Pyramid Schemes Exploit Economic Uncertainty in the Caribbean Amid COVID-19
Experts warn of an increase in pyramid and Ponzi schemes that take advantage of the financial uncertainty brought about by the COVID-19 pandemic in the Caribbean.
The Impact of COVID-19 on Caribbean Economies
The pandemic has resulted in a deep recession in Caribbean economies, leading to widespread financial uncertainty among citizens. According to the International Labour Organization (ILO):
- Reduced output production
- Deteriorating trade flows
- Increased unemployment rate
Many residents are anxious about their household finances.
A Favorable Environment for Pyramid Schemes
Robert FitzPatrick, President of North Carolina-based non-profit Pyramid Scheme Alert, explains:
“Pyramid schemes do very well in bad times. With so many people now unemployed and encouraged to work from home, they have seen an explosion during the pandemic.”
Pyramid and Ponzi schemes have already cost investors hundreds of millions of dollars across several Caribbean jurisdictions, including:
- Antigua and Barbuda
- Barbados
- British Virgin Islands (BVI)
- Guyana
- Jamaica
- Trinidad and Tobago
Lack of Effective Regulation and Collaboration
The absence of robust regulatory responses is a significant concern. Despite a history of pyramid schemes involving complex cross-border operations, there has been limited regional collaboration to address this issue.
In countries like Guyana, there is no specific legislation banning these harmful schemes. Anil Nandlall, Attorney General of Guyana, calls for immediate regional level action:
“We need to pursue this at the CARICOM and Caribbean Financial Action Task Force (CFATF) level.”
Ineffective Existing Regulations
Some countries, such as Barbados, Jamaica, and the British Virgin Islands, have attempted to regulate pyramid schemes using consumer law and anti-trust legislation. However, these patchy solutions have been insufficient in containing the problem.
Targeting Vulnerable Individuals
Contractor Trevor Smith in Trinidad and Tobago is one example of someone who, due to the financial impact of the pandemic, was drawn to a DDS investment opportunity. Despite promises of up to 600% returns, Smith only recovered a portion of his investment after 40 days.
Challenges Enforcing Regulations
Modern pyramid schemes often operate through messaging platforms like WhatsApp and Telegram, making it difficult for law enforcement agencies to investigate and prosecute them effectively.
The Need for Comprehensive Regulation
Without comprehensive regional legislation to outlaw these fraudulent schemes, vulnerable Caribbean citizens will continue to be affected by the financial distress caused by these scams.