KUCHING: Time and again, we hear stories of friends or family members losing their life savings to con men, money scams or investment schemes promising elaborate returns of money.
The recent spate involving JJ Poor to Rich (JJPTR) is the latest in a string of such scams.
The scheme was thrust into the limelight after it claimed last month that its funds were siphoned off by ‘hackers’, resulting in the alleged loss of over US$50 million or RM217 million.
Investors had gone knocking on JJPTR’s doors when their 20 per cent monthly returns were not banked into their accounts last month.
On April 27, the company promised to refund all investment funds collected from its 31,000 members.
Its founder, Johnson Lee said this was made possible through the injection of capital by a new pool of foreign investors. He said refunds would be given to those who had just sent in their initial investment capital as well.
However, following the arrest of Lee and two of his key associates, everything came to a full stop as to its business operations as of May 16 this month. They were nabbed to facilitate investigations under Section 420 of the Penal Code for cheating.
Lee and his associates were arrested by federal police from the Commercial Crimes Investigation Department in Kuala Lumpur and Klang, with police confirming that five of the JJPTR bank accounts were also frozen.
After weeks of posting regular updates to reassure investors – including videos from Lee and presentations of a new plan – it was discovered that two JJPTR FB pages have now been deactivated, while other pages have not been updated since.
This case brought to light the issue Malaysia faces: why are its citizens so gullible to fall for such scams?
Lack of financial awareness
Financial experts cite a lack of financial awareness as a reason to why consumers continue to become victims.
iMoney Group chief executive officer and co-founder Lee Ching Wei told BizHive Weekly that it all boils down to lack of financial literacy and also herd mentality.
“Just because a lot of your friends or family members are investing in something doesn’t mean it is a sound investment,” he said in an interview.
“People tend to take shortcut in their investment –- they want to see huge returns without doing their due diligence. Unfortunately, that’s not how investment works.
“You may get lucky once or twice, but you won’t be lucky every time.”
On this note, Bank Negara Malaysia Governor Datuk Muhammad Ibrahim earlier this year affirmed that the pursuit of financial knowledge is a key economic imperative encouraged by the central bank.
“In today’s world, the ability and knowledge to save, invest and borrow are essential life skills, be it for individuals or businesses. Various efforts have been undertaken to improve financial inclusion in Malaysia.
“While results are promising, our efforts in achieving financial inclusion need to be further intensified.”
Ibrahim said there remain gaps in access to financing for certain segments of society.
Examples of the common issues faced by consumers include:
1. Misrepresentation or mis-selling of financial products, including incidences of product pushing;
2. Disputes on interest rates, loan balances or settlement of insurance claims due to the lack of transparency and understanding in relation to the terms and conditions, or contract ‘fine print’;
3. The lack of capacity and poor discipline in financial management, resulting in high household indebtedness.
4. The measures taken to overcome financial difficulties
“From the aspect of consumer protection, the Bank continues to devote efforts towards strengthening trustworthy and user-friendly redress mechanisms through the Financial Ombudsman Scheme, in addition to strengthening policies on market conduct of financial institutions to ensure fair dealings to consumers,” the governor continued.
“The Bank will also continue to accelerate initiatives on financial literacy to ensure that the financial advisory services provided by financial institutions, Laman Informasi Nasihat dan Khidmat (LINK) and the Credit Counselling and Debt Management Agency (AKPK) will continue to enhance the overall skills and knowledge in finance.
“Various initiatives are also being undertaken at the school and university level, as well as targeted and high-impact financial education programmes catered towards teenagers and adults by AKPK.”
Protecting consumers from traps
On the other end of the spectrum, government bodies and associations are consistently active in ensuring consumers are aware and well-prepared to avoid such traps.
Bank Negara Malaysia is proactive in protecting consumers in this regard. They periodically update a list of unauthorised companies and websites which are neither authorised nor approved under the relevant laws and regulations administered by BNM.
The latest list consists of 302 companies and is consistently updated, with the latest as early as this week.
BNM also said the list of companies and websites is not exhaustive and only serves as a guide to members of the public based on information and queries received by BNM.
“The list will be updated regularly for public’s reference,” it said.
Only financial institutions – that is banks, insurance companies and takaful operators as well as money changers, remittance service providers and currency wholesalers licensed by BNM under the relevant laws and regulations administered by BNM – are allowed to provide financial services in Malaysia.
Bank Negara on a website dedicated to fraud alerts warn consumers of several ways scammers search for victims.
