RIYADH, 14 January 2007 — If you get an offer to buy into a deal that offers a 70-percent return on investment, chances are the offer is a scam. But according to a report in yesterday’s Al-Riyadh newspaper, this didn’t stop some 30,000 people last year from losing an estimated SR7 billion on similar kinds of offers from phony financial institutions.
In 2001 the Saudi Arabian Monetary Agency (SAMA), and the ministries of interior and commerce began cracking down on unlicensed investment companies. Arrests were made and in December 2002 the SAMA increased its auditing efforts to root out these schemes as well and individuals operating investment schemes without a license.
But in 2006, government officials repeatedly warned individuals to be wary of investment schemes, indicating that after four years of increased vigilance the problem still persists. Even when individuals were arrested, investors rarely recoup their money. There is no consumer guarantee for buyers and officials seem to be playing a Whack-a-Mole game where each time an arrest is made another perpetrator appears to rip off unwary investors.
High profile cases of investment companies such as Al-Eid, Al-Jumah and Al-Nafisah became household names in 2006, but the victims of the alleged frauds perpetrated by these men have no idea if and when they will ever be able to recoup all or some of the money they invested.
Al-Eid convinced about 10,000 investors to buy into 22 various real estate and construction projects and allegedly attempted to run off with hundreds of millions of riyals.
Investors are wondering when the Ministry of Commerce will institute better protections against these scams.
