Stiff penalties proposed for pyramid scam schemes

PUBLISHED : Wednesday, 08 December, 2010, 12:00am
UPDATED : Wednesday, 08 December, 2010, 12:00am

Con artists running pyramid schemes face the prospect of up to seven years in jail and a HK$1 million fine under proposed law changes.

Hong Kong's Pyramid Selling Prohibition Ordinance has not been updated for 30 years and its effectiveness has been eroded by new tactics in changing economic times, resulting in acquittals in some cases.

The government, in reviewing the law, proposes a package of changes to combat such schemes. Linda So Ka-pik, a deputy secretary at the Commerce and Economic Development Bureau, said the public would be consulted on the new measures.

Under the present law, a pyramid scheme must involve the sale of goods or services by a participant.

With the law changes, any scheme in which new participants must make a payment and attract new members would be covered, whether or not it involves the sale of goods or services.

Anybody who establishes, manages or promotes such a scheme - whose benefit comes entirely or largely from bringing in new members - would commit an offence and face a maximum penalty of seven years' jail, up from three, and a fine of HK$1 million, up from HK$100,000.

So said they were interested in hearing the views of the public as to whether participants in such schemes, not just the promoters, should be held to have broken the law. 'We think those who know benefits are derived from bringing in new members and still do that to satisfy their greed should be punished by law,' she said.

Views can be submitted to the bureau via mail, fax or e-mail until January 31. The government will then consider the views before finalising the law changes for introduction to the Legislative Council before the middle of next year.

Pyramid schemes, which are illegal in many countries, require members to pay a participation fee in return for the right to receive commission on fees when they introduce new members, and when those new members introduce more, and so on.

In many cases, the potential cash flow tempts recruits to borrow money to join, and then they fall into financial difficulty or bankruptcy when they fail to find new members.

From 2007 to September this year, police received 10 complaints about suspected pyramid selling schemes and arrested 17 people in connection with five of the cases. But nobody was prosecuted because of insufficient evidence.

Ineffective law

Hong Kong's Pyramid Selling Prohibition Ordinance has not been updated for this many years: 30