Enforcement Against Ponzi Scheme, The Fraudulent Method to Generate Easy Money in Malaysia

Abstract

Ponzi schemes are a type of investment fraud that offers investors great rates of return with no risk. Although various measures have been taken by law enforcement agencies as well as financial regulators to prevent this kind of problem, many people are still deceived by this kind of scheme. In Malaysia, there is no specific law mentioning Ponzi scheme. However, relevant laws such as the Penal Code, Financial Services Act 2013 and Direct Sales and Anti–Pyramid Scheme Act 1993 are some applicable laws that can be used to combat the Ponzi scheme. Hence, this article aims to examine the enforcement measures in Malaysia concerning illicit investment schemes and recommend various methods used by the United States and Australia for comparative purposes. Preventive measures and existing regulations used by the United States and Australia are also highlighted to compare the effectiveness of current enforcement done by the authorities in Malaysia. Findings show that despite Malaysia having a few laws in place to tackle this fraudulent scam, they are far from perfect. Therefore, more comprehensive regulations and strategies regarding this scheme are needed since it would assist the relevant authorities in preventing similar fraud. In conclusion, the Malaysian government needs to adopt proper regulation, education, and enforcement to reduce or prevent the number of Ponzi scheme cases in Malaysia. If left unaddressed, the situation will worsen, negatively affecting investors, creditors, and the public.