Glaring gap in the system of dealing with financial crime

Free Malaysia Today

11-06-2025

From P Sundramoorthy
The recent closure of another financial crime case raises critical questions about the capacity and willingness of the criminal justice system to prosecute white-collar crime in Malaysia.
At the heart of the controversy is a scheme that lured investors with promises of high, stable monthly returns. Many of the victims, including pensioners, civil servants, and small business owners, were drawn in by what appeared to be a legitimate passive income opportunity.
From a criminological perspective, this case exemplifies opportunistic financial victimisation, where individuals are preyed upon not only for their trust but for their socioeconomic vulnerabilities.
Despite the nature of the complaints and the profile of the scheme, police informed victims that the matter is civil rather than criminal.
This distinction has effectively denied victims access to state-led prosecution and transferred the burden of justice to the private civil courts, an expensive and protracted route that many victims, especially low-income or elderly individuals, cannot afford.
This creates a secondary victimisation, where victims are re-traumatised by a justice system that appears indifferent to their plight.
The decision to classify the investigation as requiring no further action raises serious criminological concerns about the enforcement of Section 420 of the Penal Code, which criminalises cheating and dishonest inducement to deliver property.
In practice, many commercial scams are deliberately structured to blur the line between business failure and criminal fraud. Perpetrators often use partial deliveries, formal company registration, or early payouts to mimic legitimacy. This creates criminogenic asymmetry, where offenders exploit legal and evidentiary loopholes to operate with near impunity.
Regulatory inertia
There is also growing concern over regulatory inertia: the failure of oversight bodies to adapt quickly enough to hybrid financial crimes that do not fit neatly into existing categories of enforcement.
The recent case exposes a glaring gap in Malaysia's fraud governance framework: the lack of a clear standard for when economic deception rises to the level of prosecutable crime.
Critics argue that by abdicating responsibility to civil litigation, the state is essentially privatising justice for financial crime and offloading its prosecutorial burden onto victims. This not only weakens deterrence but sends a damaging message that well-packaged scams can escape criminal scrutiny if they are dressed in business formalities.
Four ways to reform
Legal and criminological experts are calling for urgent reform through the following measures:
A statutory clarification distinguishing commercial loss from criminal misrepresentation.
A greater integration between enforcement agencies, such as the police, Bank Negara Malaysia and Securities Commission.
A dedicated financial crime unit to handle hybrid scams that fall through regulatory cracks.
Protection mechanisms for vulnerable victims of white-collar crime, similar to those afforded in domestic violence or cybercrime cases.
In parallel, victims are organising to pursue collective redress through a class action civil suit, but advocates warn this is only a partial remedy. Without state-backed criminal action, key perpetrators may never face meaningful accountability.
This is a watershed moment for policymakers and law enforcement.
If systemic inaction becomes normalised, Malaysia risks cultivating a climate of impunity for financial predators, leaving everyday citizens increasingly exposed to complex, well-disguised forms of economic exploitation.
P Sundramoorthy is a criminologist at the Centre for Policy Research in Universiti Sains Malaysia.
The views expressed are those of the writer and do not necessarily reflect those of FMT.