Combating Saradha And IMA ‘Islamic Banking’ Scam; Lok Sabha Passes Bill To Tackle Unlawful Ponzi Schemes

The Lok Sabha yesterday (24 July) passed the Banning of Unregulated Deposit Schemes Bill, 2019, which seeks to tackle the problem of unlawful ponzi schemes exploiting vulnerable people, reports IANS.

Presented before the House by Minister of State for Finance Anurag Thakur, the bill contains provisions to penalise those running illegal deposit schemes with imprisonment of between 1 to 10 years, and fines ranging from Rs 2 lakh to Rs 50 crore.

The bill also includes a mechanism to ensure that depositors whose money had been taken are justly compensated; the same would be done in a timely fashion by attaching properties and other assets belonging to the defaulting entities.

The government aims to ensure that the menace of ponzi schemes in society is nipped in the bud with this new legislation. A large number of people continue to fall prey to promise of incredibly high returns assured by unregulated entities.

At particular risk are those with limited access to traditional banking services and those who lack necessary financial literacy to understand the impossibility of receiving the grand returns promised to them by illegal firms.

Quite often, as seen in the Saradha chit fund scam, which affected nearly 1.7 million, largely low-income depositors from rural West Bengal, those running the scheme at the top were believed to have close links with the ruling political establishment. Trinamool MP Kunal Ghosh was even allegedly paid a monthly salary as the CEO of the Saradha Group’s media wing.

In a more recent ponzi scheme which unravelled, IMA Jewels, which is believed to have duped depositors to the tune of Rs 1,500 crore, was allegedly linked closely to suspended Congress leader Roshan Baig.

The founder of the scheme, Mohammed Mansoor Khan, who publicised it his ponzi scheme as an Islamic Banking alternative to traditional financial institutions, even blamed Baig for the collapse of the pyramid scam as the latter allegedly failed to pay him back Rs 400 crore.

The specific nature of the provisions of the Banning of Unregulated Deposit Schemes Bill, 2019 will aid in both deterring unregulated pyramid schemes from taking root in the first place, and also ensure that a mechanism for restitutive justice is provided to victims who suffer financial losses by being taken advantage of by ponzi schemes.