False Refund Scheme: Detection And Prevention Schemes

Question 1
Q. Distinguish between the various false refund schemes. Detection and Prevention measures

1. False refund schemes

A refund its process when a customer returns an item of merchandise purchased from the store. Examples of the schemes are as follows:-
1.1. Cash schemes
a) Theft of cash receipts
1. The employee physically stealing money from the cash till by not recording the sales
2. Fraudster overstates the legitimate amount of refund with the intention of steal the excess money
3. Refund appears as credits to the customer’s credit card rather than as cash disbursement
4. Customer is paid the actual amount owed for the returned merchandise and the excess is kept by fraudster
5. With credit card refund the perpetrator

The significant different is that the Ponzi scheme has only one “official” promoter while the Pyramid has several promoters.
Both schemes have much in common, they are both fraudulent investment schemes, they promise the “investors” unrealistic returns on invested capital, both typically encourage investors to reinvest their returns, both depend upon new “investors” to satisfy their obligations to prior “investors” and both are always insolvent and against the law.

Ponzi Schemes
• A Ponzi scheme is it’s a most popular and most devastating form of investment scam, especially so as pensioners and other soft targets are usually the victims and up facing lifelong financial devastation.
• The scheme it’s built meticulously from the ground up.
• An unscrupulous agent begins by creating false documents, which are then use to lure investors.
• Most of the Ponzi’s relies on the word of mouth.
• To promote the scheme well dressed, very intelligent, eloquent, confident and visibly successful individual is used to spread the word.
• Ponzi scheme operate on target market, if it’s the rich and high profile people they are targeting and the person recruit will be purported to be in the same league and this will be believable to the

v) If each recruit is successful, they'll all end up with R550 in profit from a R50 investment.

b) A product-based pyramid scheme
i) Is the same concept disguised as a legitimate direct sales opportunity; ii) A distributor recruits 10 salespeople who each pay R500 for a starter kit of products to sell. iii) The distributor gets 10 percent of each starter kit that's sold. iv) The distributor also gets 10 percent of each product that any of his recruits sells, including more starter kits.
v) The recruits are told that the fastest way to make money isn't by selling products, but by recruiting more people to buy starter kits. vi) The people at the top of the pyramid get commissions from everyone in their down line, the many levels of recruits below them on the pyramid.

2. One of the differences that make a Pyramid scheme more difficult to detect than a Ponzi scheme is the sheer number of people involved, which lends the scam credibility in the eyes of the investors.
3. Instead of recruiting investors, the perpetrators of the scam recruit more recruiters.
4. Each investor it’s required to bring more investors on board who will work under