“Financial scams target people of all backgrounds, ages and income levels. Fake lotteries, advance-fee frauds, get-rich-quick schemes and internet investment schemes are some of the favoured means of separating the unwary from their hard-earned savings.
“New varieties of these scams appear all the time. Despite the on-going awareness programmes by the relevant authorities and media coverage on the plight of victims of financial fraud, many are still knowingly or unknowingly falling prey to the activities of fraudsters.
“One of the best ways to combat this financial fraud is through prevention.”
Bank Negara Malaysia will continue to work with the relevant authorities and regulatory agencies towards clamping down on the activities of financial fraudsters and promote consumer awareness on illegal financial schemes.
The credit card conundrum
One cannot talk about money scams without covering credit cards, being an easy target for scammers.
And with Malaysia moving forward with contactless card updates, digital transactions and cashless withdrawals, it is pertinent to stay vigilant of scams of this manner.
According to iMoney’s chief Lee, there are about 9.3 million credit cards in circulation in Malaysia as of last year, with total transaction value amounting to a whopping RM118.5 billion.
Authorities are heightening security for credit and debit card usage in Malaysia by replacing the signature-based system with the personal identification number (PIN) verification.
Merchant payment terminals are also to be upgraded to accommodate the new security-enhanced system.
The migration to PIN from signature, which has started since last year, is part of a worldwide shift that has been implemented in Europe, Canada, Australia and New Zealand, with the Middle East also making the similar move.
Currently, all locally-issued credit cards have been replaced with those requiring personal identification numbers (PIN), according to BNM.
A total of 96.1 per cent of debit cards have been replaced while 99.8 per cent of point-of-sale terminals have been upgraded ahead of the July 1 deadline when signature authorisations will no longer be accepted.
“No extension will be granted,” BNM governor Datuk Muhammad Ibrahim told reporters while announcing Malaysia’s GDP for the first quarter of 2017 last week.
With just nearly 40 days left, Muhammad Ibrahim told the public to contact their issuing banks if they have not replaced their cards.
Contactless cards more secure than you think
As Malaysians move towards becoming a cashless society, consumers should opt for innovative payment methods which are convenient, speedy and secured, especially for purchases costing RM250 and under.
However, rumor mongers are active in spreading fear of using these cards, sharing horror stories of its misuse.
The Association of Banks in Malaysia (ABM) highlighted that contactless payment cards are “more secure than you think”, debunking several myths out there surrounding said cards.
“We wish to provide clarification regarding a video posting featuring “electronic pick-pocketing” of contactless payment cards which has caused come concerns over the security of such payment methods,” it said in a statement.
“ABM would like to highlight that the video, which we are given to understand, is several years old, was thought to have been made in the US where many contactless cards are/were still using magnetic stripes.
“While it is possible to build a scanner that can read certain information from payment cards using magnetic stripes, this technology will not work on cards which are using an Europay, MasterCard and Visa (EMV) chip.”
To note, EMV is a global specification for bank chip cards which prevents the cloning of cards. An EMV chip helps to reduce fraud as it is very difficult and costly to counterfeit.
When a transaction is performed by reading the EMV chip, a unique one-time cryptogram is produced which must then be validated for the transaction to be approved.
“The chip contains a secret unique cryptographic key, and unless that key can be extracted, it is not possible to copy or clone the chip,” ABM highlighted.
“More importantly, it should also be noted that it is not possible to build a regular magnetic stripe card from this captured data due to a magnetic stripe protection mechanism.”
Malaysia completed its migration to EMV chip cards by the end of 2004. Currently, all contactless payment cards issued in Malaysia have an EMV chip, therefore significantly reducing incidents of fraud, ABM stated.
“It is therefore not valid to cite a US example as proof that Malaysian cards are at risk,” it added.
To note, the US is still using the old signature-verified system for its credit cards.
“We would also note that Malaysia adopts a more secure payment verification method for internet transactions. To guarantee the security of each transaction, cardholders are required to enter a transaction authorization code (TAC) that is sent to their mobile phone or a card holder security device.
“In the event the card details have been fraudulently used for a transaction on an overseas website which has not implemented a secure payment verification method, the Malaysian cardholder will be protected by liability shift rules.
“These rules are imposed by the international card schemes which require overseas retailers to bear the liability of such fraudulent transactions.”
‘Maximum limit can be set’
The ABM has also clarified that card issuers may set a maximum amount for each contactless transaction as well as an appropriate cumulative limit for contactless transactions which do not entail any cardholder verification.
