Recently, the Uganda Police Force raised an alarm about a Ponzi scheme that crashed the dreams of many. They had invested to take advantage of a handsome return on their deposit. The nightmare followed when the fraudsters vanished.
Ponzi schemes derive their name from an Italian con artist in the 1920s, named Charles Ponzi. He promised a 50 percent payment in 45 days and 100 percent payment in 90 days for redemption of international postal reply coupons.
It turned out that the earlier investors were being paid using the money of those who bought into the scheme much later. With time, the exponential returns overwhelmed the system, and when newer investors dwindled, the system collapsed.
It left many holding empty bags while Ponzi smiled all the way to the bank. There were many such characters recorded in the 1880s before, like Adele Spitzeder, Sarah Howe, William ‘520 percent’ Miller.
In the modern age, Bernie Madoff in 2008 creamed off about $65 billion; Allen Stanford in 2009 stole around $7 billion, while Scott Rothstein in 2009 pilfered around $1.2 billion.
In Uganda, around 2001, a wave of a pyramid schemes hit Kampala. Unlike Ponzi’s where money is paid to one person, pyramids operate on the principle of various people being paid for recruiting others to join the scam. You bring a set number of people, then get paid your deposit plus interest. The last person in the chain gets hit. Many got hit.
Today, hardly a day passes without news of a new, very tempting venture promising free or very easy, big money.
One called the ‘Unicef Foundation Promotion’ requires the successful applicant to divulge their personal data. Only for the scammer to access their account and rob them.
There are those who call pretending to be acting for Uganda’s major mobile phone service providers. They warn of disconnecting the phone and blocking the mobile money facility because the owner did not update their personal details with the Uganda Communications Commission. In the process, they may gain one’s password and clear their account or steal their phone number and misuse it in crime. Others call, holding out as officials of a banks advising on how to change or ‘safeguard’ passwords for mobile banking. The motive is to access the account and steal.
Then there are all these jobs where a deposit is sent to a crook as ‘facilitation’ to connect the sender to a job in Uganda or overseas with unbelievably huge salaries. They vanish the moment the money is deposited.
The ‘daily bread’ is the one about a factory needing a very expensive chemical to run. The caller lures their victim into a scheme to buy it cheaply from ‘an employee who stole it from the company.’ The caller and the victim will then sell it to the factory at even 50 times the price they bought it (because the factory is desperate) and share the proceeds.
For today, we shall not go into the religious people who ask for a deposit or sowing in exchange for miracle prayers. Or the traditional healers, a.k.a. witch doctors, who mix some concoctions and give people as lucky charms to grant them ease in their aspirations. Or the politicians who promise heaven and disappear after they win their elections. We shall also leave out the promise of sports betting because that is another topic with a life of its own.
Uganda is very fertile ground for these con-tricks because many people are very poor, unemployed, and desperate.
According to the World Bank, Uganda’s national poverty rate hovers at around 16.1 percent or about seven million citizens.
Most have been driven to the urban areas because the rural cash crop economy has collapsed over time. The false promise of the cities offers no jobs, as the manufacturing sector in Uganda is not growing to accommodate them. This is due mainly to the pressure of cheap and good quality imports from China.
Those lucky to be employed hardly have anything left to save in wages as their existence is hand-to-mouth.
Yet many have a good education, which comes with expectations of a quality of life better than that lived by the peasantry. They, like the biblical hungry people, to whom bitter things taste sweet, will try their hand at anything, however risky it may be, including crime, just to take care of immediate needs like food and shelter, school and hospital fees. An article titled, Poverty, scarcity, and the Psychology of Decision-Making, published by the University of Alabama at Birmingham, concludes that ‘poverty creates a ‘scarcity mindset.’
This overloads mental bandwidth with urgent survival needs. This cognitive fatigue narrows focus to immediate relief, making individuals highly vulnerable to scams that promise quick financial fixes.
What has exacerbated the problem of scamming is the proliferation of the Internet and computer technology. There are various links that look genuine, and one may click on them in the comfort of their home without peers to advise or caution them.
Then there is the major problem of unregistered or fraudulently registered SIM cards that cannot be traced to the correct individual. It defeats the purpose of universal mandatory registration of SIM cards. Some people use the identification of the dead to get phone SIM cards.
Mobile phone companies, for the sake of business, have not been very diligent in some of their efforts to expand their business. For instance, a conman may apply and receive a merchant code number with an individual’s name, trading as a public service provider. He will use this to collect money from unsuspecting clients.
Many times, people who are conned are too embarrassed to report to the police. If they do so, the process is too long and tedious. A suspect may be released for lack of follow-up to ensure prosecution. This only serves to embolden the scammers to rob other people.