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Illegal Internet Investment Scheme

Illegal Internet Investment Scheme is a variation of illegal deposit taking activities which employs the use of internet (e.g: through emails and websites) as a primary channel for interaction, communication and transaction of business engaged in fund management and investment advice without any licence.

Illegal investment schemes are those companies or individuals that are dealing in securities, trading in future contracts, and providing fund management services and investment advice and related to securities or futures without being licensed by the Securities Commission under the Capital Markets & Services Act 2007

In addition, fund managers are required to hold a fund manager's licence under Section 15C of the Securities Industry Act 1983. 

What are the characteristics?

With the Internet becoming a common part of daily life, it should be no surprise that fraudsters have made cyberspace a prime hunting ground for new victims.

The Internet has made it simple for fraudsters to reach out to millions of potential victims at minimal cost.

Many of the online scams we see today are merely modified versions of old schemes that have been used to fleece offline investors for years.

How it's done?

  • Operators of illegal internet investment schemes lure unsuspecting victims to make on-line investments or receive investment advice online, by offering investment opportunities above a market rate of return and will claim that their schemes are at zero or very low risk.

  • When questioned, most illegal operators will either claim to be foreign operators that do not require licenses from Malaysian regulators to operate their business, or claim that they already have the appropriate license from relevant authorities/regulators.

  • Unsuspecting victims of these schemes would be enticed as operators will pay them high returns at the initial stage and this is used as a tactic to lure and recruit new investors.

  • The survival of this scheme is dependent upon the recruitment of new depositors, i.e., funds obtained from new depositors will be used in paying dividends to the existing depositors. Therefore, the scheme will fail when there is no contribution of funds from new depositors; and

  • However, the operator will eventually abscond with deposits collected when he feels that the scheme is about to fail, thus leaving the depositors at the losing end. 

  • These operators are not licensed to receive deposits by Bank Negara Malaysia or licensed to offer investment advice from the Securities Commission related to fund management, securities and futures.

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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