Money Smart Week: Heighten your financial awareness to avoid falling prey to opportunistic scams

Money Smart Week: Heighten your financial awareness to avoid falling prey to opportunistic scams
(Photo: Twitter / @SAgovnews)

As lockdown tightens its grip on families’ purses, unlicensed financial services providers are swooping in.

First published in the Daily Maverick 168 weekly newspaper.

The timing of Money Smart Week, which runs from 22 to 28 March, seems particularly pertinent in the current climate: a year of lockdowns has highlighted the value of financial literacy as many consumers face job losses, forcing them to re-evaluate their finances.

The financial literacy campaign is aimed at motivating and empowering South Africa to make better financial decisions.

 Arm yourself

Money Smart ambassador ProVerb says becoming financially savvy is one’s best chance of achieving financial freedom.

“If we are to break the cycle of poverty, then we have to empower ourselves and the next generation. Financial literacy is a powerful tool that is unfortunately not as widely taught in school as it should be,” he says.

Avoiding debt has helped him considerably in the past year: “As an entertainer with inconsistent income, especially now with the pandemic and income being so interrupted, savings have really come in handy.”

Lyndwill Clarke, head of consumer education at the Financial Sector Conduct Authority (FSCA), agrees: “A low savings culture and the failure to service debt, together with a decline in disposable income and the financial impact of the pandemic, makes a campaign such as Money Smart Week even more vital to improve the ability of consumers to make sound and informed financial decisions. After all, one financially literate person in a home can influence an entire generation.”

To help improve financial awareness, DM168 has rounded up some of the recent consumer warnings issued by the FSCA:

Crypto assets

As crypto assets have increased in popularity, so too have the complaints to the FSCA from consumers who have invested in these products and lost their money.

Crypto assets, including cryptocurrencies, are digital representations of value that are not issued by a central bank. Popular crypto assets include bitcoin and ethereum. Crypto assets are currently unregulated by the FSCA or any other body in South Africa, which means, if you fall victim to a scam, you have no recourse and you are unlikely to get your money back.

“The high risks already inherent in crypto assets are further being compounded by scam activity as well as by unregulated firms targeting consumers with marketing material that highlights the rewards but not the potential downsides of investing in crypto.

“It is for this reason that the FSCA is working at finding measures to regulate certain aspects and players in the crypto asset space,” says Brandon Topham, divisional executive for enforcement at the FSCA.

In November last year, an Intergovernmental Fintech Working Group, comprising the FSCA, National Treasury, the South African Reserve Bank and Prudential Authority, the Financial Intelligence Centre, the National Credit Regulator and South African Revenue Services, published recommendations pertaining to the regulation of crypto assets. This document and the public comments on the recommendations are under consideration and, until any legislation is in place, this sector remains unregulated.

The most recent warning from the FSCA in relation to crypto assets was not to deal with, which is not authorised to provide financial services.

Forex trading

While foreign exchange trading can be legitimate, it is often used as a front by scammers and is viewed as a high-risk investment – even when it is legitimate.

Some of the firms the FSCA has issued warnings against include:

Bureaux Trading – This trading platform claims to make use of a “trading bot” that completes more than 1,000 trades a day. It claims that its “unique algorithms, and high-performance speed” obtain “greater profit as compared to traditional trading at stock exchanges while maintaining the uttermost reliability level”.

However, Topham points out, Beurax requires a South African financial services provider licence from the FSCA to conduct business with South African citizens, making it highly likely that the company is conducting unregistered business, which is a criminal offence. Topham said the FSCA would also be confirming the company’s alleged authorisation by the Australian Securities and Investments Commission.

“Regardless, Beurax still requires a South African licence to operate locally. A South African licence will subject Beurax to codes of conduct that are designed to protect the investors… Our view is that Beurax is luring South African citizens to do business with it with promises of unrealistic returns. The claim on the website of a return of 28% a month is simply not realistic and raises a major concern about the legitimacy of the business,” he says.

CFX South Africa is also not registered or authorised to provide financial services to the public.

Forex Guru Investment. Complaints to the FSCA show that this company has been soliciting money and making promises of huge returns.

FWT Markets and Forex Kings have been soliciting money with promises of unrealistic returns.

 Dodgy funeral insurance

At a time when the death rate is rising, dubious funeral insurance providers are taking advantage of the situation. Clarke says you should only deal with companies that are licensed to sell you funeral insurance.

Your policy document should include the name of the long-term insurance company underwriting the funeral policy.

You can check that the company is registered with the FSCA by calling 012 428 8000 or 0800 20 37 22 and by checking the financial service provider (FSP) number on the document.

The FSCA’s recent warnings about funeral insurance providers specifically refer to these companies as not being licensed:

  • Celani Funeral Services
  • Christian Funeral Parlour
  • Impilo Plus Insure. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.


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