MISAPPROPRIATION OF DONATION FUNDS: REAL VICTIMS ARE THE NEEDY- EXPERTS

The growing accessibility of technology, combined with society's generosity, has become a key driver behind the proliferation of online donation activities. These campaigns, often spearheaded by non-governmental organisations (NGOs), institutions, and individuals, frequently emphasise charitable causes as their core premise.

However, alongside these noble efforts lies a darker reality: some individuals and organisations exploit these methods as a personal revenue stream, misusing the funds collected for purposes far removed from their stated objectives.

In this second instalment of Bernama's special report, we delve into the root causes, operational tactics, and long-term societal implications of this pressing issue.

Misappropriating public donation funds is not a new phenomenon. Yet, the dramatic rise in online donation campaigns has significantly amplified the risk of such criminal activities.

Experts point out that the absence of stringent oversight and clear regulations governing these activities creates ample opportunities for exploitation by unscrupulous quarters.

They also highlighted recent legal actions taken by the Malaysian Anti-Corruption Commission (MACC) against a non-governmental organisation (NGO) and a well-known influencer for allegedly misappropriating public donations intended for the Palestinian cause. This case underscores the severity of the issue, suggesting it is far more pervasive than generally perceived.

Experts caution that if such trends persist, public trust in charitable organisations and humanitarian initiatives could be severely undermined. This erosion of trust would not only deter future donations but also deprive genuinely vulnerable communities of the crucial aid they depend on.

MODUS OPERANDI

Commenting on the issue, criminology and psychology expert from Universiti Sains Malaysia, Associate Professor Dr Geshina A. Mat Saat, said perpetrators view online donation collection as "easy money with the least amount of effort."

"Fraud related to fundraising occurs for many reasons. Among them is the religious encouragement to donate and help those in need. This aspect makes it easier for individuals, NGOs, and charitable organisations to disguise themselves under the banner of religion, launching donation campaigns supposedly to assist the needy during festive seasons and other occasions.

"Donors, driven by good intentions, are often unaware that their contributions are being exploited or misused until scandals are exposed in the media," she told Bernama.

People need to be more careful with online fundraising scam syndicates.

She added that some perpetrators establish fake NGOs or misuse the names of reputable organisations to collect donations. However, the funds collected are not directed to the intended recipients but instead used for personal gain.

 Geshina further noted that taking an excessively large percentage of public donations under the pretext of covering administrative costs also constitutes fraud.

 “For instance, if RM500,000 is collected in donations, less than 10 per cent of the total amount may actually reach the charitable organisation or individuals originally intended to benefit from the funds.

“Such fraudsters use cognitive distortions or personal logic to 'justify' their actions, claiming that the portion taken is their right or salary, or as management costs for handling the donation funds," she explained.

She also pointed out that in some countries, NGOs or charitable organisations receive tax exemptions, enabling fraudsters to profit not only from public donations but also from government incentives, all without the authorities noticing.

"If such criminal activities are discovered, it is not difficult for the perpetrators to shut down the established charity and disappear with the illicit funds," she added.

 EXPLOITATION OF SOCIETY’S EMPATHY

When asked about the factors contributing to the proliferation of online donation activities, Geshina said the "success" of raising large sums of money often motivates criminals to engage in such activities.

She explained that these perpetrators manipulate public empathy by exploiting the suffering of certain groups.

"This is exacerbated by a mindset where people rarely, if ever, consider the existence of cunning and manipulative individuals who would misuse aid meant for those truly in need.

"When news of charity fund misappropriation spreads, it leaves a profound impact. Victims feel betrayed, angry, and lose trust.

"But the true tragedy falls on vulnerable groups. They become victims twice: first, when their plight is exploited by irresponsible individuals, and second, when the much-needed assistance never reaches them," she added.

Assoc Prof Dr Geshina A Mat Saat

 Geshina said that charitable organisations, especially those that collect funds, must have an accountable and transparent system that can be checked by anyone, particularly by donors who wish to contribute large amounts.

“Donors need to be aware of the existence of such scams and make sure the charity is legitimate and trustworthy. They should never donate blindly without investigating first, as such actions directly encourage illegal or unlawful activities by fraudster,” she said.

Geshina said donors should also file reports so that investigations can be conducted.

“Legitimate charitable organisations will have no issue meeting the licensing requirements and maintaining proper accounts. In fact, they will support efforts to make it more difficult for scammers to operate”, she added.

Crime analyst Shahul Hamid Abdul Rahim expressed similar concerns, highlighting that many people are still unaware of donation fraud, especially in online fundraising campaigns.

"This is particularly the case when donation campaigns appear credible, with fabricated testimonials and forged financial reports," he said, adding that victims often fail to verify the authenticity of such information.

