• Sep
  • 18
  • 2009

RBI named 7 MLM companies involved in operating ponzi schemes

Posted In Finance, RBI / FEMA | 6 Comments » Print Friendly and PDF

Coming down heavily on shady operations of fraudulent multi-level marketing companies, Reserve Bank of India has alerted banks to be careful while opening accounts of the marketing/trading agencies. Many such firms pose as MLM agencies for consumer goods and services and manage to mobilise large amount of deposits from the unsuspecting public with promises of ridiculously high returns.

With MLM companies, operating ponzi schemes mushrooming all over the country, RBI has urged banks to be extremely careful before issuing large number of cheque books to these firms.

Also cautioning the general public from falling prey to such schemes, RBI has named seven MLM companies:

  • Fine India Sales Pvt Ltd,
  • Lakshya Levels Marketing,
  • Eve Industries,
  • Trident Advertising and Trade Links Pvt Ltd,
  • Super Life Link Distributors,
  • Lue Brain Education Society, and
  • Manya Mantra Marketing.

“These firms and their agents had reportedly promised very high returns on deposits and lured common people to part with funds in the name of certain investment/deposit schemes,” the RBI said in a circular.

How these MLM companies function:

The representatives of the above firms open accounts at various bank branches at different locations and make numerous small cash deposits in those accounts.

These funds, running into crores of rupees, after being pooled at the Principal Accounts of the MLM firms, were eventually allowed to flow out for purposes apparently illegal or highly risky.

These firms get large number of cheque books issued from the banks, where they have their accounts and issue post dated cheques, of small amounts representing future interest dues and deposit payments, to the investors.

Interesting, investors deposited their money in the accounts of MLMs at places far away from where the accounts were actually opened. This was facilitated by Core Banking Solution offered by the banks.

Since the operations of the firms involve unusually high returns, ongoing repayments of interest and deposit amounts depend on continuous and uninterrupted flow of fresh deposits.

Therefore, at some stage, the flow of deposits get stifled and post dated cheques start bouncing.

Some dubious Websites:

RBI, also published the names of two Websites that some of these MLM firms used to advertise their deposit schemes:

http://www.alaskaindia.net/business_plan.html

http://www.fineindia.net/

A word of caution for banks:

RBI said, banks, while opening accounts of the marketing/trading agencies, should strictly comply with ‘know your customer’ and anti-money laundering guidelines.

CIRCULAR ISSUED BY RBI ON THE ABOVE MATTER IS AS FOLLWS:-

RBI/2009-10/ 158

UBD. CO. BPD. PCB.Cir. No.9/12.05.001 / 2009-10 September 16, 2009

The Chief Executive Officers of All Primary (Urban) Co-operative Banks

Dear Sir/Madam

Adherence to KYC/AML guidelines while opening and conduct of the accounts of Multi Level marketing firms

1. It has come to our notice that certain firms posing as Multi Level Marketing (MLM) agencies for consumer goods and services have been actually mobilizing large amounts of deposits from the public with promise of high returns. The names of some of these firms are:

i. Fine India Sales Pvt. Ltd.

ii. Lakshya Levels Marketing

iii. Eve Industries

iv. Trident Advertising & Trade Links Pvt. Ltd.

v. Super Life Link Distributors

vi. Lue Brain Education Society

vii. Manya Mantra Marketing

2. The representatives of the above firms had opened accounts at various bank branches at different locations in the country and numerous small cash deposits were being made in those accounts. The firms and their agents had reportedly promised very high returns on deposits and lured common people to part with funds in the name of certain investment/deposit schemes. These funds, running into crores of rupees, were being pooled at the Principal Accounts of the MLM firms and the funds were eventually flowing out of those Principal Accounts for purposes apparently illegal or highly risky. These firms had managed to get very large number of cheque books issued from the banks and they have, in turn, issued to the depositors, post dated cheques for small amounts representing future interest dues and deposit payments. The small depositors were depositing the money in the accounts of MLMs at places far away from the places where the accounts were actually opened which was facilitated by Core Banking Solution (CBS) offered by the banks. Since the operations of the firms are essentially deposit taking activities involving unusually high returns, the ongoing repayments of interest and deposit amounts in respect of existing deposits would depend on continuous and uninterrupted flow of fresh deposits with increasing volumes. Therefore, at some stage, the flow of deposits is bound to be stifled and post dated cheques tendered thereafter would bounce, due to inadequate funds available in the accounts.

