Pushpan Murugiah, CEO of the Center to Combat Corruption and Cronyism (C4), said this has resulted in several NGOs and charitable bodies being mired in scandals.
He cited Aman Palestin Berhad and Yayasan Akalbudi, both established to serve charitable causes, as “notable” examples.
In February last year, two Aman Palestin executives and a company director claimed trial to a total of 164 charges involving money laundering, criminal breach of trust (CBT) and cheating.
Deputy prime minister Ahmad Zahid Hamidi was also charged with corruption, CBT and money laundering of Yayasan Akalbudi funds but secured a conditional discharge in September 2023.
“There is an inherent risk that not just ‘pro-business’ groups, but NGOs as a whole can be used as vehicles to facilitate corruption and money laundering,” Pushpan told FMT.
He was asked to comment on the deregistration of Ikhlas, a society for small-time entrepreneurs, after it failed to submit its annual financial statements.
On Sunday, the Malaysian Muslim Consumers Association announced that it would no longer work with Ikhlas after finding out that it was deregistered in 2022.
Pushpan said there was no specific law to govern “NGOs” and “charitable bodies”, adding that there was ambiguity around the definition of those terms.
Instead, he said many NGOs are registered under different legal frameworks—some as societies under the Societies Act 1966 and others as companies limited by guarantee under the Companies Act 2016.
“The lack of legal clarity as to who is responsible for governing charitable bodies allows many bad actors to escape accountability and oversight for their actions,” he added.
Pushpan called for the government to improve the governance of these bodies and mooted the establishment of a single oversight body to govern their activities.
He said the setting up of such a body—alongside other needed reforms like a Political Financing Act, transparent beneficial ownership rules, and a Procurement Act— would ensure that charitable bodies are not abused for corrupt purposes.
“This is especially so when it comes to organisations that have ties to political parties or politicians,” he said.
Lawyer Salim Bashir called for laws which would compel NGOs to disclose the sources of their income and the manner in which their funds are managed.
“The government must consider establishing an oversight body like the UK Charity Commission to monitor NGOs’ activities or to attend to complaints against unlawful acts that are deemed to be detrimental to public safety and economic security,” he said, according to a report by Scoop.
Fellow lawyer Rajesh Nagarajan said NGOs play a vital role in nation-building and should be subject to proportionate checks and balances—particularly in areas when public trust and commercial interests intersect.
He suggested that businesses consult the various chambers of commerce and trade associations to verify the existence and reputation of NGOs, particularly lesser-known ones, prior to making their contributions.
Such a step would prevent companies from being inadvertently connected to any fraudulent fundraising efforts.
“Engage lawyers early when facing suspicious donation requests or threats cloaked under ‘activism’ to avoid reputational and financial damage,” he said, when contacted by FMT.