MPs blame rise in fraud on cryptocurrency

Legislators have attributed the increase in fraud on the mushrooming ponzi and pyramid schemes, and the rise in cryptocurrency.

This was after the State Minister of Finance, Hon David Bahati told Parliament sitting on 04 February 2020 that government has established an Expert National Task Force on Fourth lndustrial Revolution to explore the issue of cryptocurrencies and provide proposals on its application in Uganda.

“The Taskforce will also consider global trends with a focus on developments and aspirations for Uganda and the East African region.” he said.

Bahati said that advertisements will be placed in the newspapers discouraging Ugandans from investing in ponzi and pyramid schemes.

“We are also discussing with the Internal Affairs Ministry to ban such schemes. The challenge is that operators of such schemes register as financial institutions but when they get on the ground, their operations are different,” Bahati said.

The Minister admitted that ponzi and pyramid schemes involve dishonest investors taking advantage of innocent individuals by encouraging them to invest their savings into ventures that have no underlying product with a promise of extraordinary returns.

“We have continued to advise the public to desist from investing in cryptocurrencies since they are yet to be supervised and regulated in Uganda. We have therefore, strongly encouraged the members of the public to do their business transactions with only licensed financial institutions,” Bahati added.

Bahati outlined gov’t actions against the schemes

He revealed that the Ministry of Justice and Constitutional Affairs was in the process of amending the  Penal Code Act to criminalise ponzi and pyramid schemes and that the Uganda Registration Services Bureau will soon  adopt clear guidelines to determine beneficial ownership of companies during registration.

“The Second Schedule of the Anti-Money Laundering Act, 2013 is also being amended to include virtual assets providers on the list of accountable persons,” he said adding that, ‘this will bring virtual assets service providers including providers of cryptocurrencies to be brought under the purview of the Financial Intelligence Authority and will be required to adhere to reporting requirements under the Act”.

Hon Mwine Mpaka (NRM, Youth Western) who moved a motion in 2018 calling for a ban on such schemes however, accused government of protecting those involved in the business.

“The Financial Intelligence Authority submitted a list of all companies involved in this fraudulent business and the Ministry of Finance knows them but they are quiet. I know of a bishop who is involved in this business and he is heavily guarded,” he said.

Hon. Jovah Kamateeka (NRM, Mitooma district) called for increased sensitisation of the public about the dangers of investing in such schemes.

“We need to encourage our children to value hard work because some university students have also been duped. You do not put money into a computer and think you will earn too much,” she said.

The Speaker, Rebecca Kadaga questioned government’s commitment towards banning such schemes saying that the issue has been raised severally but no action has been taken.

“We expected government to update Parliament on progress made in disbanding accounts of such schemes and a ban on their operations,” she said.

Kadaga directed government to update the House on the progress made on sensitizing the public on the dangers of investing in ponzi and pyramid schemes.

Cryptocurrency is a virtual currency in which encryption techniques, based on Block chain technology, are used to generate units of the virtual currency and verify the transfer of virtual funds.

Cryptocurrency provides for its own authenticity, validity and usage terms and conditions.  lt is a decentralized peer-to-peer payment network that is powered by its users with no central authority.

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