The SUN HK : Pyramids And Multi-Level Marketing Schemes

By Cynthia Tellez

Too often we complain of inadequate income, and for good reason. The inflation rate of Hong Kong is such that the annual salary increase of FDW does not reflect this reality. It is for this reason that the Asian Migrants’ Coordination Body (AMCB), which has long championed the interests and wellbeing of the FDWs in HK and their families, is currently campaigning for the FDWs’ salary to be raised to $5,894 , based on its study of the current economic condition of Hong Kong.

Because their income is often not enough to make ends meet, many FDWs aspire to earn additional income. Some resort to gambling: tong-its, bingo, mahjong, jueteng, etc, hoping to turn the luck on their side. Some brazenly take part-time jobs, which are illegal and could cost them their jobs, or even land them in jail. Others engage in small scale buy-and-sell, or go into multi-level marketing, which is risky, or get involved in downright pyramid schemes.

Everyone knows that making money from other kinds of work or sources outside of an FDW’s monthly salary is illegal in Hong Kong. This is imposed by the Immigration Department among the many conditions of stay which govern domestic workers’ (a.k.a. foreign domestic helpers) life in Hong Kong. This means that FDWs are allowed to enter Hong Kong on condition that they will work for a specific employer, at a specific address, and do only housework. Anything outside of these will be considered illegal, and makes the offender liable for prosecution.

Let me focus today on pyramiding and other related schemes.

One of the most alluring or enticing forms of “investment” is pyramiding, which promises huge profits at the shortest possible time.

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Pyramiding does not involve direct sales of products. It is a scheme wherein a person profits from the recr

It works this way: A person will recruit, say, 10 second-tier people/ or downlines directly below her. Each new recruit pays a membership fee/recruitment fee, part of which goes to the recruiter. This allows the first person, as recruiter, to earn from each “downline” (or recruit), and even from these downline’s subsequent recruits.

Each of the 10 new members is also enticed to recruit her own 10 downlines so she will, in turn, have an expanded source of additional income. The resulting structure resembles that of a pyramid, with the new recruits at the bottom, carrying the burden of paying the fewer people above them, all the way to the top.

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According to Investopedia, “Pyramid schemes are viable as long as the lowest levels remain wider than the upper ones. But once the lowest levels shrink, the entire structure collapses. By nature of exponential math, it’s just plain impossible for pyramids to sustain forever, and somewhere in the chain, people will invariably lose their money.”

Another scheme is the multi-level marketing (MLM), which according to Investopedia, could be “a legal business practice” because, unlike the classic pyramid schemes mentioned above, this model involves the sale of actual products or services. There are, indeed, a lot of legal MLM or networking schemes, like the sale of Triumph, Tupperware. etc. But there are also many suspicious multilevel and networking schemes. Some of these do not require their participants to actually sell products as they can use these themselves. In order for the company and uplines to generate income, they have to keep recruiting sellers or investors below them who are lured into “investing”, meaning buying, those products and services, and at the same time, recruit more members/downlines.

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There are a lot of MLM schemes in Hong Kong, with many catering to FDWs. Many recruiters often assure their new recruits that the money to buy their products as initial “investment” is not a problem. They encourage the recruits to apply for a loan and even provide references, assuring them that they will recover this initial outlay faster than they think possible.

When the downlines fail to lure in more people, the company and the upline still get to keep their money, leaving the new recruits with unpaid loans. And when collection agencies are called in, life becomes more stressful for the already burdened OFW. Relationships suffer. Friends (who were recruited but failed to keep the chain going) become enemies. And when threats of legal action are made, the blame game begins.

So when seemingly-good-hearted people approach you and offer you similar business venture or activity for extra income, be reminded of the following to avoid becoming victims of such schemes. You could also end up endangering your job and future in search of that extra buck.

Always be conscious of the reminders stated above. Be critical of these schemes that benefit only the primary investors. Since it is a scheme, it is bound to benefit only the schemer who preys on the more vulnerable section of the society. So be aware, beware.

Always have a second thought. Ask yourself first whether or not the offer is legally permitted in Hong Kong. Remember that we are in a foreign land. The laws differ from our laws in the Philippines. So even if the “business” is registered in the Philippines, assuming that they showed a registration certificate, it is not automatically allowed to operate in Hong Kong unless registered here. Be critical of “sweet-talking” people.

We must know the laws that govern our actions here in Hong Kong.

Bear in mind that your Hong Kong work visa is conditional, meaning, you are only allowed to do domestic work at the address indicated in the employment contract.

So do not listen to those who say that you can do extra work (business, part-time work) for extra income. This is not allowed. Even selling via facebook or any social media, if detected by the authorities, could endanger your future.

Be aware of the reminders above to avoid unnecessarily putting yourself in a risky situation. Better to be cautious than sorry afterwards.

If you have other queries, do not hesitate to call our office at 2522-8264.
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This is the monthly column from the Mission for Migrant Workers, an institution that has been serving the needs of migrant workers in Hong Kong for over 31 years. The Mission, headed by its general manager, Cynthia Tellez, assists migrant workers who are in distress, and focuses its efforts on crisis intervention and prevention through migrant empowerment. Mission has its offices at St John’s Cathedral on Garden Road, Central, and may be reached through tel. 2522 8264.

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