How Are Expats in Oman Falling Prey To Financial Fraud?

18 Oct 2018
POSTED BY Y Magazine

Financial fraud is rife in the GCC, and Oman is no different. We look at how investment scam operators are ripping us off, what we can do to avoid getting sucked in, and how to walk away.



If something sounds too good to be true, the chances are, it probably is.

Yes, it’s an old saying. But when it comes to looking after our hard-earned money, the people who get rich from our investments are often not us.

This is the basis of ‘regulated fraud’ in the GCC, in which an extensive network of seemingly legitimate agents steal off the plates of those less privileged.

Standing outside Gerard’s* workplace in Muscat – donning a designer three-piece suit and armed with a fancy leather-cladded Mont Blanc briefcase, a swanky Swiss watch, an Apple smartphone, and most significantly, wearing a Cheshire cat smile – is finance manager cum broker Robert*, who works for an ‘expert’ investment firm based in Dubai.

His intention? To help Gerard “save up for retirement”. At least, that’s what he had conveyed in the cold-call that he had placed to lure him in.

But everything Robert owns – the fancy attire, gizmos, and all his assets – are all built on the blood, sweat, and tears of hundreds of expats looking for the same thing that Gerard is: to invest their hard-earned money in a safe, tax-free haven and earn interest on their savings.

Given the prospect of striking gold, Gerard doesn’t give his fellow Brit’s words a second thought. His money will be safely housed in an investment firm on the Isle of Man – a tax haven – and the interest will earn him 150 per cent of his initial investment over a period of 10 years.

Robert’s charm is such that 42-year-old expat Gerard will sign up for the ‘Savings Account’ as soon as he can. His initial investment will stand at GBP 10,000 (RO5,062), for which he will then pay in instalments, monthly.

By the end of the term, his final cash out will be GBP25,000 (RO12,656) – an incredible amount by all means.

It all sounds wonderful but it was not, and is not, the reality.

Fast forward to today, and Gerard is in a legal tussle with the financial firm.

In an interview with Y Magazine, he says: “There was no looking beyond his (the broker’s) words. I believed everything he said, though, I did play my cards then to make sure to see the supporting documents and verify everything.

“So, in March of 2016, I signed documents in my office in Muscat – all attested and verified by the Emirati authorities.”

What Gerard didn’t know, however, was that he’d just signed up for the most elaborate scam in the region. Four months into the investment – after which Gerard has left his job in Oman and is back in the UK – he receives word from his broker that he’s being couriered the legal documents and all the terms and conditions.

And to his horror, he finds that he isn’t signed up for a ‘Savings Account’ at all but rather a ‘Managed Savings Account’.

This means his returns will stand at a mere 6 per cent per annum at best after settling the annual account maintenance fee, finance premium for the company, and an encashment charge that can go up to 75 per cent if he withdraws from the scheme.

The most shocking of revelations, however, is that Gerard hasn’t been locked into a 10-year contract but rather a 14-year scheme – and that, to him, makes a world of difference.

As per the financial institution that has been known to be involved – indirectly through outsourced brokers – in such schemes, too, explains that a ‘Managed Savings Account’ is in fact an investment-linked life assurance policy.

As per the company, the investor gets to choose the number of years to be committed under the account term at commencement but is also offered the opportunity to pull out should he wish to.

While that is true, an investigation into this company’s terms and conditions reveal that such instances would cost the investor big bucks in penalties. While the percentage of penalties vary, we learn that the company charges investors 55 per cent and above in penalties.


But is this legal?


According to financial lawyer Sandeep Sharma – an expert in the field of investment security – working in a leading law firm in Oman, it is indeed permissible for an investment company to cut risks by opting to penalise the investor.

He tells us: “The limit that a company can charge may vary from country to country. In the case of Dubai, the local regulatory board Dubai Financial Services Authority (DFSA) keeps an eye out for such practices.