He stressed that society must take proactive measures to investigate and confirm the legitimacy of any fundraising effort. This can be done by consulting the relevant authorities or organisations such as the RoS.

IMMEDIATE ACTION NEEDED

According to Shahul Hamid, the misappropriation of public donations has been deeply rooted for a long time and is becoming increasingly difficult to control with the advent of social media platforms and crowdfunding methods.

Muslims are always taught to give charity to any party that needs help, especially financial help.

 He stressed that this issue is critical and requires immediate attention, particularly as some cases involve substantial amounts of money, reaching millions of ringgit.

"In the past, public donations were collected through door-to-door methods or in public spaces, backed by verified fundraising permits.

“As a result, society faces difficulties in distinguishing legitimate donation campaigns, including those claiming to support causes such as aid for Palestinians or Syrians, mosque construction, or orphan care.

"In this regard, the public can verify the legitimacy of these organisations with relevant authorities or agencies, such as the RoS," he shared.

ENFORCEMENT OF A SPECIAL ACT

Shahul Hamid pointed out that under current legal practices, organisations intending to collect donations must obtain approval or permits from authorities such as the police and state Islamic Religious Departments.

However, he noted that there are currently no binding guidelines or regulations governing these collections, including the practice of taking up to 30 per cent of donations to cover administrative costs.

"The question is, are we truly able to monitor and ensure that this percentage does not exceed the recommended limit?" he asked.

He also noted that many NGOs lack stringent auditing systems to ensure transparency and fairness in the distribution of funds.

Therefore, he urged the government to introduce specific legislation to regulate donation collections, particularly online. Such a law would enable agencies like Bank Negara Malaysia (BNM), RoS, the Royal Malaysia Police (PDRM), and the Prime Minister's Department to collaborate effectively in overseeing and monitoring fundraising activities.

Shahul Hamid Abdul Rahim

The act, he suggested, should include strict conditions such as obtaining permission to collect funds, defining the validity period for campaigns, and establishing proper fund management methods.

"In addition, a dedicated enforcement body could be established to ensure that collected funds are used for their intended purposes and not misappropriated," he said.

 Shahul Hamid also advocated for expanded powers for BNM to closely monitor donation activities and urged the RoS to take a more proactive role in ensuring NGOs adhere to regulations and use funds for legitimate purposes.

He explained that current applicable laws, such as the Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001 (AMLA), have limited jurisdiction in addressing this issue.

"With strict enforcement, cases of misappropriation can be minimised, and the public will gain greater confidence in contributing to legitimate causes. This would help preserve the integrity of NGOs and charitable organisations, ultimately strengthening public trust," he said.

MONITORING BY RoS

When asked about the issue of donation collection, RoS Director-General Datuk Mohd Zulfikar Ahmad said NGOs are permitted to engage in such activities if they are outlined in their constitution.

"To ensure good governance, particularly in the financial management of organisations, any fundraising or receipt of donations must align with the organisation's constitution and comply with the Societies Act 1966, Societies Regulations 1984, and other applicable laws," he explained.

Organisations intending to conduct fundraising activities must apply for and receive approval from the relevant authorities.

"Failure to obtain this approval could result in legal action under the relevant legislation, including the Societies Act 1966 (Act 832)," he added.

Mohd Zulfikar stressed that registered organisations are required to submit annual financial reports to the RoS. This helps monitor the flow of funds and ensures there is no misappropriation or misuse in their fundraising activities.

 He further noted that the RoS actively monitors and supervises NGOs under its jurisdiction to ensure they adhere to their stated objectives and comply with national laws, including those concerning the misuse of donations or welfare funds.

Monitoring is also carried out through the submission of Annual Returns, ensuring that activity and financial reports, particularly those related to donations received and contributions made, are well-documented, he added.

Citing figures, he said as of August 2024, there were 196,691 registered entities under the RoS, including political parties. Among these, 96,722 are NGOs, consisting of 85,984 main NGOs and 10,738 branches, while the remaining 99,969 entities include political parties (70 main and 99,899 branches).

 LIMITED MANDATE

Meanwhile, BNM told Bernama that it does not have full authority to oversee donation activities conducted by NGOs or non-profit organisations (NPOs).

Bank Negara Malaysia. Photo credit MATTA website.

BNM said any fundraising activity, including online campaigns, falls under the jurisdiction of other agencies such as RoS, the Companies Commission of Malaysia (SSM), and the Royal Malaysia Police (PDRM) under laws such as the Societies Act 1966 and the House-to-House and Street Collections Act 1947.

"However, BNM advises the public to always refer to official sources for accurate information," the central bank said in a written reply.

Translated by Salbiah Said