Swindlers thrive on missing regulations
Multilevel marketing (MLM) companies are preying on regulatory and human weaknesses. They are managing funds and doing banking business illegally, but openly.
Asset managers, merchant bankers, brokers or portfolio managers who manage others' wealth are subject to government licence to operate.
But MLM companies in the country are growing fast in the absence of a regulation, investment analysts say. People's relentless efforts for financial security have made the moneymaking game easier for the fraudsters, they add.
According to Joint Stock Companies and Firms registrar, some 70 MLM companies are operating in the country. Nearly two-thirds of them are involved in banking, which is illegal. The rest offers a very few products.
Both concepts charge Tk 1,000 to Tk 10,000 for membership.
There are many more companies spreading out countrywide and running business without a trade licence.
Around 50 lakh people are involved in the business, says Al-Mahmud, managing director of Mway International Limited, an MLM company. And the money involved will be several thousand crore taka, he adds.
Market players, however, blame each other.
“We are creating jobs for thousands of unemployed youths. MLM exists in many countries including in developed ones,” said Gazi Md Zakir Hossen, chief executive officer of Uptrend Distribution (BD) Ltd known as uptrend2u.
But a section of unscrupulous gang is cheating people by offering big returns, Hossen claimed.
He points fingers at unipay2u, TVI Express, Visa Ray, Speak Asia, Legend Venture, Unigateway, Goldtrend, Neway and Destiny-2000 Ltd.
Many companies have already folded up, he said.
Meanwhile, a section of MLM companies at a press briefing yesterday requested the government to take action against those involved in illegal banking in the name of MLM.
This group claims multilevel marketing doesn't allow banking, and it must be product-based. This means profit will come from selling products.
Whatever the concept is, these companies are managing funds of people, mostly uneducated, in an unregulated way. They manipulate people by winning their trust.
And if a company can bring a minister, a senior politician or a lawmaker in any of its programme, it not only adds beauty to the occasion but also helps the company expand.
Ifty Islam, an investment analyst, says MLM companies in Bangladesh are “self-styled investment advisers” and “fund managers,” who are out of any regulations.
“They must be regulated because only regulations can protect individual's investment,” Ifty noted.
The government, however, has moved on the issue after receiving complaints against some companies. It is now working to formulate a guideline to regulate such business.
“An investigation is underway against the companies that cheated people,” a senior commerce ministry official told The Daily Star yesterday.
On Sunday, Bangladesh Bank cautioned those investing in multilevel marketing companies that offer abnormal profits.
The central bank said investors can be deceived by the MLM companies that offer 10 percent or more profits a month upon investments in gold markets abroad or foreign exchanges.
The Anti-Money Laundering Act 2009 deems such investments to be offences, the statement added.