“While the legal limit that is allowed to be extracted from the investor is still dictated by the financial brokers and the institutions, it must be kept in mind that you can still fight for your rights.”

According to the lawyer, investors must be made aware by their brokers in signing that they have accepted the terms and conditions. Also, they must be made aware of all applicable charges – be they hidden or not – and penalties; and procure in signing that they have understood all possible risks.

“That said, we cannot scrutinise the financial institution at face value, either,” he says.

“Often, it isn’t the scheme that is at fault, but rather the broker that one deals with – they can be dishonest to make a quick buck. And some very well-known firms are notorious for allowing their contracted brokers to run such schemes. “In such cases, you can file a lawsuit against the broker or the brokering firm – but in many cases, the agents will try to settle for an out-of-court payout to protect their identity and reputation in the industry.”

However, the lawyer represented an American businessman in Oman who had fallen victim to a broker from a UAE-based firm in 2005, which saw him losing an excruciating GBP 650,000 (RO329,000) in charges when closing his account.

To protect the investor’s identity Sandeep doesn’t reveal more information – but we understand that several expats, mostly high-paid ones, are considered sitting ducks for agents looking to make a quick buck.

In reality, however, the scams do not end there. While Oman and the UAE share several unique features, including a boundary, UAE lays victim to several scams involving innocent residents – with some inevitably trickling down to Oman.

While the accurate statistics of scam losses isn’t known, we are aware that more than 200 Omani expats, of a total of 3,700 victims, were involved in an overseas investment scam – Ponzi, which was a fraudulent investment operation that worked by paying returns to separate investors with money paid by subsequent investors, rather than from any actual profits earned.

That said, the world of financial brokerage reveals that most advisors and agents selling investment schemes are not qualified for the job – which may be the reason several expats are left questioning their policies and ending up with several loose ends after the signing.

During our research, we come across several job postings on websites such as Bayt.com and Wisdom Jobs Gulf for ‘Financial Advisors’, ‘Financial Brokers’, and ‘Insurance Agents/Finance Brokers’ – all looking for British nationals and without any prior work experience.

All our efforts to contact these companies end in vain. But from the job descriptions posted online, we learn that these agents aren’t paid fixed salaries but make their earnings from commissions instead.

Moreover, the latter title of an ‘Insurance Agent’ merely requires the candidate to hold a high school diploma – hardly a qualification for a high-risk finance advisor role.


Story of an expat victim of financial fraud


Michell Bianchi, an Italian expat working in the automotive sector as a leasing manager, reveals that he fell victim to such a scheme in 2015. Much like Gerard, he too was promised high returns – but he says he hadn’t made a penny since the day he signed up for the contract.

He says: “When I had just come to Muscat, I decided to save some money for my marriage and other expenses. That’s when I approached a company called ‘financial.org’ (a company that has been known to sponsor British Formula One Team ‘Williams’) and decided to make an investment there.

“I opted to go for the least risky scheme – a savings account. To maintain legality, I would only send Omani Riyals into my account, which I was promised would be set up in the Cayman Islands.

“But, after signing the documents, I came to understand that my broker hadn’t been able to procure a savings account but instead a mutual fund scheme. He then had the audacity to keep it away from me for a whole 13 months (!)

“When I enquired with my broker about this, he stated that he had just joined the team and that he wasn’t in accordance with the company’s and country’s laws, yet. “He also stated that his only way to earn money was through clients – and even asked me to continue with the scheme.

“I refused, and his lapse meant that I was reeling for months in court in Dubai before I was awarded my 13 months of payments in full.”

Michelle is one of the lucky ones too, as he rightly confesses: “Expats who come to the Middle East are only here to make money. But, then you have these companies that, due to lack of diligence or with the aim to cheat, leave these people in a financial limbo.”

Meanwhile, our interviewee Gerard’s misery continues today, as he learns that as a part of the ‘Managed Savings Account’ scheme, he’d also been signed up for a Unit Trust – again, without his consent.


