22 September 2021 03:28 am Views - 14136
- Sampath Bank filed two Suspicious Transaction Reports (STR) against ‘Best Life’ company
- To gain firsthand experience, the writer signed up for Zoom-based presentations and learned how the promoters were manipulating victims
- CBSL investigation file into ‘Best Life’ company is stuck at AG Dept. for years
- Sri Lanka had no laws against pyramid marketing until the 2005 Gold Quest scam with even new CBSL Governor Cabraal, had been in the news over alleged links
- Famous celebrities, sportsmen, politicians, TV channels and newspapers knowingly or unknowingly found to have promoted pyramid schemes
- Evidence revealed that pyramid promoters disguised true purpose through overpriced products or services with no standard recognition
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*Ravindu had just graduated when he heard of a job opening at 'Best Life International (Pvt) Ltd'. After attending “motivational” discourses and workshops, prior to starting work there; Ravindu thought he was fortunate to have joined a company that sold “genius” business opportunities to make Sri Lankans rich quickly. However, the incontrovertible evidence in our possession has revealed that ‘Best Life International is engaged in Pyramid Marketing, which is illegal in Sri Lanka under the Banking Act No.30 of 1988.
CBSL explains, the salient feature of a pyramid scheme is that the number of participants expands rapidly in an exponential manner at each stage, as new participants are drawn to the scheme. It further states that these schemes are considered calculated consumer frauds owing to the large majority of participants at the pyramid’s bottom levels who inevitably lose the money they pay into the scheme.
To gain firsthand experience, the writer signed up for Zoom-based presentations being carried out by three different companies including one by Best Life International (Pvt) Ltd and were able to learn how clever the promoters were at manipulating potential clients. The promoters at the zoom seminars used such phrases as, “change your destiny, go for dreams faster.” During the zoom seminars, the writer witnessed hundreds of participants some with their family members, together sitting down and trying to understand the complex pyramid scheme, explained by the promoters.
Ravindu says he has come across countless terrible stories during the five years he worked at ‘Best Life’. “I felt guilty, for knowingly letting down those people. Several clients, some as old as my father came to me and cried, asking me to return their hard-earned savings which they invested in the scheme.” It resulted in Ravindu demanding changes within his workplace. He had made an attempt to inform those at the top that this business was being conducted in an unethical and unfair manner with those at the lower levels of the pyramid being badly affected.
A few weeks later, Ravindu was asked to leave. By that time, he knew how powerful and how highly connected the company heads were. He left the company because he did not want to cause more problems but was asked to submit a letter signed by him that he had resigned on his own accord and was not sacked.
“In a pyramid scheme, the owners of the companies are in the winning position always. The people who get fooled and join later are the losers. If any agent joined the scheme have earned some money, that is money lost by the levels below him,” Ravindu said.
Those who join the scheme with dreams to make millions in a week, inevitably lose the money, they have. If one argues that they become victims because of their education level or unawareness, it is not at all true because Daily Mirror Eye interviewed professionals who had also fallen prey to these dubious schemes. We also met several undergraduates who had even stopped their degrees and joined these schemes.
Hyin Perera, who was awaiting his A/L results in 2012, was given three options if he was to join the Best Life team and get rich quickly. “To join the company, we were asked to buy goods or services to the tune of Rs.65,000. There were three packages, consisting of household items, a web designing course, and promotion of the ‘Mahindagamanaya’ movie by finding schools to televise it.
He said he chose the second option -- the six-month web designing course. “To receive our certificate, we were asked to find a potential company and get their website designed at a cost of Rs.25,000.” Hyin, with many others in his batch, who were not even certified web designers with just five or six months’ tuition, were not in a position to practically do so.
"If one argues that they become victims because of their education level or unawareness, it is not at all true because Daily Mirror Eye interviewed professionals who had also fallen prey to these dubious schemes. We also met several undergraduates who had even stopped their degrees and joined these schemes."
“My friend in the previous batch somehow managed to obtain the course certificate. Later, when he went to a government marketing institution for a job interview, his certificate was rejected on the basis that it had no value or recognition.”
Hyin says the company stole their money and suddenly vanished. “When I went to discuss my project, the institution where we had classes for several months, had been shut down. When I made inquiries, we were informed that the teacher who conducted classes had suddenly gone abroad. Since then I have kept chasing behind them but there has been no worthwhile result.”
Many of those engaging in pyramid schemes are often those who are already financially vulnerable like *Chitra. She is a retired government servant from Kandy joined Best Life in 2014 when it was gaining popularity in her town.
