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High-risk investors have no legal backing
published: Sunday | December 2, 2007
Gareth Manning, Sunday Gleaner Reporter
Eaton
Investors risk financial schemes stand to lose big, should the schemes crash, because participants will have no legal footing on which to recover their investments, according to attorney-at-law and University of the West Indies lecturer, Shirley-Ann Eaton.
In an interview with The Sunday Gleaner, Eaton, who is a former secretary of the Jamaica Bankers' Association, says while money lent to investment schemes can normally be retrieved in a court of law, this is not so in the case of the current high-yielding schemes. This, she points out, is because the law does not cover schemes offering excessive interest on money loaned.
Under Section Three of the the Money Lending Act and Money Lending (Prescribed Rates of Interest) Order of 2007, there is only provision for the recovery of loans that carry an interest rate below 40 per cent per annum in a court of law. This is far below the super interest rates many of the current investment schemes have been offering to their lenders - between 118 per cent and 120 per cent per year on principal amounts that start from a minimum of $100,000.
no resort
"If the interest rate is more than 40 per cent per annum, it is unenforceable (and) I can't take you to court and sue you for the money I have loaned you. So it raises the question of whether there is even any private law remedy," explains Eaton.
Furthermore, these investors could also find themselves in prison if those schemes are found to be laundering money. According to Eaton, they make the perfect vehicles to launder tainted funds because unregulated and high-yielding, they operate through the formal system in order to make payments to their clients, which makes them desirable vessels for money launderers.
"I don't know of anywhere in the world where anybody is getting a return of 120 per cent per annum on any kind of investment," Eaton argues. "What if, wilfully or inadvertently, these schemes contain proceeds of crime? What if money being given to them actually is criminal proceeds?"
According to the Financial Services Commission (FSC), there are over 20 "extremely high-yielding unregistered investment schemes operating in Jamaica".
Under the recently enforced Proceeds of Crime (Money Laundering Prevention) Regulations, a person can be found to have committed an offence under the act if that person knows or believes or even has reasonable grounds for knowing or believing that those handling their funds are engaged in laundering.
imprisonment
If convicted before a resident magistrate, that person could be ordered to pay a fine not exceeding $1 million or be sentenced to a term not exceeding one year or to both a fine and imprisonment. If indicted before a Circuit Court, however, that person could face imprisonment of up to 10 years and a fine.
In addition to prison terms for laundering, investors could face severe pressure from tax authorities. as under law they should be filing their tax returns.
"The question is, can the tax man get a reasonable fix on how much money these people are earning? And they can, if the money is being paid through the formal banking sector," Eaton states.
Tax Administration Department spokesperson Meris Haughton, while unwilling to disclose the approach being taken to recover the billions owed to it in income tax by these investors, noted that "all annual sums invested are taxable and we would not want to disclose exactly how we will recover those taxes".
FSC list of 'extremely high-yielding unregistered investment schemes'
Caribbean Real Estate Investment Fund (CAREIF)
World Wise Partners Limited
Swiss Cash
Higgins Warner Music and Entertainment
MayDaisy E-Partner Plan Club
F1 Investments/F1 Holdings
A3 Union
Wealth Builder and Associates
Right Vision E-Partners Private Members Club
Strategical Alliance Investment Company
SGL Holdings
Partner Financials
Kingdom Investments Unlimited International (KIUI)
Image Consultants & Services
Nipo Farms
USIMO
Other investment schemes not Included because of court proceedings:
Cash Plus Group
OLINT Corp. Limited
Overseas Locket International Corp.
LewFam Investments and Trading Limited
LewFam Investments Club
Note:
1. The latter four operations have been served with 'cease and desist' orders. 2. Olint, LewFam and Cash Plus have filed action against the FSC, for which court rulings are pending.
published: Sunday | December 2, 2007
Gareth Manning, Sunday Gleaner Reporter
Eaton
Investors risk financial schemes stand to lose big, should the schemes crash, because participants will have no legal footing on which to recover their investments, according to attorney-at-law and University of the West Indies lecturer, Shirley-Ann Eaton.
In an interview with The Sunday Gleaner, Eaton, who is a former secretary of the Jamaica Bankers' Association, says while money lent to investment schemes can normally be retrieved in a court of law, this is not so in the case of the current high-yielding schemes. This, she points out, is because the law does not cover schemes offering excessive interest on money loaned.
Under Section Three of the the Money Lending Act and Money Lending (Prescribed Rates of Interest) Order of 2007, there is only provision for the recovery of loans that carry an interest rate below 40 per cent per annum in a court of law. This is far below the super interest rates many of the current investment schemes have been offering to their lenders - between 118 per cent and 120 per cent per year on principal amounts that start from a minimum of $100,000.
no resort
"If the interest rate is more than 40 per cent per annum, it is unenforceable (and) I can't take you to court and sue you for the money I have loaned you. So it raises the question of whether there is even any private law remedy," explains Eaton.
Furthermore, these investors could also find themselves in prison if those schemes are found to be laundering money. According to Eaton, they make the perfect vehicles to launder tainted funds because unregulated and high-yielding, they operate through the formal system in order to make payments to their clients, which makes them desirable vessels for money launderers.
"I don't know of anywhere in the world where anybody is getting a return of 120 per cent per annum on any kind of investment," Eaton argues. "What if, wilfully or inadvertently, these schemes contain proceeds of crime? What if money being given to them actually is criminal proceeds?"
According to the Financial Services Commission (FSC), there are over 20 "extremely high-yielding unregistered investment schemes operating in Jamaica".
Under the recently enforced Proceeds of Crime (Money Laundering Prevention) Regulations, a person can be found to have committed an offence under the act if that person knows or believes or even has reasonable grounds for knowing or believing that those handling their funds are engaged in laundering.
imprisonment
If convicted before a resident magistrate, that person could be ordered to pay a fine not exceeding $1 million or be sentenced to a term not exceeding one year or to both a fine and imprisonment. If indicted before a Circuit Court, however, that person could face imprisonment of up to 10 years and a fine.
In addition to prison terms for laundering, investors could face severe pressure from tax authorities. as under law they should be filing their tax returns.
"The question is, can the tax man get a reasonable fix on how much money these people are earning? And they can, if the money is being paid through the formal banking sector," Eaton states.
Tax Administration Department spokesperson Meris Haughton, while unwilling to disclose the approach being taken to recover the billions owed to it in income tax by these investors, noted that "all annual sums invested are taxable and we would not want to disclose exactly how we will recover those taxes".
FSC list of 'extremely high-yielding unregistered investment schemes'
Caribbean Real Estate Investment Fund (CAREIF)
World Wise Partners Limited
Swiss Cash
Higgins Warner Music and Entertainment
MayDaisy E-Partner Plan Club
F1 Investments/F1 Holdings
A3 Union
Wealth Builder and Associates
Right Vision E-Partners Private Members Club
Strategical Alliance Investment Company
SGL Holdings
Partner Financials
Kingdom Investments Unlimited International (KIUI)
Image Consultants & Services
Nipo Farms
USIMO
Other investment schemes not Included because of court proceedings:
Cash Plus Group
OLINT Corp. Limited
Overseas Locket International Corp.
LewFam Investments and Trading Limited
LewFam Investments Club
Note:
1. The latter four operations have been served with 'cease and desist' orders. 2. Olint, LewFam and Cash Plus have filed action against the FSC, for which court rulings are pending.
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