INTEGRITY AND ANTI-

CORRUPTION COURSE
Kursus Integriti dan Antirasuah (KIAR)

NACP
2019-2023
DRCHARANJITKAUR
HDS1

Module
WHITE-COLLAR
CRIME

DRCHARANJITKAUR
Slide 2

HDS1 Hani Dhania Samion, 8/19/2021

 “25,000 investigation papers
Why is it important for involving commercial crimes were
us to know? opened nationwide involving a loss
of RM6.2 billion from January
to December 2019.”
“Renowned audit firm
PricewaterhouseCoopers (PWC) “Police arrested 15,000
recorded an increase in the individuals involved in the crime”
white-collar crime index in this
country in 2018.” Datuk Seri Mohd Zakaria Ahmad,
Director, Commercial Crime Investigation
Department, Bukit Aman
Datuk Seri Akhbar Satar,
President, Transparency International
BH Online, 30 January 2020
Malaysia

Astro Awani, 26 November 2018

DRCHARANJITKAUR
White-collar Crimes
This term was introduced by an American
sociologist, Edwin Sutherland in 1939.

"A crime committed by a

person of respectability and
high social status in the
course of his occupation"
Edwin Hardin Sutherland
13 Aug. 1883 - 11 Oct. 1950
- Edwin Sutherland, 1939 -
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White-collar Crimes
General meaning - crimes
that do not involve
violence, is financially
motivated. Committed by
professionals in the public
and private sectors.

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Why is it called
White-collar Crimes?

In general,
professionals wear
white shirts with ties.

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Blue-collar Crimes vs White-collar Crimes

Crimes committed by
the lower social group,
causing injuries and
property damage.

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 Accounting
Fraud
fraud

White-collar
Corruption Crimes
Misappropriation

Cyber crimes
Ponzi Scheme
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Effect of
White-collar Crimes

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 Each year, businesses
suffer a 5% loss due to
fraud activities.
Worldwide, the total
amount of loss is
USD3.7 trillion.

- Study by ACFE in 2013 -

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Case 1: Enron Scandal

In 2001, energy giant, Enron

went bankrupt due to fraud in
its financial report.

Enron’s auditor was stripped of their

license. Due to the Enron scandal,
Arthur Anderson was badly impacted
and was no longer the biggest firm in
the world.
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 Case 2: Collapse of Barings Bank

• Barings Bank - oldest bank in United

Kingdom.

• Once owned the account of Queen

Elizabeth II.

• Went bankrupt in1995, after 233 years of

operation.

• Cause - fraud activity, illegal speculation

activity by a manager, Nick Leeson.

• Leeson caused Barings a loss of US$1.4

billion.

• Leeson was imprisoned for 6½ years.

DRCHARANJITKAUR
Case 3: Bernie Madoff’s Ponzi Scheme

• Bernard Lawrence Madoff (born 29 April 1938)

- Ponzi Scheme legend.

• Also known as Pyramid Scheme.

• Madoff was once the president of National

Association of Securities Dealers Automated
Quotation (NASDAQ).

• 2008 - Madoff was arrested, $65 bililon was in

his account.

• Madoff admitted that one of his subsidiary

companies conducted Ponzi Scheme on a large
scale.
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• On 12 March 2009, Madoff (71 years old) pleaded guilty to 11 charges.

• Madoff was sentenced to 150 years in prison.

• Ordered to pay back $170 bilion to his investors.

• While in prison, two of Madoff’s children died. One due to suicide while
the other because of cancer.
DRCHARANJITKAUR
Case 4: The tale of the 1 cent robber

• Aman Shah - 24 years, executive at Hock Hua Bank,

RM1,800 monthly salary.

• In 1990, Aman stole 1 cent every day from

customers’ bank accounts.

• The money was transferred to a proxy account in

another bank.

