Expert: 'Kootu' scheme contributors not automatically offenders
KUALA LUMPUR: Joining a kootu scheme does not necessarily make a person an offender, a banking law expert said.
A banking law expert from Universiti Utara Malaysia has clarified that joining a kootu scheme does not automatically make a person an offender, according to a recent article in the New Straits Times.
Dr. Muhammad Hafiz Badarulzaman, a senior lecturer at UUM's School of Law, emphasized that the Kootu Funds (Prohibition) Act 1971 primarily targets those who operate or promote kootu funds as a business. He explained that businesses established solely to promote kootu funds cannot be registered under the Registration of Businesses Act 1956. Similarly, companies with objectives to promote kootu funds cannot be registered under the Companies Act 2016.
However, Dr. Hafiz clarified that traditional kootu arrangements without profit, interest, or membership fees are not prohibited under the Kootu Funds (Prohibition) Act 1971. He also noted that kootu contributors can be held legally accountable if they promote or assist in organizing the scheme. Under Section 2 of the act, promoting includes managing, organizing, aiding, assisting, or taking part in the promotion of a kootu fund.
Dr. Hafiz emphasized that large-scale commercial kootu schemes involving illegal money games or fraud could face investigations. However, he argued that imposing criminal liability on ordinary contributors would require careful consideration, as they could be victims themselves. He pointed out that criminalizing all contributors unbearably broad would be impractical, and existing laws could be applied where a contributor was found to have abetted or been complicit in an offense.
The expert noted that the existing legal framework under the Kootu Funds (Prohibition) Act is broad enough to cover kootu schemes organized online. Section 2 of the act defines a kootu as a scheme or arrangement involving participants contributing to a pool paid out according to an agreed method, without restricting the medium used for organization.
He cited a 2022 case where a trader was fined RM50,000 by the Butterworth Sessions Court for pleading guilty to promoting a kootu fund through Facebook involving five participants and RM100,000 in transactions.
The article highlighted that the existing legal framework can effectively handle online kootu schemes, but the more pressing issue lies in enforcement and distinguishing between commercial promoters and ordinary contributors.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
