesson from our previous outings.
We make a huge hue and cry, play the blame game for a while, and very soon forget everything till the
next attack!

When the outrage is over ‘rape’ we blame the police authorities who in turn fortify the roads for a few days,
force shut the shops early and relax thereafter, till the next victim surfaces.

When it a financial scam, whoever pulls it, the easy way out is ‘blame it on Chit Fund’, with an attitude
of who cares what is a chit fund.

The authorities, even those hand-in-gloves with the unscrupulous politicians, and more importantly the media
who in their pursuit to garner more TRPs/ readership and outwit competition turn their backs to the facts
and hurry to find a scapegoat, which can sensationalize the whole issue for a while, till the next ‘breaking
news’ .

Unfortunately, more often than not, it’s a financial scam and the scapegoat; always is ‘Chit Funds’.

It could be seen that ‘Saradha Group’, in question this time, had varied business interests with around hundred
and odd companies which were in Realty, Construction, Tours & Travels, Exports, Agro, Livestock,
Foods, Multipurpose, Ad agency and of course, presence in media with their 24-hour ‘channel 10’ and also
newspapers and magazines. However, what is quite glaring is that they did not float any ‘Chit Fund’ company,
yet their scam/ failure is attributed to Chit Funds!

While doing it, we simply forget that:

– Chit Funds are not allowed to accept deposits from the public.

– Chit Funds are perfectly legal, governed by the “Chit Funds Act, 1982, and administered by the State Governments

– There is an office of ‘Registrar of Chit Funds ‘in every state who monitors their operations, rather minutely.
The Kokotta Registrar is in 3rd floor, Writers building, 1, K.S. Road.

– The regulations over chit funds are more stringent, even compared to deposit accepting companies. Utilisation
and appropriation of subscribers’ money is strictly prohibited, and provide for capital adequacy and
other prudential norms.

– Chit Funds, as of now, are not allowed to carry on other businesses without the permission of the Registrar/State
Governments and as of date no permission has been given.

– Chit Funds have been there from time-immemorial, even before the advent of banking. Many of the companies
having been around for more than 100 years! And have been carrying on their business in an impeccable
manner.

– Though the buzzword ‘Financial Inclusion’ is recent, Chit Funds have been doing it since inception, catering
to the un-served population in remote areas and are one of the most popular & trusted form of informal
finance.

– Even the Bill & Melinda Foundation have chosen the channel of ‘Chit Funds’ for their poverty alleviation
The program, in India and, are working closely with them in rural as well as urban India.

The fact remains that the Chit Fund is a time-tested tool and shall always remain so. However, what we need
to think is:

– Will passing the buck to chit funds or for that matter anybody, help stem the rot.

– Is it fair on our part to defame any individual or institution for no fault of theirs? More so, when the
culprit is of a different breed/ variety.

– Is it not more important to find out the root-cause and weed it out, lest it springs up again?

– Is it not our moral duty, be it administrators, regulators, politicians, or the ever important fourth estate,
media to rather find the actual culprit and then pass the verdict!

To counter the threat of multi-level marketing fraud effectively, investigative, law enforcement, and regulatory
authorities will need to work in close coordination. Their focus should be:

– Expansion of their capability to gather and share intelligence on all aspects of MLM, Residuary and other
deposit taking institutions and their key participants; and acting thereupon to initiate remedial measures,
if required.

– Increase public awareness and education programs to help individuals and businesses to more readily recognize
solicitations by fraudulent companies and take action to avoid or minimize losses to such schemes;

– Development of effective measures to more promptly identify and support victims of MLM/other ponzi schemes
through public- and private-sector resources like introducing Deposit insurance, as prevention is better
than cure; and

– Look into investor protection measures, to enhance the participation of informal finance in the National
Financial Inclusion Program, as suggested by the Key Advisory Group on Chit Funds, formed by the Department
of Financial Services, Ministry of Finance, Government India.

For the investors, a thought to chew, ‘to err is human, greed is inherent in most of us, but should we blame
others for our plight?’

Our Concern:

While the recent incidents are definitely scary and tragic, attributing it to chit funds, will only further
aggravate the whole issue, as it may create a run even in the established chit fund companies, who are
playing a major role in the national economy.

While our representatives will be more than glad to offer solution and remove shortcomings, if any, our immediate
request is set the records straight, i.e. stop misuse of the word ‘Chit Fund’ in such reporting.