“Debit cardholders can also ask the card issuer to change the maximum amount for contactless transactions or switch off the contactless functionality for their debit cards,” it said in another statement. “Debit cardholders may check with their card issuers on how this can be done.
“We would like to remind all cardholders that they are responsible to safeguard their payment cards. It is the cardholder’s responsibility to notify their card issuer as soon as reasonably practicable in the event of loss/stolen or unauthorized use of their payment card.
“In the event a payment card is lost or stolen, the card issuer may excuse the cardholder from liability for unauthorised transactions made using the said card.
“This is provided the card issuer is satisfied that the cardholder has taken all reasonable precautions and diligence to prevent such loss or theft, and notified the card issuer promptly once the loss was discovered.”
Types of money-related scams
Illegal Foreign Exchange Trading Scheme
Illegal Foreign Exchange Trading Scheme refers to the buying or selling of foreign currency by an individual or company in Malaysia with any person who is not a licensed onshore bank or any person who has not obtained the approval of Bank Negara Malaysia under the Financial Services Act 2013 or Islamic Financial Services Act 2013.
This scheme involves the act of buying or borrowing foreign currencies from or selling or lending foreign currencies to a non-licensed onshore bank.
It can also be in the situation where the non-licensed onshore bank does an act that involves, is in association with, or is preparatory to, buying or borrowing foreign currencies from, or selling or lending foreign currencies to, any person outside Malaysia.
Unauthorised Withdrawal involves the withdrawal or transfer of funds from an individual’s banking account without proper authorisation or consent by the individual.
Such incidents are normally the result of an individual knowingly, or unknowingly, divulging their personal information such as personal identification numbers (PIN) and password to fraudulent or third parties.
Based on investigations, many cases were due to customers knowingly or unknowingly divulging their personal information such as personal identification numbers (PIN) and passwords to third parties or fraudulent parties.
The transactions involved were genuine, using complainants’ account information and followed the required process. CCTV recordings had captured the complainants activating access to Internet banking at ATMs.
Most complainants were not Internet savvy and failed to understand that their own actions had led to the fraudulent withdrawal of funds from their accounts.
Forex scams usually come in the form of ‘forex brokers’ soliciting investments with guaranteed high returns. Some investors were even promised up to 250 per cent returns.
According to Bank Negara’s definition, forex schemes is any individual or company that is buying and selling foreign currency without a license, or without approval from the central bank. If it’s not licensed or approved by BNM, it is best to stay away from such investment, be it forex trading or gold investment.
Ponzi schemes are similar to pyramid schemes.
This usually involves recruiting new members or investors.
Typically, each member is required to pay a membership fee, and the fees will be used to pay the earlier investors.
The cycle goes on until there isn’t enough money to go around anymore, and the scheme would start to crack.
Money games is run similarly to a pyramid scheme too. You are paid to recruit down lines, and you are typically promised that you will get back your investment capital within a few months and start seeing profit thereafter.
These are usually disguised as legitimate investment in forex, shares, commodities or even real estate.
Misuse of Bank Negara M’sia and senior officers’ and positions
The fraudulent use of Bank Negara Malaysia’s name, corporate logo as well as Senior Officers’ names and positions by fraudsters in illegal schemes or fraudulent activities in order to mislead members of the public.
The illegal schemes or fraudulent activities may be promoted through emails, letters, phone calls or other forms of communication.
Caller ID spoofing
Certain banks see their general line numbers being used by unauthorized parties to trick unsuspecting customers into providing their personal information with intention to cheat. The phone numbers used are exactly or very similar to the Bank’s contact number.
Based on complaints received, calls are mostly related to credit card transactions.
Examples include collection of payment overdue, verification of transaction done at a location where the customer may not reside or a transaction that is not performed, uncollected credit card, or so on.
Illegal Deposit Taking
Illegal Deposit Taking is an act of receiving, taking or accepting of deposits from members of the public that promises a repayment with interest or returns in money or money’s worth without a valid license under the Banking and Financial Institutions Act 1989 (BAFIA).
The operators of the ‘illegal deposit taking’ schemes have no valid licence to collect deposits and exploit the basic human tendency towards greed.
The operator promises very high returns on investment.
Unauthorised Use of Credit or Debit Card
Unauthorised Use of Credit or Debit Card is a transaction involving the charging of expenses/purchase of goods and services without the consent of the cardholder.
