Malaysians still have a low level of scam awareness, particularly when it comes to knowledge of investment and capital market products. This can be seen from the significant rise in online scams over the last two years – almost 72,000 scams and RM5.2 billion in losses was reported from 2020 to May 2022, according to the the Royal Malaysia Police’s (Polis Diraja Malaysia; PDRM) commercial crimes investigation department (CCID).
The pandemic, rise of social media and rapid technological developments have all led to more retail participation in the capital market. The popularity of the Internet and social media has also provided fertile ground for fraud and scam activities by entities that are illegal or do not comply with the laws. There is also a low level of digital financial literacy in the country.
A survey commission by Bank Negara Malaysia in 2021 revealed that one in three individuals stated they would be willing to share their bank account passwords or PINs with close friends. This increases the risk of online fraud and being used knowingly or unknowingly as ‘mule accounts’ to perpetrate fraud.
Almost two-thirds of individuals surveyed do not pay attention to the security features of a website before they perform online transactions. As a result, individuals are far more likely to be deceived into providing their banking credentials through a fake website that enables scammers to use their information to commit fraud.
Thus financial education is critical to the safe and effective use of digital financial services. Of the 72,000 scams reported over the last two years, 68% (or 48,850) were related to online scams, while loan and investment scams accounted for almost 12,000 of the overall scam cases.
In the first nine months this year, the Securities Commission of Malaysia (SC) received 1,800 complaints and enquiries related to investment scams and unlicensed activities. Last year, 275 names were added to the SC’s Investor Alert List, 143 websites were blocked and 35 social media pages were geo-restricted.
So far, this year, 194 new names were added to the Alert List, with 143 websites and 26 Facebook pages blocked. The significant increase in scams and retail investor losses reported highlights the continued investor vulnerability and very low scam awareness.
As long as our scam awareness is low, scammers will always find a way to trick us.
“Most scams are spread through messaging apps and platforms like WhatsApp and Facebook. And we have recently noticed that they have started using Telegram as well. Many of these scams also claimed to be ‘syariah-compliant’ informed SC’s Chairman Dato’ Seri Dr. Awang during the SC’s flagship investor education fair InvestSmart® Fest (ISF 2022) held recently in conjunction with Financial Literacy Month 2022 and World Investor
“Therefore, the best course of action investors can take to avoid falling prey to investment scams and unlicensed activities is to equip themselves with better financial knowledge,” he said in advising investors to safeguard themselves from the porous nature of the Internet.
Surveys undertaken by the SC also found that Malaysian investors have unrealistic expectations about investment returns due to the misconception about risk and returns. Low financial literacy and low scam awareness makes investors vulnerable to unlicensed activities and scams.
Scam Awareness: Unlicensed Activities And Scams
Scammers are finding increasingly sophisticated ways to target investors, who range from the vulnerable at one end to those who invest primarily by the desire – or hope – to gain lots of money irrespective of the risks involved. Some would call this the ‘gambling instinct’.
Under Malaysian law, any company or individual who wants to provide capital market products and services to Malaysian investors, such as unit trusts, stocks, digital investments, bonds, must be licensed or registered with the SC. This also applies to those who are or claim to be licensed overseas. As such, investors are putting themselves at risk when dealing with unlicensed or unregistered parties as the SC’s regulatory reach over these illegal entities is limited.
“This is important because entities licensed or registered with the SC, must fulfil stringent regulatory requirements that are designed to protect investors. Investors who choose to trade on unlicensed platforms risk not being protected in the event of any dispute arising,” said the SC Chairman.
In short, the SC cannot protect you if you choose to invest with unlicensed people. The SC Chairman also disclosed that there has been an increased use of celebrities or influencers on social media to endorse or promote investment advice and investment offerings.
The public should also be wary of self-proclaimed investment gurus who offer questionable advice or use social media to spread false or misleading information, he said.
While pushing for greater adoption of digital innovation in the capital market to better serve the needs of investors, safeguarding investors’ trust and confidence is also important. Indeed, these digital services have widened access to the capital market for underserved investors at a lower cost. The availability of these platforms has made it possible to invest little amounts of money or spare change, some from as low as RM5.
As the Malay proverb goes: “Sikit sikit, lama lama jadi bukit”.
However, investors need to exercise vigilance against potential risk. “An informed investor is a protected investor. We need to cultivate a culture of enthusiastic, yet informed investor participation. One where the public is educated on the numerous investment options available, as well as their rights and responsibilities as investors.
Armed with the right knowledge, investors are better positioned to safeguard their interests, and they can also become the SC’s ‘eyes and ears’ in detecting potential fraud or misconduct,” said Dato’ Seri Dr. Awang Adek Hussin, Executive Chairman, Securities Commission Malaysia.
When it comes to investing, always remember this
- Never deposit your money into someone else’s bank account; and
- Deal only with licensed persons.
Armed with the right tools and knowledge, investors will be able to capitalise on opportunities offered by our capital market. But first, let’s begin by raising the scam awareness campaign.