• Lavish lifestyle. Owns 6 supercars, i.e Lamborghini

Countach (RM1.3mil), Mercedes Benz 300SL
(RM502,000), Mercedes Benz 300E (RM192,000),
Porsche Carerra 928 S4 (RM638,000) and BMW
329i (RM68,000).

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 • Exhibiting 3 of his cars at a showroom, Bukit
Bintang (June 1990).

• Appeared live on the show Sekapur Sireh

(TV3), sharing the advantages of each of his
cars. (3 June 1990).

• Former manager became suspicious after

watching the show and lodged a report.

• Aman was charged with fraud amounting to

RM4 million.

• He was found guilty and sentenced to 5 years

in prison.

DRCHARANJITKAUR
 Case 5: Pak Man Telo Scheme

• Ponzi scheme in Malaysia.

• Popular around the 80’s, in Taiping, Perak.

• Founded by Pak Man Telo, former reporter.

• This scheme used the money of new investors to

pay dividends to earlier investors.

• Pak Man’s company - Pestama Enterprise

received money from people, promised a 10%
return each month.

• 50,000 investors with a total investment of RM99

million.
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 • 1989 - Pak Man was arrested by Bank
Negara.

• He was charged with illegally accepting

deposits from the people.

• The scheme became unstable. Investors

demanded their money.

• Commotion broke out at Pak Man’s residence.

• Peak of anger - Pak Man’s child was

kidnapped for ransom.

• Court - Pak Man was found guilty, imprisoned

for 2 years.

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CURRENT CRIMES

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DRCHARANJITKAUR
  Masterminded by Taiwanese and Chinese
MACAU Scam syndicate - using international lines from
Hong Kong and domestic.

 4 most popular modus operandi:

a. Winning a lucky draw.
b. Kidnap scam and asking for ransom.
c. Impersonating a police officer, court officer
or other government agencies.
d. Impersonating officers from Bank Negara
or commercial bank.

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 Lucky draw
 Victim receives a telephone call - informing him
that he has won a lucky draw worth millions of
MACAU Scam (1) dollars from a company in Hong Kong and
Macau.

 The syndicate provides a phone number to

contact if the victim wishes to claim the prize.

 After the victim agrees, he has to pay taxes and

insurance by depositing money in certain
accounts to claim the prize.

 After the transaction is complete, the caller

cannot be contacted and the promised prize
money is not received.

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 Police officer / government agency
MACAU Scam (2) ‘spoofing’
 Victim receives a telephone call from an
individual claiming to be a court officer or police.

 Victim is accused of being involved in illegal

activities (such as ah long, mafia and drug
POLIS dealing)
(scam)

 Victim is asked to transfer money from his

account to certain accounts, supposedly to
avoid the victim’s account from being frozen by
authorities.

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 Bank Negara or commercial bank
officer ‘spoofing’ (credit card)
MACAU Scam (3)  Victim receives a call from someone claiming to
be a bank officer.

 Victim is accused of failing to pay credit card

bills.

 Victim is ordered to contact someone, allegedly

an officer from Bank Negara Malaysia (BNM) to
avoid from being blacklisted or accounts frozen.

 Victim is asked to transfer money to certain

accounts through e-banking or via a cash
deposit machine (CDM).

DRCHARANJITKAUR
 Kidnapping scam and demanding
MACAU Scam (4) ransom
 The victim receives a telephone call from
someone, claiming that his / her child or family
member has been kidnapped.

 The victim is deceived to transfer ransom

money to a third-party account number provided
by the caller (syndicate).

 Other tactics - alleged hit and run and failure to

pay loan from bank / financial institution.

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Love scam  The victim meets on the internet and falls
in love.

 The suspect wants to come to Malaysia

to marry the victim.

 After arriving in Malaysia (allegedly), the

suspect / syndicate member will contact
the victim and claims that the suspect
has been detained by authorities for
several offences.

 The victim was asked to pay a certain

amount of money to free the suspect.

