New FSCA investigator gets tough with scamsters

New regulatory powers make it easier to investigate financial fraud.

FSCA investigator gets tough with scamstersThe new director of investigations and enforcement at the Financial Sector Conduct Authority (FSCA), Brandon Topham, made it clear in a media briefing recently that he will be taking a tough stance against anyone defrauding South Africans of their hard-earned cash.

He told journalists that he has accepted the position as he feels very strongly about the growth of criminal syndicates operating in the financial sector. “We cannot have a situation where people are driving fancy cars on the back of others’ misfortune.”

The FSCA’s powers have been expanded, making it easier to investigate potential fraud, and the number of staff in the investigation department has been doubled. Topham says his focus will be to increase the speed of investigations and to work with the prosecuting authorities to bring criminals to justice.

Casting the net wider

One of the key changes is that anyone offering financial services or products will fall under the ambit of the FSCA. Until recently the powers of the regulator extended only to those companies and individuals who were licensed under the Financial Services Board. Therefore, when a consumer reported illegal activities of individuals or companies that were not registered, the regulator could not investigate. Now anyone involved in offering financial services and products can be investigated.

The FSCA also has the power to decide what products and services are considered part of the financial sector. Topham says they are currently discussing including cryptocurrencies as a financial product which would then allow them to investigate allegations of fraud in this area.

Topham says their powers of investigation will also extend to offshore transactions. If a South African resident conducts an investment with an offshore platform through the internet and is defrauded, they can lodge a complaint with the FSCA. While Topham says the chance of recovery is low, the department will liaise with international authorities to shut down illegal operations. Directors of these companies will also be prevented from doing business in South Africa.

The department is taking a more proactive role in identifying scams by monitoring social media and advertisements –  for example those Facebook “forex traders” who claim to double your money in a week. They will also send “mystery shoppers” to courses and seminars where individuals may be selling schemes with the aim of defrauding investors.

While Topham’s enthusiasm is a breath of fresh air and we are already seeing more investigations and warnings coming from the FSCA, the rise in criminal activities will keep them under severe pressure. It also takes years to complete an investigation and prosecute those involved. Even with the enhanced powers it will be difficult to recoup money that has been stolen and the focus will be on preventing the fraudster from preying on more victims. Prevention is always better than cure, so be vigilant and don’t fall for promises from get-rich-quick schemes.

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Pyramid Schemes remain under the National Consumer Commission

Pyramid Schemes are not considered financial products and fall under the misuse of marketing and the Consumer Protection Act. They therefore remain under the National Consumer Commission (NCC). However, Topham says the FSCA will investigate pyramid schemes that have grown significantly in size and which pose a risk to the public at large.

Twin Peaks model

As part of the restructuring of how the financial industry is regulated, the FSCA replaced the Financial Services Board (FSB). The financial industry now has two main regulators under the Twin Peaks model: the South African Reserve Bank which oversees prudential issues such as the stability of the banks and creating prudential regulations to prevent a financial crisis, and the FSCA which oversees the conduct of the industry, especially in relation to consumers.

This article first appeared in City Press.

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