Friday, February 23, 2024

Affording consumers protection from fraud

The resurgence of a phenomenon that has grabbed the headlines recently and elicited a stern warning from the state financial intelligence service has left many alarmed and perplexed. The proliferation of schemes in which their promoters invite the public to buy shares or invest jointly in real estate, agriculture, transport, construction and other sectors represents a return of similar practices in the past where fraudsters bent on conning the public using legally sanctioned business operations as cover has become a cause for concern. These individuals/companies deploy smooth-talking sales operatives and alluring ads in which they convince unsuspecting members of the public to part with their hard-earned money to acquire houses, vehicles, construction machineries and other assets at low prices or earn astronomical returns on their investment. The rise in incidences where unscrupulous characters rip off merits a comprehensive investigation by the relevant government agencies and law enforcement organs to determine who is behind them and the extent of the harm they have occasioned. Turning a blind eye to untoward practices which undermine the inviolable trust that should exist between contracting parties makes it difficult for the public to engage in commercial dealings and thereby dampen the investment climate.

The interaction between the business community and consumers should not be governed by the concept of freedom of contract alone if consumers are to be safeguarded against fraudulent acts; they also need to have recourse to other appropriate legal and administrative remedies to protect their interest. All businesspersons who demand partial or total payment in advance prior to delivery must not be allowed to collect such payment before they furnish adequate assurance guaranteeing that they will honor their obligations in accordance with the terms of the contract. They should also be required to have a paid up capital that enables them to meet their contractual commitments. The absence of legal protections like these has played a significant role in the financial ruin and psychological trauma that thousands of deceived consumers have suffered from.

Another factor that has contributed to the weak state of consumer protection from scammers is the lack of strong regulatory frameworks and agencies that, with the notable exception of financial institutions, has left many share companies founded through public subscription at the mercy of such characters. Banks and insurance companies operating in Ethiopia would have gone bust let alone thrive as they do now had the regulatory National Bank of Ethiopia not exercised strict control over them. The impressive profit they consistently turn year in year out as well as the scandals it dealt with decisively before they got out of hand is a testament to this fact. A raft of companies engaged in real estate, agro-industry, transport, merchandise sales and other sectors have either shut up shop or are barely surviving due, among others, to the non-existence of close monitoring that allowed charlatans to utilize the companies as vehicles to execute their reprehensible plans.

The astounding effrontery of the scams perpetrated for some time now by mafia-type groups have made it practically impossible to continue with the traditional trust-based nature of business transaction that existed for generations. Business dealings by nature require the exercise of acumen and farsightedness. However, the deceptions that are being witnessed these days are becoming more sophisticated by the day, swelling the rank of victims who fall prey to them. The responsibility of keeping abreast of the loopholes which cheats exploit and close them off primarily rests on the shoulders of the government. The rule of law will remain a pipe dream as long as citizens are unable to rely on the government to protect them from con artists and bring the criminals to justice.

All this compels us to raise some critical questions. What explains the lack of any meaningful action on the part of pertinent government agencies like the Ministry of Trade and regional/municipal trade bureaus, the Trade Competition and Consumers Protection Authority, and law enforcement organs take proactive measures to discourage confidence tricksters from duping citizens all over the country? Doesn’t this inaction imply that they enjoy the backing of powerful patrons? Who was entrusted with ensuring that they provided proof demonstrating possession of the requisite business license, capital base, work experience, commendable track record, insurance coverage, etc., before they embark on soliciting money from the public? Any investigation into the matter should address these and similar other issues.

It’s through a strict enforcement of the law that swindlers who have no qualms about fleecing citizens can be brought to heel. This calls for, inter alia, the introduction of a new set of rules, namely making it mandatory for any business enterprise to take out adequate insurance prior to mobilizing funds from the public, to strengthen existing legislations. The victims of previous as well as recent scams have asked the government to help them recover their losses. Though it cannot compensate them directly from its coffers, it has to explore various options that alleviate the suffering they underwent. It is also incumbent up on it to see to it that they get justice by punishing the culprits to the fullest extent of the law. Such clear demonstration of a commitment to hold elements intent on enriching themselves at the expense of credulous consumers will have a strong deterrent effect.   

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