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| Warning: Women Empowering
Women "Gifting" Scheme - It Could Seriously Damage Your
Pocket!
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The Government wants to warn people
about a "gifting" scheme operating widely in the UK under
the name "Women Empowering Women". Far from
empowering women, it could leave them seriously out of pocket.
Patricia Hewitt MP, Secretary of
State for Trade and Industry and Minister for Women warns:
"This scheme has a nasty sting
in the tail and preys on vulnerable women.
"I am extremely concerned that
many have lost thousands of pounds of their hard-earned cash and
potentially many more will lose out.
"I want the public to be aware
of the risks associated with schemes of this kind. I would urge them
to think long and hard before they get involved, and then
think again."
How it Works…
The scheme works like a chain
letter and only women can take part. It is based on individual
contributions or "gifts" of £3,000 given to a member of a
network (usually a family member or friend). In return, each
participant may expect to receive multiples of that amount up to £24,000
as they progress though the network hierarchy. However, this is
dependent on new participants continually joining the scheme.
The danger is that these types of
networks break down as the pool of new investors eventually dries
up. Participants joining the scheme late stand a good chance of
losing their original contribution never mind any return.
Women Empowering Women
does not appear to contravene current UK legislation on pyramid
schemes or multi level marketing because it does not involve any
trading of products or services nor any form of company structure or
control.
However, all schemes where money
changes hands may be subject to the general criminal law on fraud,
theft, and deceit. Anyone with evidence that a criminal offence may
have been committed should report the matter to the police
immediately.
Legally, these schemes are
difficult to crack but the Government is currently looking at how
they are dealt with internationally, particularly in the USA where
they are more common. We are examining all the avenues for
protecting the public from this type of scheme.
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The mechanics…
The risks are clear. For
example: If eight people invest £3,000 each and then progress
through the levels of the network, they will each expect to
receive £24,000 when they reach the final level.
If each of those eight people
are to receive that sum however, it will be necessary for 64
people to have each invested £3000. Each of those 64
investors will be expecting to collect their £24,000, but
that would mean that 512 people would now have to invest. The
next level would require 4096 participants then 32,768 then
262,144.
In simple terms each
participant needs another 8 investors in the scheme to get
their money back and make a return. The supply of potential
investors will dry up, leaving the majority of people in the
scheme having paid out a large sum and receiving nothing in
return.
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 Click
button to view our Fact Sheet on Trading Schemes.
March 2004
- The Department of Culture Media and Sport have published the draft
clauses of the Gambling
Bill dealing with chain gifting schemes. Under these
clauses, people who organise, promote or recruit into such
schemes would risk up to a year in jail and fines of £5,000.
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