THE Retirement Fund Incorporated’s (KWAP) reported RM200 mil loss arising from Indonesia’s eFishery scandal is more than a financial setback. It raises important questions about how public institutions evaluate investments and whether traditional due diligence remains adequate in an era of increasingly sophisticated fraud.
By conventional standards, KWAP appeared to have followed established investment practices. Audited financial statements were reviewed, independent experts were engaged, and the transaction underwent the checks expected of major investments.
Yet KWAP was not alone. Global investors including Temasek, SoftBank and Northstar also invested in eFishery.
That is perhaps the most sobering lesson.
If experienced institutional investors can be deceived, the challenge is no longer simply identifying bad investments. It is recognising that financial fraud has evolved far beyond the safeguards many institutions still rely upon.
Today’s fraudsters are no longer merely manipulating accounts. They can inflate revenues, fabricate customers and exploit weaknesses in conventional oversight to create convincing but misleading pictures of financial health.
Traditional due diligence, while still essential, is no longer sufficient on its own. Annual audits provide only periodic snapshots, while investor presentations inevitably highlight strengths rather than expose weaknesses.
Trust has never been an investment strategy. In today’s environment, verification has become indispensable.
So what should change?
First, forensic accountants should be involved before major investment decisions are made, not after problems emerge. Their expertise lies in identifying inconsistencies and testing assumptions that conventional due diligence may overlook.
When hundreds of millions of ringgit are at stake, this additional scrutiny is a worthwhile investment.
Second, institutional investors should strengthen post-investment monitoring. Verification should not end once capital has been committed.
Customer numbers, revenue streams and operational performance should be independently reviewed on a regular basis rather than relying solely on annual reporting.
Third, artificial intelligence should become part of the investment oversight process. AI tools are increasingly capable of detecting unusual financial patterns, unexplained revenue spikes and accounting anomalies that may warrant closer investigation.
As financial fraud becomes more technologically sophisticated, investment oversight must evolve accordingly.
Institutions should also consider establishing independent “red teams” tasked with challenging investment assumptions before major decisions are approved.
Their role would be to identify weaknesses, question optimistic projections and test whether an investment can withstand rigorous scrutiny.
Such scepticism may prove invaluable. When enthusiasm surrounds a promising investment opportunity, an independent voice questioning the prevailing consensus can help prevent costly mistakes.
Transparency should also remain central to the management of public funds. Institutions entrusted with billions of ringgit have a responsibility to communicate clearly how investments are performing, what risks exist and how those risks are being managed. Public confidence depends not only on investment returns but also on accountability.
No governance framework can eliminate fraud entirely.
Financial history is marked by major scandals, from Enron and Wirecard to Theranos and FTX. Each exposed weaknesses in existing safeguards while prompting improvements in corporate governance and investment oversight.
The eFishery case should be viewed in the same light.
Rather than becoming another costly lesson quickly forgotten, it should encourage Malaysian institutions to strengthen due diligence, embrace new technologies and build more resilient governance frameworks capable of detecting increasingly sophisticated deception.
Ultimately, this is not merely about one failed investment. It is about protecting the retirement savings of teachers, nurses, civil servants and millions of Malaysians who depend on public institutions to manage their money responsibly.
In an age of increasingly complex financial fraud, good governance must go beyond compliance. It must question assumptions, verify evidence and remain vigilant long after an investment has been made. ‒ July 16, 2026
KT Maran is a Focus Malaysia viewer.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main image: The Star