3. Some of the above firms were advertising their deposit schemes through websites. A few such website addresses are:

http://www.alaskaindia.net/business_plan.html

http://www.fineindia.net/

Preliminary reports reveal that the names of the banks, where the MLM firms or their agents were maintaining accounts were getting associated with such operations of MLM firms. This has potential reputation risk for the banks, especially in the event of the firms failing to repay the depositors. Incidentally, as it appears, during personal contacts with the prospective depositors some of these MLM firms or their agents had used the name of the banks where they had accounts.

4. In view of the above, we advise that banks should be careful in opening accounts of the marketing/trading agencies etc. Especially, strict compliance with KYC and AML guidelines contained in circulars UBD.CO.BPD (PCB) No. 1/12.05.001/ 2008-09 dated July 02, 2008 and UBD.PCB. Cir. 30/09.161.00/ 2004-05 dated December 15, 2004 issued by RBI should be ensured in the matter.

5. In cases where accounts have already been opened in the names of the marketing agencies, retail traders, investment firms, the banks may undertake quick reviews. Wherever large number of cheque books has been issued to such firms, the relative decision may be reviewed in the light of the following:

• Whether the cheque books have been issued to customers on the basis of their express request and after following the internal processes laid down in the matter.

• Whether the number of cheque books is consistent with/matching the profile of the customers as also their nature of business operations.

6. Even where the volume of transactions/ profile of the customers apparently justify the number of cheque books issued, special ongoing monitoring of the operations in the accounts of such types of firms should be made especially if large volumes of small cash deposits are being made in those accounts and withdrawals are being made there from, through cheques written for small amounts, either across the counters or through clearing. In respect of such account holders banks may, in specific cases, call for the data from the account holders on the number and aggregate amount of post dated cheques issued. The data/information so collected should be analysed in select cases to rule out the possibility of the firms being engaged in deposit taking activities. Certain indicative parameters for selecting accounts for further scrutiny and action are the bunching of dates of the post dated cheques, the uniformity in the amounts of cheques etc. These data should be analysed together with data on cash deposits of small amounts on previous distant dates resembling the deposit contracting/ mobilizations dates in terms of similar bunching and uniformity of amounts.

7. Please acknowledge receipt. Also, unusual operations noticed during the above review may be immediately reported to us and other appropriate authorities, such as, Financial Intelligence Unit (FIU-IND), Department of Revenue, Ministry of Finance, Government of India, Hotel Samrat (6th Floor), Chanakyapuri, New Delhi – 110 021.

Yours faithfully,

(A. K. Khound)

Chief General Manager-in-Charge


6 Responses to “RBI named 7 MLM companies involved in operating ponzi schemes”

  1. vijay singh says:

    Please give me the full detail of government rule about MLM & Pyramid Scheme………

  2. DHARMINDER SHARMA says:

    MLM SE LOGO KO ROJGAR MILTA HEI BUT JO COYS MLM KE NAAM SE MONEY CIRCULATION AUR INVESTMENT PER 20 TO 30 MONTHLY RETURN KA BADHA KAR BEBKHOOF BANA RAHI HEI–UNKO BANDH HOONA CHAYIE. MLM COMPANIES JO PRODUCT SALE PER COMMISSITION DE RAHI HEI AUR TDS RIGHT TIME PER DEPOSTED KAR RAHI HEI–THESE COMPANIES REALY DOING GOOD JOBS . ROJGAR DENE ME MLM COMPANIES REALY NO DOUBT HELP KAR RAHI — JESE RCM BUSINESS,RMP,ETC ..INVESTMENT PLAN JITNI JALDI HO SAKE STOP KAR DENE CHAYIA–DHARMINDER SHARMA

