SEC WORKS WITH SWAZI CENTRAL BANK

UNCLAS MBABANE 000083


AF/S (MHARRIS)
USAID FOR TINA DOOLEY-JONES

E.O. 12958
TAGS: ECON EFIN PREL PGOV WZ
SUBJECT: SEC WORKS WITH SWAZI CENTRAL BANK


1. SUMMARY: On March 17 - 19, two Security and Exchange Commission
(SEC) officials, funded by USAID, participated in a regulatory
workshop on Ponzi and pyramid schemes, sponsored by the IMF and
hosted by the Central Bank of Swaziland (CBS). The conference
convened working level bank officials from twelve African countries
to discuss ways and means to fight Ponzi and pyramid schemes. SEC
officials report that most attendees acknowledged the potential for
Ponzi schemes in their countries and understood the ramifications of
large scale Ponzi schemes. Attendees agreed that collective action
against these schemes would be more effective than individual
country efforts. END SUMMARY.


2. On March 17 - 19, Jane Jercho, SEC Associate Regional Director
for Examinations, and Timothy Warren, SEC Associate Regional
Director (Enforcement),participated in an IMF- sponsored regulatory
workshop on Ponzi and pyramid schemes. SEC's participation was
funded by USAID. Representatives from 12 African countries
participated in the three day conference hosted by the Central Bank
of Swaziland. SEC officials report participants exhibited a good
knowledge base, high degree of professionalism, and actively
participated in discussions. The conference covered the impact of
Ponzi and pyramid schemes, legislative initiatives, effective
remedies, and investigating and prosecuting techniques. Country
representatives indicated significant hindrances to combating Ponzi
and pyramid schemes are: difficulty in closing down Ponzi schemes
while they are "successful"; scheme operators involving people who
are politically connected, providing protection from possible future
prosecution; inadequate regulatory framework; and difficulty in
acquiring evidence to prosecute cases in cash societies. Workshop
attendees noted South Africa's absence, complaining that scheme
operators flee to South Africa and South Africa has not been
responsive to the problem.


3. COMMENT: The workshop is a timely coincidence as the CBS is
currently dealing with three alleged pyramid schemes. The CBS froze
the bank accounts of all three organizations in late 2008. One of
the alleged pyramid schemes is operated by Qhawe Mamba, co-owner of
a local television channel and reported to have a close relationship
with the royal family. As the economy worsens, the middle class,
feeling the pinch of financially tough times and needing other ways
to increase their income, plus those in rural areas who are
perpetually short on cash and with few income-generating options,
are targets.


4. Embassy Mbabane appreciates Embassy Pretoria and USAID Pretoria
assistance in facilitating the SEC's participation in the workshop.

PARKER