If you are a Malaysian, you may have heard of the term 'kootu', which refers to the scheme for savings and raising quick cash from contributions made by a group of individuals every week, or month.

The money from the fund is then withdrawn by the group leader and given to a participant, mainly by a lottery mechanism.

We may have played this scheme at one point or another, or at least have friends and family members who have, but do you know that participating in one is legally wrong in Malaysia?

In February this year, nasi lemak stall operator Nor Jaimah Kamarudin, 38, was fined RM50,000 in default of a year's jail by the Butterworth Sessions Court for running a kootu fund, which is called a tontine or chit fund in English, for a group of people.

The mother of three is believed the first person in the country to be charged with the offence since amendments were made to the Kootu Funds (Prohibition) Act 1971 in 2011. The amended charge carries a maximum jail term of 10 years, or a RM500,000 fine, or both, upon conviction.

Nor Jaimah reportedly organised a kootu fund for five individuals via Facebook between January and August 2018, and used her personal bank account to receive and pay out close to RM100,000 in kootu funds during the period.

When is it Illegal?

According to Registrar of Societies (ROS), playing the traditional kootu fund among friends and family is legal as they are based on values and trust.

However, the scheme can be considered illegal in two situations.

Firstly, it is considered unlwaful when the kootu leader charges a membership fee from the participants to subscribe to or join the scheme.

Secondly, the scheme also turns illegal when the kootu leader claims profits from the contributing members to enrich him/herself.

Lawyers have said that advertising or promoting kootu funds among the general public would also render it illegal under Section 3 of the Kootu Funds (Prohibition) Act 1971 (Act 28).

In addition, people who play kootu funds, especially through channels that outside their trust circle (for example: via WhatsApp or social media), also risk losing their money or get in trouble with the law, as in many cases, they do not even know who the kootu leader is.

Furthermore, the more money accummulates in such scheme, the more risk it carries of turning into black money, lawyers have cautioned.

Should something go wrong and a report is lodged, both the group member and the leader could be charged for their involvement in the kootu fund.

Given the facts, you may want to reconsider your plans to start playing kootu, as doing so may put in you in a bigger trouble.


Source: Bernama, FMT
Photo source: asklegal.my