Telex Free Rwanda Company channeled over $11.3million (over Rwf7.6bn) to Germany and the US without taxes, according to a new report on the operations of the company.
The report was released yesterday hours after government announced a ban on the operations of the company.
The probe report, obtained by The New Times, accuses the firm of promoting money laundering that has the potential to facilitate terrorist activities.
Telex Free Ltd which registered in June 2013, was banned from operating in the country due to what the government termed as illegal foreign financial transactions.
“P.L.I Telexfree Rwanda Ltd activities are similar to that of a pyramid scheme which can easily be a channel to jeopardise the financial sector and facilitate money laundering. The Ministry of Trade and Industry hereby informs the general public that the operations of P.L.I TELEXFREE RWANDA Ltd are banned,” the ministry said in a statement.
The company is accused of operating a pyramid scheme style business that benefits few people leaving many counting losses.
Though Telex Free locally registered by shares with two owners, it worked as a liaison office for the Telex Free head office in the US.
All the financial operations in Kigali were remotely controlled by the US office. In Kigali, it was managed by Fred Murangira, a Rwandan and Stephen Assimwe, a Ugandan national.
The Ministry of Trade and Industry and the central bank commenced investigations into the company’s activities after realising some illegalities.
“They told us that $6 million was to be sent to Rwanda from US as taxes but they failed to justify it,” Emanuel Bayingana, the ministry official in charge of competition said in an interview.
Bayingana, who was among the investigators, added that the company was benefiting the owners in the US at the expense of Rwanda’s economy.
How the company works
To join the company, a member must invest $400, $1,525 or $16,225 for a year.
The member is then obliged to post certain adverts daily obtained from the firm to a Telex free website and the returns are given depending on the individual’s initial investment.
When a member invests $400 they allegedly get $20 weekly for 52 weeks while the one who invests $1,525 earns $100 per week.
A member who invests $16,225 is entitled to $1100 per week.
One of the members, who preferred anonymity, said he had benefited much from the company.
“I invested $1,525 and I got profits every weekend,” he said.
He appealed to the government to allow the company to operate.
The funds invested by members of Telexfree Rwanda Ltd were transferred to Germany on Telexfree e-wallet account. If such physical cash is transferred through a local account, the e-wallet on the Telexfree’s software of the member is credited by electronic system but not backed by physical cash in Rwanda.
For a promoter to convert digital cash into physical cash they have to recruit another person who will pay them cash in their e-account and they too become a new member.
The ban followed a February 14, 2014 letter from the Rwanda Utility Regulatory Agency (Rura) instructing the owners to cease all the company’s administrators and report their activities to the regulator within three days.
When contacted, Fred Murangira Nyakana, the managing director, declined to comment.
However, unconfirmed reports indicated last evening that some company representatives from the US had arrived in the country to engage government on the possibility of lifting the ban.
The company, that also operates in Uganda, and Kenya, was suspended in Brazil, Peru, and Tanzania over suspicion of involvement in money laundering.
Similar companies whose activities have been banned in Rwanda include Diamond Holiday Travels, Cooperative Abigize, Aguka development initiative, Twese development initiative, and Ingaru company Ltd.