Govt bans network marketing business; Unity's registration scrapped

KATHMANDU, May 24: The government has finally imposed a ban on network marketing business on Sunday, ending a long-running marketing scam of Unity Life International (ULI) that cheated hundreds of thousands Nepalis for years.

It also annulled Directives on Network Marketing of Commodities with immediate effect, and issued a notice asking all the firms involved in faulty commission-based pyramid-style network business to immediately stop operations. The Department of Commerce had issued the directives allowing network marketing on commodities two months ago. [break]

“Given the poor level of consumer awareness, poverty and undue maneuvering by cunning marketers, it is not appropriate to let the business to run just on the basis of directives. Hence, we have decided to impose a blanket ban on the business,” Finance Minister Surendra Pandey told myrepublica.com.

The government has decided to scrap the registration of ULI and suspend all its operations. “Ministry of Finance (MoF) has already instructed the Company Registrar´s Office (CRO) to implement the government decision through the Ministry of Industry,” said an MoF official.

This action has been taken in order to facilitate further investigations into the scam, dig out its fixed assets and investments and take action against it, elaborated the official.

MoF has instructed Nepal Rastra Bank (NRB), Insurance Board (IB), Securities Board of Nepal (Sebon), Department of Revenue Investigation (DRI), Cooperatives Department (CD), Department of Commerce (DoC) to proactively build cases against ULI and forward them to concerned agencies responsible for filing court cases against ULI.

Unity flouted banking, insurance, consumer rights and foreign exchange laws

DRI to investigate revenue evasion, money laundering

Joint team of all concerned ministries proposed for further investigation

Code of conduct sought for leaders´ public participation

Unity was engaged in illicit network marketing business and had raked in billions of rupees from 650,000 people selling them social security schemes without due authorization over the last four years. “Written instructions have been sent to all related regulatory bodies for actions from their respective sides,” said Minister Pandey.

The actions were taken after a joint investigation team of DRI, NRB and IB submitted a detailed report on the illegal activities of Unity to the government on Sunday.

The report has concluded that Unity violated Bank and Financial Institutions Act (BAFIA), Insurance Act (IA), Securities Act (SA), Cooperatives Act (CA), Foreign Exchange Act, Revenue Leakage (Control) Act and Consumer Rights Protection Act, among others.

“More than half a dozen cases have been recommended against the company,” said the source.

On the charge of running illegal network marketing and selling insurance products without authorization, the government will file a case of forgery against Unity. Department of Commerce and IB have been instructed to support Nepal Police to make strong case against forgery.

Nepal Rastra Bank has also been asked to extend support to the Ministry of Home to build a strong case against Unity for running banking activities without due approval violating Clause 71 of BAFIA.

“We will also work together with DRI to carry out further investigations and take actions against Unity for dealing on foreign currency without approval,” said NRB Governor Yuba Raj Khatiwada.

The investigations found Unity was also selling services abroad and promising to settle the liabilities from Nepal without securing necessary approval from NRB for activities related to foreign currency.

Given that the investigators could not unearth enough cash and assets belonging to ULI, as the company claimed to have possessed, the government has assessed that Unity might have siphoned off the money out of the country.

“If that is the case, the company will face action for money laundering. Hence, DRI has been instructed to investigate the matter,” said the source.

The investigation team has also recommended to the government to recover the money from the promoters of Unity and work out ways for refunding it to ULI clients on the basis of proof and priority.

The report has also suggested to the government to develop a code of conduct to regulate involvement of political leaders in award distribution and inaugurating ceremonies of private companies.

milan@myrepublica.com