Arbuzov: Ukraine to put end to financial pyramids

Adoption of the draft law on combating pyramid schemes will put an end to fraud in the financial market, which has become a mass phenomenon due to the low level of financial literacy of the population and the lack of effective legislation to prosecute and punish cheaters.

This was stated by first vice Prime Minister Serhiy Arbuzov, commenting on the adoption by the Verkhovna Rada in the first reading of the government’s draft Law "On the Prohibition of Pyramid Schemes in Ukraine".

"The appearance of bubbles has recently become a serious problem. Legislative gaps obstructed effective fight of financial regulators and law enforcement agencies. The provisions of the Law "On Protection of Consumers' Rights", which also prohibits the creation of financial pyramids, turn out to be imperfect: they regulate only the relationship between the consumer and the producer - seller of goods or services, or natural persons – entrepreneurs. However, the pyramids are created without any registration, so the current legislation cannot be applied to their organizers. Often, fraudsters manage to avoid any liability because of gaps in the law. Therefore, the need for a special law on the prohibition of pyramid schemes arose. It was developed on behalf of President Viktor Yanukovych by the government and the National Commission for Regulation of Financial Services. We expected that this document would be supported by deputies as it was aimed at protecting the ordinary people from fraud," Arbuzov said.

He explained that the bill, proposed by the government, will implement a comprehensive system to combat the creation of bubbles. In particular, it provides not only for giving a legal definition of this fraudulent scheme, but also for a ban on advertising of financial services, which have a signs of pyramid. In addition, the law imposes criminal liability not only for organization of the pyramid schemes, but also for the promotion of their activity.

Arbuzov said he hoped that the deputies with the government and the concerned authorities would promptly finalize the bill for the second reading.