Legal Loophole Exploited by Money Game Masterminds

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If we are not to be a hotbed of illegal investment schemes, we must plug the legal loophole that operators of such schemes exploit so that they can no longer get away scot-free.

  • They look like MLM, sound like MLM, but are not MLM
  • Not governed by MLM laws
  • Genuine MLM companies affected

The Malaysian Direct Distribution Association (MDDA) has called for a loophole in the law to be quickly plugged to prevent our country from becoming a hotspot for money game operators.

The Star reported that these illegal operators often posed as multi-level marketing (MLM) companies, yet they do not fall under the scope of the Direct Sales and Anti-Pyramid Scheme Act. This enables them to bypass restrictions that genuine MLM companies must abide by, according to MDDA president Rosedy Issa.

“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.

The fraudulent acts by illegal schemes also adversely affect the reputation and business of legitimate direct selling companies. With the public thinking all MLM firms are scams, they are reluctant to buy from the legitimate companies.

Apparently, many small home-grown direct selling companies have closed shop as they were unable to compete on such an uneven playing field.

With the recent spate of money game schemes gone bust causing a stir, MLM industry players are calling for swift action from the government.

Two prominent scheme operators were detained in May and June, respectively, and were subsequently released.

According to Bank Negara’s financial fraud alert microsite, at least four illegal operators of illegal investment schemes were convicted from 2012 to 2016 under the Financial Services Act (FSA) and Anti-Money Laundering and Anti-Financing Terrorism Act (AMLAFTA).

Lawyer Muhammad Akram Abdul Aziz, who specialises in civil litigation explained that if illegal investment schemes are taken to court under FSA and AMLAFTA, the prosecution must prove beyond reasonable doubt that they have carried out money-laundering activities or illegally taken deposits. Otherwise, the masterminds behind these schemes will probably 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,” the lawyer said.

Akram believes that the only way to stop the rampant growth of illegal schemes is to have 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,” Akram said.