By: Brendan Dale

It’s always really sad to read about people who lose their life savings by investing in companies that turn out to be scammers. I heard a story this week about a Durban-based company called Global Investments which fleeced over 800 investors of all their life savings and the owners are still on trial for fraud to the value of R140 million. This is just one of many ponzi schemes in South Africa and it is terrible that people can lose all their money so easily.

There are many reputable banks and investment companies in South Africa that have been in existence for a long time. Even though it is possible that internal fraud or mismanagement could happen, all companies have processes and procedures in place to ensure the good management of your money. There is however a notable difference between a legitimate company where an employee steals money and a ponzi scheme. A ponzi scheme is really just a fraudulent investment company which is set up with the intention to steal money. Such schemes seldom last more than a few years as they are unsustainable.

Here are 2 simple tips to help you identify a scam or fraudulent operation.

1 – Check the FSB registration

All non-banking financial companies in South Africa have to be registered with the Financial Services Board (FSB). The FSB is an independent institution which oversees financial services and essentially helps to safeguard against scams. Even if a company has printed material or a website with their FSB registration number, spend 2 minutes and check it yourself at:

Only deal with companies whose FSB status is Authorized.

2 – If it sounds too good to be true, it is

Be skeptical of anyone who promises you high returns on your money. No one can guarantee returns in excess of 15% so don’t even entertain such thoughts. This doesn’t mean that you cannot make great money on investments; it’s just that no-one can guarantee it and it is a bit of a gamble.

If you have any doubt or something just doesn’t feel right, rather don’t do it! There are so many well established and reputable investment companies in South Africa. You could invest with a promise of 25% growth and lose absolutely everything, or you could invest with a legitimate company and probably earn a lower interest rate but your money will be safe until you need it.

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