PETALING JAYA: While Malaysians are known for their generosity, they should exercise caution before donating to any cause, especially those promoted by influencers, say financial experts.

 Certified fraud examiner Raymon Ram said while there are laws regulating financial crimes related to the mishandling of public donations, there are no specific regulations on influencers to ensure transparency.

“This is especially true for those who are fundraising. They should be required to adhere to the same standards as registered charities and non-profit organisations.

“For example, there are influencer marketing regulations in the United Kingdom that require the influencer to be upfront about paid promotions or affiliations with entities collecting donations,” he said when contacted.

On July 10, a husband-and-wife influencer pairing was among four suspects arrested by the Malaysian Anti-Corruption Commission (MACC) for allegedly misappropriating more than RM3mil in public donations over the past four years.

Over a dozen bank accounts containing around RM740,000 belonging to the couple and the two others were frozen as part of the probe.

Raymon said all entities collecting donations should be required to register and report with relevant authorities such as the Registrar of Societies (ROS) or the Companies Commission of Malaysia (CCM).

“Section 14 of the Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) can be strengthened to enforce these requirements, ensuring that all fundraising activities are transparent and accountable and are made liable for reporting suspicious transactions,” he said.

Raymon also said financial crimes related to the mishandling of public donations in Malaysia are primarily regulated under AMLATFPUAA, particularly Section 4, which defines the offence of money laundering, as well as Section 44, which empowers authorities to seize and freeze assets linked to illegal activities.

Other laws include the Penal Code, Sections 405 and 406, which address criminal breaches of trust, and the MACC Act 2009, Section 17, which targets corrupt practices.

He said illegal actions in handling donations include deceiving donors about the purpose of the funds, using donations for personal gain instead of the intended cause, and engaging in transactions involving the proceeds of illegal activities.

“Guidelines for transparent financial practices and regular audits should be enforced to ensure proper use of funds,” he said.

He advised the public to verify the fundraiser’s registration with the appropriate authorities like the ROS or the CCM.

“Verify the legitimacy of the fundraiser, demand transparency and report any suspicious activities to authorities. By doing this, you contribute to the ethical and effective use of your donations and safeguard yourself against potential fraud,” he said.

Syarie lawyer Dr Zulqarnain Lukman also concurred, saying the collection of donations by NGOs or foundations is not fully regulated.

“Laws regulating NGOs permit the collection of donations. To exercise caution, you can check the details of the association with the ROS at https://semakan.ros.gov.my/public/.

“The public can also check if associations are blacklisted,” he said, adding that foundations are usually established under the Companies Act 2016 in a company limited by guarantee.

“Such companies need specific permission from the director general of Inland Revenue to collect donations,” Zulqarnain said, adding that some foundations would collect donations even without obtaining permission.

The director of financial planning at Finwealth Management Felix Neoh believes the public should not be “desktop donors” or those who make financial transfers without fully understanding who they are donating to.

“Take some time to visit the charity and get to know how they’re making an impact in their respective areas.

“If their approach resonates with you, then you will feel more comfortable with making donations,” he said.

He advised the public to check if the charity has received approval from the Inland Revenue under Subsection 44(6) of the Income Tax Act 1967 before making an online donation as these companies qualify for a deduction for their contributions.

He said without due diligence, people can be easily influenced by what charity organisations claim.

“Some people donate for financial benefits such as income tax deductions or the feel-good factor,” he said.

He added that people can also consider other types of donations such as spending time assisting the charity in areas they have experience in.

“Go through more establishments such as global or well-known local charities to be safe.

“You can also split your donations over time instead of just making lump sum payments,” he said.

Malaysia Literacy in Financial Education Association founding chairman Amy Seok said donors should also be wary of emotional manipulation and high-pressure tactics, which can be “red flags”.

“People often donate to unknown individuals or associations due to emotional triggers, empathy and the influence of social proof,” she said.

“Emotional appeals such as stories and images of those in need can create a sense of urgency and compassion, compelling people to help immediately and donate without thorough verification.

“Instead, take time to reflect and consult with trusted sources before making a decision.”

https://www.thestar.com.my/news/nation/2024/07/25/be-wary-of-donation-drive-by-influencers