 

source Link:www.merinews.com/article/why-media-should-stop-misusing-word-chit-fund/1…

New Delhi : In 1919, Carlo Ponzi…

Publication:Bhadas 4 Media

Date Of Publication:02-05-13

New Delhi : In 1919, Carlo Ponzi started the scheme for which he became famous: he paid off early investors with money taken in by later investors by creating a consumer stampede with hype of phenomenal returns within a very short period of time. Ponzi exploited the investor market by approaching people most likely to trust him — his family and friends, his Catholic priest, and some neighbors from whom he collected a total of about $1250. Ninety days later, he returned $750 in “interest”. His ecstatic original investors unwittingly did his marketing for him — they told everyone they knew about this “bonanza,” and investments snowballed.

The party did not last. Within a year, a suspicious Boston Post’s front page questioned the legitimacy of the enterprise. Investors panicked and demanded their money back. It’s a bit difficult to give it back once it’s spent! Without the false hype to induce new participants, Ponzi’s scheme folded. Most of his 40,000 investors lost everything they had invested.

Fast forward to 2013, the scene hasn’t changed much; only the operators, victims have new faces. Ponzi changed name to MLM- Multi Level Marketing. Of course, the magnitude has undergone a sea-change, heading north. One of the most unsavory aspects of globalization and a growing economy is that this aspect of white-collar crime, has gained wings. Fraudulent mass-marketers reach victims via all modes of communication—postal service, telephone, e-mail, Internet sites, television, radio, and even in person. Viable multi-level marketing fraud groups require a variety of resources to operate, including the means to target and communicate with prospective victims, obtain and launder illicit proceeds, and evade law enforcement detection and investigation. These include legitimate business services, communications tools, payment processors, fraudulent identification documents, and even counterfeit financial instruments.

As a whole, nowadays, fraudulent multi-level marketing operations are increasingly transnational, interconnected, and fluid, with groups shifting alliances according to the particular needs of a scheme.

The results are unbearable, tragic.

§ For some victims, the risks extend well beyond loss of personal savings or funds to include physical threats or risks, loss of their homes, depression, and even contemplated, attempted, or actual suicide.

§ Multi level marketing fraud has a substantial impact on economies and markets by undermining consumer trust and confidence in legitimate businesses.

Operators of MLM fraud schemes are highly adaptive, rapidly changing their methods and techniques to reduce the risks of law enforcement detection and investigation and to respond to consumer and business awareness of their current methods.

But what all these scams, one after another, reveal is we haven’t learned any lesson from our previous outings. We make a huge hue & cry, play the blame game for a while, and very soon forget everything till the next attack!

When the outrage is over ‘rape’ we blame the Police authorities who in turn fortify the roads for a few days, force shut the shops early and relax thereafter, till the next victim surfaces.

When it a financial scam, whoever pulls it, the easy way out is ‘blame it on Chit Fund’, with an attitude of who cares what is a chit fund?.

The authorities, even those hand-in-gloves with the unscrupulous, Politicians, and more importantly the media who in their pursuit to garner more TRPs/Readership and outwit competition turn their backs to the facts and hurry to find a scapegoat, which can sensationalize the whole issue for a while, till the next ‘breaking news’ .

Unfortunately, more often than not, it’s is a financial scam and the scapegoat; always is ‘Chit Funds’. In the case in question the ‘Saradha Group’ it could be seen that they had varied business interests with around hundred and odd companies which were in Realty, Construction, Tours & Travels, Exports, Agro, Livestock, Foods, Multipurpose, Ad agency and of course, presence in media with their 24 hour ‘channel 10’ and also newspapers and magazines. However, what is quite glaring is that they did not float any ‘Chit Fund’ company, yet their scam/failure is attributed to Chit Funds!

Chennai, May 3: Chit funds are …

Publication:Business Line

Date Of Publication:03-05-13

Chit funds are a traditional business, strongly regulated by the State Government and Central laws and the Reserve Bank of India, clarified the Tamil Nadu Chit Fund Companies Association.

Addressing a press conference organised by it, T. S. Sivaramakrishnan, General Secretary, All India Association of Chit Funds, said the public should not confuse chit funds with the unorganised, unregulated companies that take deposits promising unrealistic rates of return or operate Ponzi schemes.

Allaying the fears of the public in the backdrop of the recent finance scams, he said the chit funds are governed by the Chit Fund Act 40/1982, apart from stringent norms set by State Governments through the Registrars of Chits.

There are over 10,000 registered chit funds in India with an annual turnover of Rs 30,000 crore. In Tamil Nadu, there are 2,000 such chit fund companies with business of Rs 4,000 crore.

Representatives of the Tamil Nadu Association clarified that registered chit funds are expected to include the term chit fund in their names and are not allowed to take deposits. It is a traditional business where the promoter only collects the subscriptions.

source link: http://www.thehindubusinessline.com/industry-and-economy/banking/chit-fu…

Against the backdrop of alleged chit…

Publication:Financial Express

Date Of Publication:03/05-13

Against the backdrop of alleged chit fund scam in West Bengal, All India Association of Chit Funds representing the Rs 30,000 crore industry in the country today appealed to public not to confuse ‘Ponzi schemes’ with chit funds.

