When Halal Becomes a Trap: How to Spot Shariah Gold Investment Scams and What Malaysia Can Learn from Indonesia

Fraudulent investment schemes in Malaysia involve using shariah-compliant terminology as a bait to lure investors into fake investment schemes. This study was conducted based on the reported cases of investment fraud in Malaysia. Based on case studies provided by stakeholders, we document how fraudsters have exploited Islamic finance terminology and promoted their deceptive schemes using false promises of high investment returns via various unregistered investment channels including online platforms and social media. In Malaysia, there are existing Islamic finance regulations under the Islamic Financial Services Act (IFSA) 2013 and the Capital Market and Service Act (CMSA) 2007. However, their main focus are only on licensed financial institutions and investment products. Hence, this leaves significant loopholes for the use of shariah-related mislabelling in fraudulent schemes. Key gaps in current Malaysian regulation include the absence of preventive controls over Shariah-related investment advertising and weak monitoring of digital promotions are key weaknesses. Enforcement is mainly reactive, meaning action is taken only after financial losses occur. Comparatively, Indonesia faces the same problem hence, but Indonesia’s system is more fragmented, with religious and financial institutions working separately. To combat such fraud, this paper recommends better enforcement measures, increased oversight, greater public investor awareness and enhanced institutional coordination within Malaysia.

Shariah-compliant gold investment; investment fraud

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