‘Money game operators exploiting legal loophole’

CHERAS: A loophole in the law needs to be quickly plugged to prevent Malaysia from becoming a hotspot for money game operators, said Malaysian Direct Distribution Association (MDDA).

Its president Rosedy Issa said these illegal operators often masqueraded as multi-level marketing (MLM) companies, yet do not fall under the ambit of the Direct Sales and Anti-Pyramid Scheme Act which governs MLM.

This allows them to bypass restrictions which legitimate MLM firms must abide by, said Rosedy.

“The Direct Sales Act is comprehensive but only deals with licensed direct selling firms. These unlicensed ones are neither here or there.

“There is no specific Act to take action against these firms and as such, they are taking advantage of the loophole,” he said.

Players in the MLM industry, which chalked up a sales volume of RM12.47bil in 2013, are calling for swift Government action after the collapse of more than five money game schemes in the past two months, which was followed by the arrest of two prominent scheme operators (later released).

According to Bank Negara’s financial fraud alert microsite, the authorities managed to haul many operators of illegal investment schemes to court, where at least four were convicted between 2012 and 2016.

According to the microsite, these operators were charged and convicted under the Financial Services Act (FSA) and Anti-Money Laundering and Anti-Financing Terrorism Act (AMLAFTA). It also warned that companies offering investment products that are not licensed under the Capital Markets and Services Act are deemed illegal.

Lawyer Muhammad Akram Abdul Aziz said the scattered nature of the Acts used to deal with illegal schemes leaves many grey areas and opens up loopholes.

“I suppose it’s like picking up titbits here and there when it comes to enforcing the various available laws against illegal investment schemes.

“To date we don’t have one that deals specifically with such schemes,” said Akram who specialises in civil litigation.

He explained that if illegal investment schemes are taken to court under FSA and AMLAFTA, the prosecution must prove beyond reasonable doubt that they have illegally taken deposits or have conducted money-laundering activities, failing which the masterminds behind these schemes will likely go scot free.

“There is bound to be loopholes in any law that we create because it is quite impossible for anyone to enact a law that covers each and every scenario in the world.

“People who want to swindle others through illegal investment schemes will find a way to avoid being caught under the law,” he said.

The only way to stop the rampant growth of illegal schemes, Rosedy believes, is to enact specific laws.

“We need a specific Act to prevent these kinds of activities. It must also arm an authoritative body with the power to investigate suspicious activities,” he said, calling for stronger provisions to close the loopholes.

Founded in 1993, MDDA is a non-profit organisation that represents direct selling companies in Malaysia in promoting ethical business conduct amongst its 68 members listed on its website (mdda.org.my).

The Bank Negara microsite is at goo.gl/5sMLg6