Financial pyramids

A financial pyramid is one of the types of fraud in which income is generated from attracting money or other property or the right to it of individuals and (or) legal entities without using the funds raised for entrepreneurial activities that ensure the obligations assumed by redistributing these assets and enriching some participants at the expense of contributions from others.

A special feature of the pyramid scheme is the promise of fast and easy money. Financial pyramids often position themselves as an investment enterprise. They offer, for example, to purchase stocks and bonds, promise to invest money in high-yield construction, in gold mining or in ultra-efficient production. They come up with loud and attractive slogans in an advertising campaign: an Internet company, an innovative project, cryptocurrencies, housing cooperatives, gold, social networks.
The term of existence of financial pyramids depends on the size of the organization and the programs offered: from 3 days to 16 years. For example, the well-known investment company Madoff Investment Securities (USA), which was a financial pyramid scheme, existed for 48 years (from 1960 to 2008).

Types of financial pyramids:
Multilevel pyramids — the main mechanism for the construction and functioning of this structure is as follows: each newly arrived participant makes a down payment, which is distributed among the members of the pyramid higher in the hierarchy. In turn, a beginner, in order to earn money, must invite several people whose contributions will also be distributed in a similar way. And so it continues until the influx of new members runs out.
Pyramids built on the principle of network marketing - the main mechanism for implementing the scheme is the sale of goods/services by the company. In this case, the product is a disguise and most often its value is overestimated. Often such products are watches, cosmetics, household chemicals, etc.
Pyramids using a scheme based on the principle of sending invitations in messengers - carried out only in online groups in messengers: WhatApp, Telegram, etc. A group is being created, in order to join which you must pay a certain amount. After joining, it is necessary to invite an additional 2-4 people, a reward from 200% to 400% is given. The number of invited participants is unlimited. 
Participation (membership) in an exclusive club - clubs offer cruises, vouchers, travel, training in creating and promoting business, marketing, investment, copywriting, as well as teaching palmistry, astronomy, improving mental balance, psychology, numerology, symbols, magic, etc. The participant must involve other participants and (or) contribute the entry fee is for a certain period, depending on the programs (from 1-3 to 5-10 years
Signs of financial pyramids: 
At the same time, financial pyramids have the following characteristics of financial pyramids:

    - Massive advertising in the media, online resources, including social networks, with the promise of high profitability, passive income;

    - The company offers to buy out movable or immovable property from customers at a price above the market (in installments of three months or at a minimum interest rate), and on the contrary offers customers to buy movable or immovable property at a price below the market (with a mandatory advance payment);

    - A prerequisite is the purchase of goods/services for a certain amount and the involvement of several additional persons (there are no retail sales);

    - Lack of license/registration of the ARRFR, including, but not limited to, the implementation of: 

banking activities, including attracting deposits, issuing loans, making transfers and payments, etc.;
activities in the securities market;
activities in the insurance market;
microcredit activities;
collection activities. 
    - Money is deposited in cash, to the card account of an individual, or through the terminals of payment organizations to an electronic wallet;

    - There is no precise definition of the activities of a company, an individual, or a public project (a statement of unique activities).

    - The availability of preliminary (special) contributions for subsequent participation in the activities of the company or project.

    - A public promise of high profitability, significantly exceeding the level of the market indicator.

    - Guarantee of profitability (prohibited in the financial market, except for bank deposits);

    - The use of words and phrases or symbols in names, symbols, advertisements that make them look like well-known companies, brands.

    - The inability of a company, an individual or a public project to confirm its activities (directions of placement of attracted funds, information about their placement). Very often, "financial pyramids" declare that they conduct their activities in areas that are associated with high profitability: oil production, gold mining, construction, microfinance activities, the Forex market. 

It should be noted that there are various types of financial pyramids, but paying attention to the distinctive features, you can minimize the risks of involvement, thereby protecting yourself and your loved ones.

At the same time, a list of organizations with signs of illegal activity (signs of an unlicensed investment intermediary, signs of financial pyramids) has been published on the ARRFR website. The specified list contains organizations that have signs of financial pyramids, the actions of which have been reported to the ARRFR by citizens.

If you are offered to become a participant in a financial pyramid scheme, you must immediately contact the law enforcement agencies at your place of residence, the Ministry of Internal Affairs and the AFM.

You can also contact the ARRFR if you suspect illegal activities in the financial market. You can contact the financial regulator through the section "Financial pyramids and financial fraud" of the FingramotaOnline mobile application or by calling the Call Center: +7 727 237 1000 (opening hours: weekdays from 9.00 to 17.00).

The following channels of communication with the population are also used to improve financial literacy: 

    - official website of the ARRFR gov.kz and a special educational project Fingramota.kz , which are a single window of information for the public and the media;

    - the mobile application "FingramotaOnline", which allows the public to receive prompt consultations from the Agency's specialists regarding financial products, their conditions and protection of the rights of consumers of financial services;

    - specialized lectures and trainings on financial literacy for target groups of the population, which include students, pensioners, residents of the regions, journalists and employees of quasi-public companies.