Syndicated loan scam


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  • Saturday, 08 Jun 2019

Thuraisingham Shan, who is also URUSKOP (Entrepreneur and Islamic Management of Malaysia's Association) Honorary Secretary and Cooperative & Management Consultant Advisor.

A SYNDICATED loan scam falsifying payslips for civil servants and employees of government-linked companies (GLCs) allegedly involving the Malaysian National Co-operative Movement (Angkasa) and various individual co-operatives is gaining traction and is currently being investigated.

These also involve loan payouts of only 50% of the amount that was applied for by civil servants with even their ATM cards being confiscated.

The broad scam was first reported in April, where malpractices in giving out loans were said to be taking place in one particular prominent Malaysian cooperative.

The malpractices, however, are said to be widespread and involve other cooperatives. Recent reports have highlighted total losses of RM340mil involving close to 170,000 victims, management fees exceeding 20% to 30% and victims having to pay back twice the amount they had borrowed.

The lure of easy money has rendered many civil servants almost in a state of insolvency. Should these civil servants throw in the towel and declare themselves bankrupt, this would ultimately affect their respective cooperatives, as they would have to take over the loans with the risk of non-performing loans (NPLs) becoming higher.

The scheme allegedly involves Angkasa, which is the apex organisation for cooperatives in Malaysia, and plays an important role in guiding the cooperative movement in the country.

Through the Angkasa Salary Deduction System (SPGA), Angkasa currently manages payroll deduction data amounting to 3,223,109 records with a net payroll deduction of RM1.165bil (2017 figures).

A cooperative loan is a type of credit service from cooperatives or foundations that’s available only to civil servants working in the government and local municipal councils as well as selected government-linked bodies.

Credit co-operatives are registered with the Co-operative Commission of Malaysia (SKM) and regulated under the Co-operative Societies Act 1993.

Co-operatives in Malaysia offer credit facilities by using funds from members or borrowed from other sources. These sources are usually limited, and hence, are also dependent on a steady flow of funds from local financial institutions.

Syndicated loan scam

In written documents obtained by StarBizweek, it would appear that Angkasa has investigated the matter on syndicated loan scams involving Koperasi Konsumer Malaysia Bhd (KKMB) and acknowledged a series of wrongdoings.

These wrongdoings allegedly involve fake payslips of members while applying for a loan, a payout of only 50% of the amount being applied for, and the confiscation of members’ ATM cards.

Angkasa has responded to queries made on these allegations in a letter addressed to Nash Associates dated May 24, 2019.

The letter was addressed to Thuraisingham Shan, who is also URUSKOP (Entrepreneur and Islamic Management of Malaysia’s Association) honorary secretary and Co-operative & Management Consultant adviser.

In the letter, Angkasa acknowledged the complaints made by Thuraisingham, which among others said that KKMB via its platform of agents, had manipulated members during the loan-application process.

Angkasa said it had randomly contacted a few government employers, and these include Universiti Malaysia Perlis (UMP) and University Malaya Medical Centre (PPUM), to ask for verification on the payslips that were sent by their cooperatives to Angkasa when the salary-deduction process was being made.

“The feedback received was that there were no changes made to the payslips of the civil servants, but there was a possibility that the payslips of a few loan applicants from both UMP and PPUM had been tampered with,” said Angkasa.

Angkasa said it had requested KKMB to give a written explanation within 30 days from May 24.

It added that it would fully co-operate with the respective parties and take the appropriate action.

Angkasa emphasised it would not compromise on the issue of the changes in the payslips.

“Strict action will be taken. This involves disciplinary action on staff of Angkasa if they are found to be involved in the tampering of payslips or any wrongdoing.”

The letter was signed by Datuk Abdullah Jusoh, the deputy CEO of Angkasa.

Following this, Thuraisingham wrote a letter to the Malaysian Anti-Corruption Commission (MACC) on May 31, asking for immediate action to be taken before the issue snowballs.

The Finance Ministry has also been informed of this.

Should the scam be allowed to continue, this could lead to the collapse of the co-operative movement and a route for increased bankruptcies among the civil service.

The one danger from such a scheme is the event of defaults. As borrowers find it increasingly difficult to repay their loans and have enough money to get by, some will resign and find new employment.

It is said that the loans would have to be classified as NPLs if they are not serviced after a year.

The risk would then fall on the co-operatives, which would be saddled with debts that cannot be repaid, jeopardising their financial health.

Thuraisingham alleges that KKMB has written off RM16mil in NPLs and that the cooperative has been involved in lending to ineligible members in a letter to the MACC.

Meanwhile, on May 14, Angkasa president Datuk Abdul Fattah Abdullah said the scammers, claiming to be Angkasa agents, used flyers to advertise their “offers”.

He said they would stick the flyers in public places, claiming that they were from a certain co-operative that could help provide personal loans with fast approval.

“On top of that, they are claimed to be interest-free loans and that borrowers need only to fill up a form for salary deduction.”

He said 800 co-operatives had obtained approval to offer loans to their members, including civil servants and GLC employees.

“However, only half of the co-operatives are still active,” he added.

Ongoing problem

More than 170,000 civil servants are said to be victims of a syndicated loan scheme with total losses amounting to RM340mil via personal loans from two foundations, starting seven years ago.

This matter started getting media publicity when civil servants came forward, claiming they had been duped when they were made to repay twice the amount of the actual loan taken.

It didn’t stop there. Victims also said that they only received 50% of the loan amounts they had applied for.

Some claimed that the loan rates were at ridiculous levels after taking into account the entire amount that would be deducted from their salaries via salary cuts from Angkasa and salary cuts from the foundation.

Local media reports, quoting sources, have highlighted that many victims say that the total loan amount received was less than the original amount they had applied for, and this lesser amount ranging between 20% and 50%, was not mentioned in the original agreement.

The actual salary deductions were also higher than the salary deductions agreed upon in the agreements.

“When the victims called the foundations to ask why their salary deductions were so high, they were only given perfunctory answers where the extra charges were for processing and legal fees,” said the source.

He said that these foundations make a profit return of more than 100% via the personal loans given out to desperate and ineligible civil servants.

It is alleged that the tactic is presently being used by the two foundations to generate returns in the hundreds of millions from civil servants since 2012.

Here’s an example of how profits are generated.

A civil servant applies for a loan of RM200,000, but only receives RM170,000 and has to repay RM300,000.

The civil servants who apply for these loans are typically ineligible for any sort of loans and are also facing desperate times.

“The question now is, why are the interest rates so high? How can processing and legal fees be in excess of RM30,000?”

Another claim by victims is that their interest rates differ, some are charged 7% while some are charged as high as 11%.

With these high interest rates, lower amounts actually being disbursed and higher repayment amounts, it is not surprising that these foundations are churning out profits.

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