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CAA revoking regulations which allowed illegal pyramid schemes
The Consumer Affairs Authority (CAA) has revoked two of its gazette notifications after the Central Bank of Sri Lanka (CBSL) wrote to the consumer regulator that shady organisations which run illegal pyramid schemes in the country used those regulations to register themselves as legal entities.
CAA Director General J.M.C Jayanthi Wijethunga told the Sunday Times the move to revoke two gazette notifications published on April 12 came after the CBSL informed CAA in writing that those regulations were used by these shady companies to register as lawful “network marketing” institutions but they were found to be engaging in pyramid schemes and cryptocurrency trading activities.
“We have been informed by the CBSL that based on its investigations carried out into these shady organisations, it found the companies had been registered under the gazette notifications issued by CAA recently,” Ms Wijethunga said.
A fresh gazette notification was issued on June 1, revoking the previous two gazette notifications by the CAA under the Consumer Affairs Authority Act No 09 of 2003.
The two gazette notifications dated April 12 which were issued earlier as Special Direction Under Section 10 (1) and b (11) of the Act made it mandatory for any individual who engages in “network marketing” business to register with the CAA as an entity.
Under the CAA gazette regulations, it is allowed for an agent or another independent agent to receive a commission from any person based on the value of the sales purchased “by any new customer introduced by such specific customer or the agent by building a sales network with new customers”. This is a similar mechanism commonly used by illegal pyramid schemes assuring attractive bonuses for existing users to recruit new customers and expand the network.
The CBSL move to call for the withdrawal of the two CAA gazette notifications came in the wake of a notice issued earlier this week. It named eight organisations running illegal pyramid schemes and requested the Attorney General to file actions against those companies.
The eight companies are Tiens Lanka Healthcare Pvt Ltd; Best Life International Pvt Ltd; Global Lifestyle Lanka Pvt Ltd; Mark-Wo International Pvt Ltd; VML International Pvt Ltd; Fast 3Cycle International Pvt Ltd; Sports Chain App, Sports Chain ZS Society Sri Lanka and OnmaxDT.
The banking regulator said that any person who directly or indirectly initiate, offer, promote, advertise, conduct, finance, manage or direct, a prohibited type of pyramid scheme in contravention of the provisions of Section 83C of the Banking Act No 30 of 1988 will be committing a punishable offence subject to a jail term not exceeding three years or a fine of Rs.1 million or both.
Accordingly, the public is informed to refrain from such activities which may be punished by law.
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