Such transactions may occur as a consequence of credit or debit cards that are lost, stolen, not received, issued on a fraudulent application, counterfeit or other fraudulent conditions as defined by the credit or debit card issuer.
Fraudsters are no longer just using SMS to elicit contact with unwary members of the public in an effort to extract personal banking information for unlawful purposes.
Illegal Internet Investment Scheme
Illegal Internet Investment Scheme is a variation of illegal deposit taking activities which employs the use of internet – such as through emails and websites – as a primary channel for interaction, communication and transaction of business engaged in fund management and investment advice without any licence.
Illegal investment schemes are those companies or individuals that are dealing in securities, trading in future contracts, and providing fund management services and investment advice and related to securities or futures without being licensed by the Securities Commission under the Capital Markets & Services Act 2007.
Protecting yourself as consumers
As scams grow increasingly sophisticated in an attempt to obtain your money or personal details, it remains crucial that consumers protect themselves by staying alert.
BNM views illegal financial schemes very seriously and will not hesitate to enforce the law against the perpetrators and promoters of such schemes.
“The wrongdoers will face the full brunt of the law, including laws administered by Bank Negara Malaysia, the Penal Code, the Interest Schemes Act 2016, the Direct Sales and Anti-Pyramid Scheme Act 1993 as well as the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001,” it said.
Under the law, action can also be taken against investors who knowingly promote and participate in these illegal schemes.
To this end, BNM said a joint enforcement action on any financial fraud and scams will be pursued by an inter-agency initiative led by the Attorney General Chambers under the National Coordination Committee to Counter Money Laundering.
“BNM would like to caution members of the public not to participate in schemes that promise unrealistically high returns, interest rates or profits.
“Members of the public should ensure that they do not fall prey to these schemes by referring to Bank Negara Malaysia’s Financial Consumer Alert which lists companies that are neither authorised nor approved under the relevant laws and regulations administered by the Central Bank. It also provides information on the common features of illegal financial schemes.”
Financial institutions (FIs) and money services business providers have been directed by BNM to heighten their vigilance in detecting the accounts which are used by the perpetrators of financial scams and to further enhance their customer due diligence (CDD) policies and processes in identifying suspicious transactions and fund flows between bank accounts so as to prevent FIs from becoming conduits that facilitate such illegal schemes.
BNM and SC also reminded consumers to always verify the legitimacy of schemes which offer too-good-to-be-true returns or investment opportunities involving above-market rates of return and zero to low risk.
“They must obtain all relevant information before parting with their money. When in doubt, the public should check with Bank Negara Malaysia, the Securities Commission or other relevant authorities on the licensing status of the local and foreign company before depositing their money or making any investment decision.
“Members of the public are also advised to alert the authorities immediately if they come across any suspicious websites, e-mails or any information on the Internet relating to investment advice and services and deposit taking activities.”
‘Be wary when investing’
Apart from the usual advice of ‘know who you’re talking to’ and ‘avoid opening suspicious texts links and emails’, iMoney’s Lee extolled the virtue of being careful in investing your finances, following the numbers reports of credit card scam reports involving hundreds and thousands of ringgit.
“Always check and double check the sources that you are receiving your credit card information. Banks will never ask you for your credit card details over the phone, SMS or email,” he added. “If you do receive such a message or call, do not respond or reply and simply call the bank to verify.
“Only use your credit card on secure Internet connection and on secure and reputable websites or apps.”
Meanwhile, when looking out for a new investment option, Lee said key signs to look out for in terms of gauging credibility is to spot “guaranteed returns”.
“There is no guaranteed returns in investment,” he affirmed.”The second sign to look out for is the percentage of returns.
“If you are getting guaranteed returns at 15 per cent to 20 per cent — it is obviously not sustainable. If it’s too good to be true, it usually is.
“If you are unsure, always look up the company on Bank Negara or Securities Commission’s websites and see if the company is in the alert list or if it is licensed.
“Lastly, do your due diligence and try to understand how the investment works. How do they use your money to make more money? Do not invest in something you do not understand.”
To those who have fallen into such scams, Lee said it would be wise to “cut your losses and seek help from the authorities.”
“Blind trust or loyalty does not bode well in this situation,” he went on to add. “Never put all your eggs into one basket. If you are investing in something, legit or otherwise, you should never put all your money into one investment.
“If something that is out of the ordinary and not regulated by regulatory bodies, it is usually high risk. Hence, you should proceed with caution and not put too much money into the said investment.”