Ponzi Schemes and Money Laundering: the Mavrodi Mondial Movement (MMM) Case Study

What is it about?

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business. 'Ponzi' schemes have existed for many years. They are simple and effective scams in which the promoters attract investors to a scheme by promising a very high return on investment, while guaranteeing the security of the investment. Part of the money deposited by early investors is used by the scheme’s promoter to pay subsequent investors their first dividend cheques or interest. These initial returns help convince victims that the scheme is both lucrative and sound. In the early stages of a Ponzi scheme, only a few investors are required for the scheme to be successful. The promoter continues paying the investors dividends until the investors are comfortable with their investments and willing to invest more. The scammers use some of the funds deposited by early investors to pay initial dividend cheques or interest - at this early stage the ponzi scheme only requires a few investors to operate successfully. The promoter continues paying the investors impressive dividends for a couple of months until the investors, encouraged by the early dividends, decide to invest more. The investors may also encourage their friends and relatives to invest. Soon there is a steady flow of funds into the scheme and an ever-growing number of investors. If the promoter is disciplined and retains sufficient funds in the scheme to continue to pay out 'dividends', a ponzi scheme can continue for many years. Theoretically, if the scheme continues to draw in new investors, it could go on indefinitely. In practice such schemes usually collapse because the promoter starts to spend the money too quickly, or the pool of investors starts to dry up. The schemes are named after Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. At a time when the annual interest rate for bank accounts was five percent, Ponzi promised investors that he could provide a 50% return in just 90 days. Ponzi initially bought a small number of international mail coupons in support of his scheme, but quickly switched to using incoming funds from new investors to pay purported returns to earlier investors. HOW DOES MMM NIGERIA WORK? MMM is a community of people providing each other financial help on the principle of gratuitousness, reciprocity and benevolence. In MMM you don’t have to make contracts or pledge your property. In MMM there are no lenders and no debtors. Everything is very simple: one participant asks for help — another one helps. The only thing that MMM demands from its participants is to be honest and kind to each other. You ask for financial help when you need it, you give financial help when you are able to do it. There is no сentral account, where all the System money flows to and where it can be easily stolen from. All the money is only on the banking accounts of the participants themselves! Participants transfer to each other directly, without intermediaries. In fact, MMM only regulates the process — nothing more. So the System completely belongs to people. How does it work technically? You declare the willingness to give help (click in your Personal Office (hereinafter PO) "Provide Help"), after which your account will be rewarded with mavro (internal “currency”/scores of the System). Mavros will start growing from the moment of offering the contribution at the rate of 30% per month. (Calculation of reward occurs twice a week, on Tuesdays and Thursdays at 00:00 GMT.) This sum in Mavro shows how much you can request for yourself. Say you have announced willingness to assist with $ 100. You will be rewarded in your PO with 100 mavro. And they will immediately start growing! A month later, these 100 will become 130 mavro. Accordingly, you will be able to request help for $ 130. However, it is not necessary at all to wait for a month. Help can be requested at any time. But only after confirmation of your mavro. What does "after confirmation" mean? It means only after you actually transfer money, i.e. really give help to another participant. (But not just declare willingness. :-)) Request for providing help comes to you in your personal office. If you do not do it within 48 hours, you will be removed from the system. Each participant is allowed to have only one account. PURPOSE This paper aims to help build awareness with the regulatory, enforcement and customs authorities as well as reporting entities about money laundering risks and vulnerabilities of the MMM Scheme, and how to mitigate them. While most publications on MMM are focused on fraud, this paper focuses on the money laundering risks and vulnerabilities associated with the MMM scheme.

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Why is it important?

As the Internet becomes more and more a worldwide phenomenon, Ponzi schemes are potentially subject to a wide range of risks and vulnerabilities that can be exploited by criminal organizations and terrorist groups. Investments in Ponzi Schemes like Mavrodi Mondial Movement (MMM) can be used to integrate money of illegal origin into the financial system, akin to investment of proceeds of crime in gambling. MMM Nigeria encourages users to provide help to other participants using bitcoin rather than traditional currencies. If you transfer money (provide help) via the Bitcoin (not a bank), you have an opportunity to acquire Mavro-50% in the MMM Scheme. Virtual currencies such as Bitcoin and other emerging payments technologies, while representing an opportunity for financial innovation, have attracted the attention of various criminal groups, and may be vulnerable to abuse by money launderers. Investments in MMM Nigeria are therefore a risk area for money laundering due to a lack of transparency regarding Bitcoins. Indeed, investments may be unclear and obscure, making it difficult to verify the origin of the invested funds.

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