Talk On Fraudulent Act

Talk On Fraudulent Act - Bankruptcy Fraud; Encik Rashid Azhari bin Tan Sri Dato' Musa

Assalamualaikum and Hi friends. Previously we have promised to share with all of you regarding the talk from Encik Rashid Azhari on bankruptcy fraud. Despite that the overall talk did not solely focuses on bankruptcy fraud; he had managed to spill out abundance of information to us pertaining to this interesting topic. The coverage of his explanation includes on the definition, element and motive, usual and basic modus operandi as well as a case example. So this was what he had shared with us:

Bankruptcy fraud is a white collar crime that takes in 4 general forms. The first form is where the debtors will conceal their assets in order to avoid having to forfeit them. Secondly is when an individual intentionally file false or incomplete forms of bankruptcy. Thirdly will be in a form whereby individuals sometimes file multiple times of bankruptcy using either false information or real information. The fourth kind of bankruptcy fraud involves bribing a court appointed trustee.

Relatively bankruptcy frauds possess the same element as any other kind of fraud. The element will be either to deceit consumer or to deceit the enforcement officers. However, in the case of bankruptcy fraud, it is more towards to cheat the law enforcer as a mode to achieve personal gain. The main motivation of bankruptcy fraud is greed. As people becoming to obsess with their wealth, they will go about any means in order to retain their property. Thus, declaring bankrupt is one of the ways to maintain their fortune since it enables them to get away with debts.

Yet how they did it? Based on Encik Rashid Azhari’s experience, usually the perpetrators who commit bankruptcy fraud will couple with another crime such as identity theft, mortgage fraud, money laundering and public corruption. The most prominent method of conducting this kind of fraud is by transferring assets to family members, then declaring themselves bankrupt. Hence, they are able to save their property from being forfeited and at the same time they are free from the shackles of credits. In fact, in Malaysia, the bankrupts may still continue to live their live in leeway due to the lenient regulations.

An example of bankruptcy fraud case in Malaysia is Koh Thong Chuan v The Official Assignee. This case was regarding Koh Liang Hee, a bankrupt who had sold a piece of property in Jalan Yap Kwan Seng Kuala Lumpur to his son Koh Thong Chuan for RM1 million. The sale and purchase agreement was executed on 22 September 1990 and subsequently on 26 March 1991 the transfer of the property was registered. Before this transaction occurred, the United Malayan Banking Corporation Bhd (UMCB) had file a bankruptcy petition against Koh Liang Hee on 15 August 1991 and he was adjucated bankrupt on 3 July 1992. Nevertheless the High Court had declared that the conveyance of the property from Koh Liang Hee to Koh Thong Chuan was void under Section 47 and/or 52 of the Bankruptcy Act 1967. The High Court Judge found that the act by Koh Liang Hee was fraudulent conveyance of transfer as it was taken place 6 month prior to the bankruptcy petition which is on the 26 March 1991. Therefore the conveyance between Koh Liang Hee and Koh Thong Chuan was void and Koh Thong Chuan had no title at any time to the said property. The High Court judge held that Koh Liang Hee had no protection of indefeasibility offered under Section 340(1) of the National Land Code 1965. These were the appeals by Koh Liang Hee and Koh Thong Chuan.  

At the end of the talk, Encik Rashid Azhari do reminded us that as a forensic accountant, we must be alert on the warning signs of fraud. Since warning signs of fraud varies from one to another, it is a job of a forensic accountant to be vigilant. Maintain a good networking and cooperation with parties such as Registration Department, Immigration Department, Bank Negara Malaysia, Road and Transport Department as well as Customs also proved to be important as it helps to speed up the investigation task.

So that was what the talk is all about. Crave for more information regarding bankruptcy fraud? Be with us to find out more as the next post we will be elaborating on Bankruptcy Fraud case studies.