Writer - How did you find the money to pay for this scheme?
Chitra - I borrowed Rs.40,000 at high interest rates from a ‘poli mudalali’. My stupidity and my Karma are so bad that I did not know it would end up like this.
W - What did they ask you to buy so as to qualify as an agent?
C - I joined by making an initial payment of Rs.32,800 for a set of bulbs. Whenever I asked for the set of bulbs, they said the package was being shipped from abroad. I never received it.
W - How did you fail to meet the targets they gave you?
C - At the time, I was two months pregnant with my baby. Although I was stupid enough to join this scheme, no matter how hard I tried I could not attract new clients into the chain thereafter. On their instructions, I brought in many people to their workshops while carrying my swollen belly. I struggled for years to recruit new clients but failed.
Chitra says her bosses encouraged her to “stay away” from people including her own family who criticized the company. She felt trapped, she said: “it is like a cult. You have no escape. Some people are very badly brainwashed that they still don’t realise the danger of these schemes”. Many victims whom Daily Mirror Eye interviewed say their decision to join the schemes, had affected not only them but also their relationships with family members or close friends, many of whom were brought into the scheme.
According to evidence gathered by Daily Mirror Eye, Best Life Company has been maintaining bank accounts in many commercial banks in Sri Lanka. But, Sampath Bank has been their bank for several main accounts. Therefore, we spoke to the Senior Deputy General Manager Operations/Group Chief Marketing Officer of Sampath Bank Tharaka Ranwala to ask if they were aware of this questionable company’s conduct. His detailed response has been written in Q and A format.
Was the bank aware of this company’s conduct? If so, what did the bank do?
“Whenever we see a suspicious kind of transaction or suspicious kind of operation of an account, our responsibility is to file a Suspicious Transaction Report (STR) with the CBSL. We did our job. In the case of Best Life, as far back as 2008, we filed an STR. Based on our report only, there was a massive investigation done by the Financial Intelligence Unit (FIU) of the CBSL. For the investigation also, we gave all the required information.”
What made the bank file an STR against Best Life?
“When the type of transactions that happen in an account goes beyond that particular account’s profile and other mandate account information over a period during which we do the transaction monitoring, we notice the discrepancies.
In the case of Best Life, the company had informed us that they are in the business of trading and selling goods and etc. It masses the kind of transaction patterns that it should have. We also received complaints from customers saying the company seemed to be a pyramid scheme.”
Has the bank been informed of any directions from the CBSL about the STRs or next steps?
“From bank’s point of view, banks cannot suspend operations of any account merely based on the fact that an STR was filed. When our Compliance Officer inquired from the CBSL about the first STR which we filed in 2008, we were informed that the investigation done by the CBSL has been forwarded to the Attorney General for further advice. But even until 2014-2016, there were no directions from the CBSL as to what we should do about these accounts. In the meantime, we noticed that volumes of operations of this company’s accounts keep increasing. Therefore, again in 2016, we filed a second STR with the CBSL. That is all that we know.”
Evidence in our possession has also revealed that the promoters of these questionable companies disguised their true purpose by introducing overpriced products or sell services that had no form of standard recognition. However, they remain focused on making money through the recruitment of new clients.
Even though Best Life promoters, who describe their company, as one engaging in Multi-Level Marketing or Network Marketing, they are really operating pyramid schemes that violate the Banking Act. Upon closer examination, we found the products or the services, they are selling are just a sham or a pretense. Further, our evidence also revealed that their sales system and the commission distribution system were all sorted out in pyramid scheme style.
"Pyramid schemes, which are illegal according to the Banking Act No. 30 of 1988 could also be specified as an “unlawful activity” under the Prevention of Money Laundering Act No.5 of 2006 and the Financial Transactions Reporting Act No.6 of 2006."
Confirming this finding, a higher official at the CBSL, under conditions of anonymity, disclosed to Daily Mirror Eye that a few years ago, the CBSL in their investigation into Best Life Company had found that this company was in fact operating a form of illegal pyramid marketing.
“We carried out an investigation which revealed that this company is into pyramid trading which is illegal in Sri Lanka. That investigation report was sent to the Attorney General’s Department a few years ago for further advice,” the official said.
When asked about the obstacles on the road to legal action, he said: “Legal action has to be taken by the Attorney General’s Department. Even we have a problem as to why legal action is being delayed. But, our job ends with the submission of the documents to the AG’s department because we have no authority to undertake legal action. All we can do is to submit the reports and suggestions calling for further action, which we have done”.
