Be cautious when playing kootu funds
Published on: Sunday, February 07, 2021
By: Bernama
KUALA LUMPUR: 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.
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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.
Lawyer Teeruvarasu K. Muthusamy said 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The money is then withdrawn from the pool by the 'kootu' group leader and given to a participant, mainly by a lottery mechanism.
He said while playing the traditional 'kootu' fund among friends and family is legal according to the Registrar of Societies (ROS), it can be illegal in two situations.
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"It becomes an offence when the 'kootu' leader charges a fee of membership from the participants to subscribe or join the 'kootu' scheme. It also becomes illegal when the 'kootu' leader claims profits from the contributing members to enrich himself," he told Bernama.
Teeruvarasu said the other scenario that would render the activity illegal is when the fund is advertised or promoted among the general public.
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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 said.
He said 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.
Another 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.
"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," she explained.
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