  3. PRAFUL DESHPANDE says:

    GOOD MORNING FRIENDS,
    AGAR GOVT. OF INDIA ROZGAR THE NAHI SAKTI TO RULS AND REGULATION KYA KAMKE. AAJ MAHENGAI ITANI BHADTI ZA RAHI HAI,OUR RUPIAYA KA VALUE KAM HOTO ZA RAHA HAI.AAJ FINE INDIA 2.50 LAKHA SE 3.00 LAKHA NET WORKARS KA GHAR CHALA RAHA THA PER MONTH HAMARA PAYMENT REGULAR ICIC66I BANK ME AA RAHATHA ,RBI & GOVT. HAMARE SYSTEM KO KYA ORGANIZ KARENGE ,BHADTI MAHENGAI KO KYA KARENGE,AJ KE TARIKH ME GHAR LENA KISI AAM ADMI KE BASME NAHI,GHAR CHALAN RS.5000/- SE 10,000/-ME KATHIN HOTE JARAHA HAI.
    itna hi kahoonga RBI ya GOVERNMENT ne HAR ek system PER, education, rules and conditions ka nirmaan karna chahiye.
    mail me:- PRAFULD1966@GMAIL.COM

  4. Rameshkumar Pandey says:

    helo good morning india, mlm par kucch rules and ragulation jaroor hona chahiye. kyonki yah ek achchh rasta hai rojgar ka. lekin abhi is par koi kanoon nahi hone ke kaaran jo chahe vo company start kar deta hai iske liye bahut sari company me paisa aata hai tab achchhe wade karte hai aur jab dene ke baari aati to company kucch bhi problem dikha kar band karne ki aur chali jati hai.
    ab isme kanoon na hone ki galti hai ya logo ko short cut kamaane ki jaldi hai. sahi education de kar hi koi company ki suruwat honi chahiye.
    Mlm yah ek system hai jo rojgaar ke saath apne sapno ke paas pahuchane ka kaam karti hai.
    Aur agar sahi jivan ka agar aanand aur samaz lena hai to Mlm ki duniya me pravesh karna chahiye.
    Mlm product par honi chahiye na ki money rotation par.
    Kyonki aane wale dour me sirf REURCHASE WITH SMALL BINARY INCOME PLAN hi chalenge. aur isme hi ham long time & acchi income le sakenge.
    Mai to itna hi kahoonga RBI ya GOVERNMENT ne Mlm par ek system, education, rules and conditions ka nirmaan karna chahiye.
    mail me:-newlookrp007@gmail.com

  5. sunil jain says:

    growth plan ek dhokha hai .please inse bachiye.

  6. neelam kumari says:

    fineindisales ko bewazah badnaam karne koshish ki ja rahi hai.company ne lakho logo ko rojgar* diya hai bank rbi aur govt.of india ko is company ko ltd. compay banana chahiye tatha is company ko award dena chahiye kyo ki is company ne bahut accha kam kiya hai,yakin nahi to koi kanpur ja ke dekh le,sathhi naseer khan bhi bahut imandar aadmi hai unhe badnaam karne ka kisi ko koi hak nahi.wo jald hi jitenge aur fineindia company fotune 500 companys me jald hi shamil hogi kyon ki is company ka lakshya ek sundar, samridh aur khushhal bharat ka nirman karna hai,rbi ko chahiye ki fineindisales pvt. ltd. ke sabhi seez aur freez account ko jald se jald chalu karne ka sabhi banks ko kada aadesh de.thanks!

Leave a Reply

GET FREE EMAIL UPDATES