BOZ warns public about Microsavers Hub malpractices

By Staff Reporter

BANK of Zambia has warned the public against a financial institution trading as Microsavers Hub as it is providing unauthorised financial services in Zambia.

In a statement, Bank of Zambia says the conduct of Microsavers Hub is in contravention of Section 6(2) of the Banking and Financial Services Act No. 7 of 2017 by offering a financial service that only collects deposits from members of the public and promising them short-term returns on their investment.

“BoZ’s review of the business model of Microsavers Hub has revealed that the company is in effect engaging in a ‘money circulation scheme,’ which is prohibited under Section 157 of the BFSA. According to Section 157 of the BFSA, “a person shall not -(a) Conduct, or participate in, a money circulation scheme; (b) Or issue a notice, circular, prospectus, proposal or other document inviting the public to subscribe to a money circulation scheme.”

According to the Central Bank, it was now collaborating with the Financial Intelligence Centre (FIC) and the Drug Enforcement Commission to assess compliance of the activities of the company with the BFSA as well as the Prohibition and Prevention of Money Laundering Act respectively.

“A money circulation scheme is an unsustainable investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation,” it warned.

The statement added, “the money circulation scheme usually entices new investors by offering higher returns than other legitimate investments, which are usually in the form of short-term returns. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going. The schemes are of various forms, but all promise high returns to individuals who are recruited by depositing money into an account after which they are issued with a purported investment document.”

“The public is warned to desist from getting involved in such illicit activities and is urged to be cautious with any investment that promises huge returns without underlying economic activity. Further, the public is advised to only deal with financial service providers licensed by the BOZ, the Securities and Exchange Commission or the Pensions and Insurance Authority.”