Daily Mirror Eye took pains to contact Best Life Group Chairman Upali Fernando, but he was unreachable for days. As we respect the fair comment policy, we then tried to speak to Best Life Group Deputy Chairman Jayantha Gunathilaka. He answered the phone and we asked him some questions.
Q: Have you ever been informed by the Central Bank of Sri Lanka or any state law enforcement agency in the country regarding an investigation being carried out into your company or complaints against it?
A: No. (silence)
Q: Not even regarding police complaints?
A: No. (silence)
Q: Your company has been accused of engaging in pyramid schemes. Can you clarify?
A: I do not know. (He cut the line abruptly and did not answer any of our calls thereafter)
As we respect the fair comment policy, we then tried to speak to Best Life Group Deputy Chairman Jayantha Gunathilaka. He answered the phone and we asked him some questions. Gunathilaka’s photographs are seen on the screens at a promotional event
Pyramid schemes, which violate the Banking Act could also be specified as an “unlawful activity” under the
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Many of those engaging in pyramid schemes are often those who are already financially vulnerable |
Prevention of Money Laundering Act No.5 of 2006 and the Financial Transactions Reporting Act No.6 of 2006. Commercial lawyer, Senaka de Saram believes that those who operate pyramid marketing scams know the law and also how to escape from the law. “In order to counter such scams, continuous vigilance and a stronger commitment by the relevant authorities are important. These companies are operating under different methodologies to escape from the existing legal system,” Mr. de Saram said.
The pyramid companies do not come under the category of non-bank financial institutions to be registered with the CBSL. These are companies registered with the Registrar of Companies. For all purposes, anyone can register a private company and later operate it for illegal purposes.
Although the illegal schemes have thrived best since the pandemic, the Resolution and Enforcement Department of the CBSL has not been able to play a proactive role in combating the schemes apart from issuing public notices. The department’s Director D.M.D.B. Dissanayake said he was of the view that administrative delays and lack of sufficient legal powers were major obstacles in rooting out these scams.
“My personal opinion is that it is great if we can take further action at a one-stop-shop as it were without having to submit reports and suggestions to various government institutions. Otherwise, it is pointless. When a germ infects our body, we need to remove it without undue delay. The more time we take, the more harm the germ does,” he claimed.
Poor financial literacy plays a big role in attracting innocent people into these scams. Prof. Nalin Abeysekera, Head of the Department of Marketing, Open University of Sri Lanka, argues that though the financial literacy rate in Sri Lanka is 35% the highest in South Asia, there is no formal consumer society in Sri Lanka.
“Leaving aside the legal issue for a moment; economically, the damage to the country’s labour contribution is not insignificant. Not only the uneducated but also professionals like teachers and engineers fall prey to such rackets.
The pyramid scammers’ marketing strategy is an art that blinds people. It is a misreading of marketing. Proper marketing follows a set of ethics and standards,” Prof. Abeysekera said.
It is understandable for the general public to frequently have difficulty in recognising an illegal pyramid scheme. Daily Mirror found some famous Sri Lankan celebrities, award-winning sportsmen, politicians, and even some law enforcement authorities knowingly or unknowingly endorsing these companies including the Best Life company.
When media’s responsibility is to expose the truth and make the general public aware of scams, several television channels and newspapers knowingly or unknowingly have promoted these pyramid marketing companies.
However, since the number of victims is increasing daily, there is a noticeable anti-pyramid campaign where hundreds of ordinary people are now campaigning against these schemes on social media. This typically occurs when the majority of the operation’s profits are funnelled to the top, leaving little or nothing for the rest of its members.
The pyramid scheme is known to have started in the USA in the early 20th century with a hitherto unknown Italian migrant named Charles Ponzi, coming up with a super-profit scheme to lure investors.
As Ponzi himself had explained to US authorities, the demand for pyramid-type schemes arises out of people’s greed. That greed in turn fuels the desire to make quick money and become rich without labouring too much.
Sri Lanka had no specific laws against pyramid marketing until the country was struck by the Gold Quest pyramid scam in 2005 with even the New Central Bank Governor Ajith Nivard Cabraal, had been in the news over alleged links to pyramid schemes.
The Gold Quest scheme spread across Sri Lanka marketing gold coins at double their value. The CBSL had later
In Pamphlet no. 4 titled Danger Posed by Pyramid Schemes and Network Marketing Programmes, the CBSL in 2006 warned the public of the following.
Although the illegal schemes have thrived best since the pandemic, the Resolution and Enforcement Department of the CBSL has not been able to play a proactive role in combating the schemes apart from issuing public notices.