“People should not confuse Ponzi schemes that offer unfeasible interest rates, cash prizes or gift articles for deposits with Chit funds which are traditional and highly regulated,” All India Association of Chit Funds General Secretary T S Sivaramakrishnan told reporters here.

He said countrywide there are about 10,000 registered chit funds with an annual turnover of Rs 30,000 crore while in Tamil Nadu it is a Rs 4,000 crore industry.

Following the recent scams, it is becoming increasingly difficult for people to enter chit deposit schemes, he said, adding the industry is governed by Chit Fund Act 40/1982 and regulated by the respective state governments.

Tamil Nadu Chit Fund Companies Association President Y S Mathivanan said people wrongly associated ponzi schemes with chit funds.

Recently, thousands of investors of the Saradha chit fund group in West Bengal launched protests alleging they were duped of about crores of rupees by the Group and its employees have become jobless. Saradha Group Chairman Sudipto Sen along with senior officials have been arrested.

source Link:http://www.financialexpress.com/news/dont-confuse-ponzi-schemes-with-chi…

In the recent scam involving Kolkata…

Publication:Mydigitalfc.com

Date Of Publication:03/05-13

In the recent scam involving Kolkata-based Sharada Group, Ponzi schemes have been misconstrued as chit funds and this has hit the industry, which has over 10,000 registered chit funds across the country and with an aggregate turnover of Rs 30,000 crore per annum.

““The misconception that equates deposit schemes with chit funds is lowering subscriber’s confidence in the latter. After the scam started being reported as one pertaining to chit funds, we have started seeing increasing participation in auctions. Several small and medium chit funds have reported investors seeking early auctioning, probably fearing loss of deposits,” T S Sivaramakrishnan, general secretary, All India Association of Chit Funds.

The industry is governed by Chit Fund Act 40/1982 and is regulated by state governments with their own set of rules. Reserve Bank of India is the principal regulator and at the state level Registrar of Chits/The Inspector General of Registration oversees these regulations.

“Ponzi schemes offer unfeasible interest rates, cash prizes or gift articles for deposits while chit funds are traditional and regulated Miscellaneous Non-Banking Financial Companies. Registered chit funds cannot accept deposits and cannot offer any other financial products or services. The companies that organize chips should have chips in its name,” he said.

Nationally, there are about 10,000 registered chit funds with an annual turnover of Rs 30,000 crore and in Kerala, the state government itself runs a chit fund.

Chit fund offers saving/borrowing option with standard returns, low-cost loans, and personalized service. Chit funds are community-driven and the industry is growing at an annual rate of 15-20 percent.

Once a chit fund company decides to commence a new group they have to deposit 100 per cent of the chit value as fixed deposit with the Registrar of Chits as security. This amount can be withdrawn only after the chat group closes and every subscriber is paid in full. The role of a hit promoter is just to collect the subscription from the subscribers. Hence he does not hold any funds, he added.

Source Link:http://www.mydigitalfc.com/news/sharada-scam-hits-chit-funds-142

The recent chit fund fiasco in…

Publication:

The New Indian Express

Date Of Publication:

03/05-13

The recent chit fund fiasco in West Bengal has not only worried a lot of depositors, but chit fund managers as well. According to the Tamil Nadu Chit Fund Companies Association (TNCFCA), in the wake of recent scams involving deposit schemes being misreported as chit fund scams, it has become very difficult for the industry to convince people to join chits. In a press meet here on Friday, the association appealed to the people of the State not to confuse ‘Ponzi Schemes’ that offer unaffordable interest rates, cash prizes and gift articles for deposits with chit funds, which are regulated by Miscellaneous Non-Banking Financial Companies.

Speaking to City Express, T S Sivaramakrishnan, general secretary, All India Association of Chit Funds, New Delhi, said, “There are more than 10,000 chit fund companies registered with us. In Tamil Nadu alone, around 2,000 registered chit fund companies are operating. These companies come under the Chit Fund Act, 1982 and are duly regulated by State governments with their own set of rules. The RBI acts as a principal regulator of this industry”.

Y S Mathivanan, president, TNCFCA, said, “Whenever there is a financial scam, it is erroneously attributed to chit fund companies. We have been misconstrued. This will result in discouragement of investors. Hence we appeal to the people not to confuse us with finance companies that cheat depositors with highly regulated chit funds.”

Source Link:http://newindianexpress.com/cities/chennai/We-are-not-%E2%80%98cheat%E2%…