Laywers: Be cautious, kootu funds can be illegal

A kootu fund is loosely defined as a pool of money raised from contributions made by a group of individuals at regular intervals, on a weekly or monthly basis.

The money is then withdrawn from the pool by the kootu group leader and given to a participant, mainly by a lottery mechanism.

Is kootu fund legal?

According to the Registrar of Societies (ROS), playing the traditional kootu fund among friends and family is legal. However, it can be illegal in two situations.

There is no doubt that the COVID-19 pandemic has disrupted the rice bowls of countless Malaysians.

In such a situation, many may be tempted to turn to the time-tested way of raising some hard cash through a kootu fund.

But several lawyers have advised the people to exercise caution when participating in kootu funds, lest they be caught on the wrong side of the law.

“It becomes an offence when the kootu leader charges a fee of membership from the participants to subscribe or join the kootu scheme. Lawyer Teeruvarasu K. Muthusamy told Bernama.

“It also becomes illegal when the kootu leader claims profits from the contributing members to enrich himself.”

Teeruvarasu added that the other scenario that would render the activity illegal is when the fund is advertised or promoted among the general public.

He pointed out that this would violate Section 3 of the Kootu Funds (Prohibition) Act 1971 (Act 28).

“Act 28 clearly states that it shall be unlawful for any person to carry on the business of promoting kootu funds and any person who carries on such business shall be guilty of an offence,” he remarked.  

Teeruvarasu further elaborated that matters pertaining to Act 28 are under the purview of the Ministry of Domestic Trade and Consumer Affairs, and any irregularities on kootu can be reported to the Registrar of Companies (ROC) and the police.

Meanwhile, lawyer Nor Zabetha Muhammad Nor, has advised people against joining kootu funds, saying they risk losing their money or getting into trouble with the law.

“There are so many ways that kootu funds are being carried out today, and they’re even being run through WhatsApp groups. There are many who join these schemes without even knowing who the ‘Ibu Kutu’ (kootu leader) is,” she explained.

“The more a kootu group’s fund keeps increasing, the more it becomes black money and that’s what usually turns it into an offence.”

Prominent criminal lawyer Datuk N. Sivananthan echoed Nor Zabetha’s sentiment, saying in the event a member lodged a report against the group leader, both players and the leader could be charged.

“Theoretically, the police can charge the player for playing and the chief for collecting (money) and also theft or cheating depending on the facts,” he said. – Feb 7, 2021

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