Unit Trusts, Mutual Funds, Managed Savings Accounts, and so on…


As per Investopedia, an online portal educating readers about investment, a Unit Trust is an unincorporated mutual fund structure that allows funds to hold assets and provide profits that go straight to individual unit owners instead of reinvesting them back into the fund.

The investment fund is set up under a trust deed and the investor is effectively the beneficiary under the trust.

While that provides a wider margin for profits for the investor, it also puts them at several risks.

To date, Gerard has lost a total of RO12,350 in hidden charges, which includes a shocking year’s worth of payment as commission to his advisor – and he continues to lose money daily. To regain what’s left of his hard-earned money in his account, though, he is now approaching the UAE authorities for help.


The Legal Line


But, can someone in Oman proceed with a legal action against someone in Dubai?

As it turns out, yes. This is confirmed by our source at the Royal Oman Police (ROP), who wishes to remain unnamed. However, he advises expats and Omanis to report immediately any sales agent working in Oman without a permit and a clearance for their company by the Capital Market Authority.

He says: “No financial body that isn’t regulated by Oman can operate within this country. That means, the funds that these expats have taken are all under the jurisdiction of UAE and the regulatory bodies in the country in which the offshore accounts exist. The Ministry of Manpower (MoM) will take strict actions against anyone operating such schemes in the Sultanate.

“It’s perfectly legal for an expat to open an offshore account – as any break in the law would probably be settled within the expat and the country that issues their passport. But, when someone falls victim to schemes such as these, then it’s best you immediately report them to the authorities wherein the companies are based out of.”

Sandeep concurs with the ROP official’s statement: “In the UAE, there are separate bodies that take care of regulating such financial institutions taking care of offshore assets. If the company is based out of the Dubai International Financial Centre (DIFC), wherein registered entities are regulated by the Dubai Financial Services Authority (DFSA), and the Abu Dhabi Global Markets (ADGM), then you’d need to approach them to file a case.

“In a few days’ time, you’ll also be presented with a case number – which you can then use to bring up your case. But one factor that I can report is that the most common complaint that we see against financial advisors and brokers here in Oman are for misrepresentation and unsuitable investments (like in the cases of Gerard and Michelle).”

In short, it’s the classic case of a client believing that they were told one thing and then finds out after the fact that what they understood to be true was not the case. However, an unsuitability case is one in which a broker invests the client’s money in a security unsuitable for the customer’s investment objectives.

But, Sandeep reveals that these scams only form the tip of the iceberg. As per the lawyer, in the region, such schemes begin with cold calling, wherein a sales agent contacts – though calls, emails or fax – victims to forge a connection. While this is not a scam by itself, our source at the ROP reveals that cold calls by overseas financial companies are illegal in Oman, and that the phone numbers can be reported to the ROP for investigation.

Other scams include sending out fake emails and phishing. These are common in Oman – and they take the form of banks or financial institutions offering services in exchange for account details and even one’s ATM pin number.

Sandeep adds: “While these scams are generally directed to unsuspecting clients, more elaborate ones like Ponzi schemes; and ‘Boiler Room Scams’ – which are essentially operators offering low value shares to unsuspecting investors. However, these shares cannot be sold as several brokers provide expats in Oman with UK-based addresses and information while the company may not exist at all.”

In an emotional turn of events, Gerard tells us: “Expats who move to the GCC come here leaving behind their lives back home. This means that they’re making a sacrifice in return of money.

“But, if there are others who are looking to pounce upon the misery of these individuals, I’d be surprised to say that I’d ever be able to trust another human being again. This is, in every way, attacking a human, when they’re down at
their lowest.

“And there are no words to describe the anguish I’m going through right now; knowing my decades of service in the GCC have amounted to nothing.”

Gerard is currently in a legal battle with his financial company to gain back his money.

But whether he will get his money back remains to be seen.

*Names changed


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