Did You Know Crowdfunding Money Into Personal Accounts Is A Crime?
Under Malaysian law, illegal deposit taking refers to the act of accepting or receiving deposits from the public without obtaining the required license or authorization from the regulatory authorities, typically Bank Negara Malaysia.
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Did you know that crowdfunding money into your personal account is considered a crime in Malaysia?
Recently, a young man went viral after he sought for public donations following an accident involving several of his family members.
A Twitter user named @qarlwho uploaded a tweet along with two screenshots showing news about his family’s accident and his bank account number.
It was later shared that he had gathered a total of RM 55,000 which began to plant some doubt in many netizens online regarding the user’s brother’s hospital bills.
What Is Illegal Deposit Taking?
Under Malaysian law, illegal deposit taking refers to the act of accepting or receiving deposits from the public without obtaining the required licence or authorization from the regulatory authorities, typically Bank Negara Malaysia.
This activity is regulated under various legislation, including the Banking and Financial Institutions Act 1989 (BAFIA) and the Financial Services Act 2013 (FSA).
The term “illegal deposit taking” encompasses situations where individuals or entities collect money or other assets from the public, promising returns, interest, profits, or benefits, without complying with the necessary legal requirements.
This includes situations where the person or entity does not hold the appropriate licence or authorization to engage in deposit-taking activities.
The Legality And Risks Of Crowdfunding: Lessons From A Viral Case
As Twitter user @nuuraimuni pointed out in several tweets, crowdfunding through personal bank accounts is considered illegal under the law.
This practice falls under the category of “illegal deposit taking” regulated by the authority of Bank Negara. The rationale behind this legal standpoint is that sudden crowdfunding activities without proper evidence and legitimate approval can lead to potential harm.
@nuuraimuni via Twitter
Using the example of @qarlwho’s crowdfunding, she pointed out that an appeal without a recognized channel or legitimate organization could bring forth consequences especially when funds are handled in an unregulated manner.
Dissatisfaction among contributors can lead to reports being filed with the relevant authorities. While it is not fair to solely blame those dissatisfied individuals, it is essential to recognize that crowdfunding itself may be inherently flawed from a legal perspective.
@nuuraimuni via Twitter
Why Regulate Something Such As Crowdfunding?
According to Bank Negara Malaysia, the aim of regulating deposit-taking activities is to protect the public and ensure the stability of the financial system.
By requiring licences, the regulatory authorities can oversee and supervise the operations of financial institutions to safeguard the interests of depositors and maintain the integrity of the banking sector.
The relevant legislation provides for penalties, including fines and imprisonment, for individuals or entities found guilty of such activities.
These laws are in place to maintain the stability and confidence in the financial sector and protect the public from fraudulent or unauthorized deposit-taking schemes.
Using Proper Channels To Crowdfund
Additionally, while it is encouraged to help those in need, she stressed it is crucial to utilize proper channels.
She said a more appropriate method to seek assistance would be through established NGOs or recognized charitable organizations to minimize harm and ensure compliance with the law.
Even the highly regarded NGO, Ebit Lew, has faced criticism for not disclosing audit reports. Public fundraising without valid permits is also in violation of the House-to-House and Street Collections Act 1947, which could result in fines or imprisonment.
@nuuraimuni via Twitter
In conclusion…
It is crucial to be mindful of the laws and regulations governing such activities.
Utilizing proper channels, such as recognized NGOs and charitable organizations, ensures transparency, credibility, and compliance with legal requirements.
By learning from viral cases and promoting responsible crowdfunding practices, we can protect the interests of both those seeking assistance and those contributing to charitable causes.
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