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Parcel scam • The victim becomes acquainted with the suspect via
social media platforms.
• The suspect convinces the victims that he / she has
fallen in love with the victim.
• The suspect wishes to send a parcel to the victim as a
sign of love.
• The victim is contacted by someone who claims to be
a customs officer or courier service company -
informing that the parcel sent to the victim has
arrived.
• The victim is ordered to pay taxes or insurance
kerana as the parcel is detected to contain
undeclared cash / valuables.
• Victim only realises he / she has been scammed
when the item promised is not received, even though
payment has been made.
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e-banking scam  Caused by customer’s carelessness for revealing
password to a third party.

 Victim receives SMS for supposedly winning a

cash prize.

 To claim the prize, the victim is instructed to open

his internet banking account and then follow the
instructions given.

 The instruction includes revealing password and

making the syndicate’s mobile phone as the
medium to receive bank verification SMS code.

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  A syndicate that deceives victims to reveal their
Phishing bank account or credit card information.

 The syndicate sends a fake e-mail that seems to

be from a legitimate party (banking institution).

 The e-mail requests the victim to reveal their

personal information.

 There are also cases where a victim is redirected

to a fake website that looks like a legitimate
website.

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Credit card scam (1)
Fraudulent applications
 Syndicate makes a credit card application
by forging identification card, salary slip and
employer confirmation letter.

 Syndicate turns an empty house with no

residents as the shipping address.

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 Account takeover / Identity theft
 Involvement of ‘insider’ in an financial institution.
Credit card scam (2)  They provide all information on account holders
to a syndicate.

 Syndicate will contact the ‘Card Centre’ an

introduce themselves as the card owner and
report the card as missing.

 Syndicate will apply for a change of address.

 After getting approval, the bank will replace the

card that was reported as missing without the
knowledge of the original card owner.

 The new card will be posted to the syndicate’s

address.

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Credit card scam (3) Non-received issue fraud
 Delivery of credit card applied by a
customer is stolen or intercepted.

 Postal workers are most likely involved.

 The original card falls into the hands of a

syndicate, who maximises the credit card
spending.

 Cash withdrawal will happen if there is an

ATM PIN on the original credit card for cash
withdrawals.

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Identifying the profile
of a fraudster

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KPMG: Global profiles of the
fraudsters
• The report was published in May 2016.

• Study on 750 fraudsters around the world.

• Stud period: March 2013 - August 2015.

• Looks at fraudster profile - involves

deception and misappropriation in
organisations.
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GENDER
• Male (79%)

AGE
• 36 - 55 years old (68%)
• 26 - 35 years old (14%)
• Older than 55 (8%)

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A majority of fraud are committed
by ‘insiders’, conspiring

• Company employees (65%), mostly

have been working for more than 6
years

• Former employees (21%)

• 62% of fraud incidents are committed

by more than one person (conspiring)
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Fraud is committed by respected
individuals with position

• Executive / Non-Executive Director (34%)

• Manager (32%)
• Employee (20%)

• A majority of fraudsters are respected

individuals in an organisation (38%)
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 Main cause of fraud?

Weakness in internal controls

leads to fraud being committed
in organisations (61%)

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 Fraud that occurs most frequently:
1. Asset misappropriation (fraud in procurement) -
(47%)
2. Fraud in financial report - (22%)

Technology is an enabler in
committing fraud.

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Fraud detection

• Reports from complainant /

whistleblower (43%)

• Company management inspection -

for example, through audit (22%)

• Coincidence (14%)

DRCHARANJITKAUR
 Why is fraud committed?

For personal gain Because there is Culture of To reach target - hide

and greed capability organisation losses to gain bonus

DRCHARANJITKAUR
 Why is fraud committed?

To reach target To reach target - Other motives Other motives (loss of

budget - hide hide losses to previously mentioned stakeholder’s trust,
losses to remain in protect organisation avoid legal action, for
the organisation. publicity, for rating)

DRCHARANJITKAUR
CORRUPTION

• Is a type of white-collar crime.

• Effects from corruption are more

serious.

DRCHARANJITKAUR