Current scams are like a virus that evolves and mutates

PETALING JAYA: Investment scams continue to prey on unsuspecting individuals, promising unrealistically high returns and leaving victims, mostly wage earners with poor financial literacy, with losses amounting to hundreds of millions of ringgit. The lure of quick profits combined with a lack of financial knowledge exposes these victims to fraud, resulting in devastating consequences. From 2018 to the present, the police have received over 23,000 reports related to investment scams, with total losses reaching RM234mil. In an attempt to shed light on this issue, The Star interviewed banking and financial experts who provided insights into why these exorbitant returns offered by dubious investment funds are simply not feasible in reality.

According to Asst Prof Dr William Choo, the Chairman of Universiti Tunku Abdul Rahman (UTAR) Centre for Accounting, Banking, and Finance, investment funds that promise sky-high returns of up to 30% per month are illegitimate. He emphasized that legal investment funds are bound by strict guidelines that prioritize capital preservation, making it impossible to guarantee such high returns. Dr Choo draws a comparison with a bank’s fixed deposit, which typically yields an average return of 2% to 4% per annum in line with the overnight policy rate (OPR). Any investment offering 100% returns poses a significant risk of losing all capital, indicating the presence of a scam.

Echoing Dr Choo’s sentiments, Dr Mohd Afzanizam Abdul Rashid, the Chief Economist of Bank Muamalat, highlighted that as a general rule, high returns come with high risks. He recommended considering the benchmark equities index return worldwide, averaging between 7% and 10% per annum. Investment scams, which promise monthly returns ranging from 6% to 30%, are simply too good to be true and should be approached with caution. Dr Rashid asserted that conservatively beating the inflation rate, currently at 2.5% in Malaysia, is already a successful investment strategy.

To avoid falling victim to these scams, Asst Prof Dr Sharon Wilson, Chairman of UTAR Centre for Media and Communication Research, advised consulting experts in financial management before investing in any scheme that offers unreal returns. She underscored the importance of seeking professional advice in an ever-evolving landscape of scam tactics. Dr Wilson likened the prevalence of scams to a “pandemic,” urging individuals to protect their elderly parents by raising awareness about these fraudulent schemes.

Comm Datuk Seri Ramli Mohamed Yoosuf, the Director of Federal police Commercial Crimes Investigations Department (CCID), emphasized that if the promised high returns were attainable, reputable financial institutions like banks would be implementing similar investment opportunities. He highlighted the role of greed in driving victims to fall for these scams despite their intelligence. Comm Yoosuf acknowledged the financial struggles faced by individuals in a high-cost-of-living environment but cautioned that involvement in fraudulent investments could worsen their financial situation.