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Illegal Deposit Taking

Illegal Deposit Taking is an act of receiving, taking or accepting of deposits (moneys, precious metals, precious stones, any other article etc.) from members of the public that promises a repayment with interest or returns in money or money's worth without a valid license under the Banking and Financial Institutions Act 1989 (BAFIA).

What are the characteristics?

The operators of the "illegal deposit taking" schemes have no valid licence to collect deposits and exploit the basic human tendency towards greed. The operator promises very high returns on investment. The returns are normally higher than the rates offered by authorised investment schemes or licensed financial institutions. Besides cash, part of the return may be paid in kind, i.e. goods, jewellery etc.

Illegal deposit taking contravenes the Banking and Financial Act 1989 (BAFIA) under Section 25(1). On conviction, operators are liable to a fine not exceeding RM10 million or to imprisonment for a term not exceeding 10 years, or both.

How it's done?

  • Part of the money deposited by early investors is used to pay the profits due to investors. The operator continues paying these profits for a few months to lull investors into a false sense of security and to persuade investors to invest more. 

  • Theoretically, if the scheme continues to draw in new investors, it could go on indefinitely. However, the catch is that at some point in time, the scheme will vanish, typically at the point where a critical mass of capital has been achieved and the operators disappear with all the deposits collected from investors.

  • In practice, these schemes eventually collapse because the operator starts to spend the cash collected too quickly, or the pool of new investors start to dry up.

  • Illegal operators then abscond with the moneys collected when he feels that the scheme is about to fail, thus leaving the depositors at the losing end.

How to Protect Yourself?

  • Remember the golden rule - if it sounds too good to be true, it's probably a lie;
  • Deal only with licensed financial institutions and authorised dealers;
  • Check with the relevant authorities before investing/ depositing;
  • Don't be pressured or rushed to invest;
  • Be extra careful with investments over the internet;
  • Be sceptical of any investment opportunity that is not in writing; and
  • In case an investment has been made, keep copies of all the investment and communications

How to Report?

You can report directly to Bank Negara Malaysia via the following communication channels:

Call: 1-300-88-5465 (1-300-88-LINK)
Fax: 03-2174 1515
SMS to 15888: BNM TANYA [your report / query]
Email: bnmtelelink@bnm.gov.my

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