Crackdown on pyramid schemes, illicit banks

PUBLISHED : Tuesday, 23 December, 2008, 12:00am
UPDATED : Tuesday, 23 December, 2008, 12:00am

Draft law revisions impose harsh penalties

Beijing will impose severe penalties on people involved in pyramid sales schemes, underground banking or manipulation of government statistics in a move to strengthen financial security, according to draft revisions submitted to the mainland's top legislative body yesterday.

The National People's Congress Standing Committee will debate eight bills and several government reports, including one on the central government's response to the international financial crisis, during a six-day, bimonthly session that started yesterday, Xinhua said.

Li Shishi, director of the Standing Committee's Legal Affairs Commission, said the proposed changes to the pyramid sales law were amended after lower-level bureaus and officials said an earlier draft was too general.

The previous version proposed that people involved in organising and conducting pyramid sales would be punished if the crime was serious, but did not detail what constituted a 'pyramid scheme', the report said.

Mr Li said the draft was revised to define pyramid selling as 'organising, leading sales activities aimed at promoting goods and providing services that require participants to pay for the products or services in order to obtain membership' and 'introducing a tiered system to force or prompt participants to attract new members to extract money and property, thereby disturbing public order'.

If the changes are passed, people convicted of involvement in such activity could be sentenced to up to five years in jail, while ringleaders could be given even longer sentences in more serious circumstances.

A regulation targeting underground banking has also been reviewed, according to Xinhua.

Illegal banks dealing in large financial transactions will be regarded as criminal organisations, the proposed amendments say.

Mr Li said his committee added this line after the Legislative Affairs Office and the Public Security Ministry highlighted how underground banking could disturb and harm the financial order.

Pyramid sales and underground banking have emerged as two major social problems in the recent weeks.

Last week, the Qinghai Industry and Commerce bureau cracked down on a pyramid sales network that involved almost 10,000 people across four provinces and millions of yuan in transactions.

Police also found that pyramid sellers targeted undergraduates who needed money for school fees. Some students even considered doing the job as a possible post-graduate career.

Illegal banks are targets despite mainland companies of varying sizes relying on them for cash in the credit crisis.

Illegal banks on the border help mainland businesspeople invest in the Hong Kong stock exchange.

The NPC has already read draft law revisions that would impose penalties on officials who 'intervene in government statistical work and manipulate or falsify data'.

The revisions of the draft are mainly aimed at preventing 'administrative intervention' in statistical work by banning any wilful changes to figures by officials, and the submission of false statistics from related agencies and staff, according to the document. Officials breaching the law could be fined or 'have their statistical licences revoked'.

The draft also said statistical departments above the county level should provide as much information to the public as possible by using 'open statistical materials'.