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Protecting Yourself: A Legal Perspective on Online Scams

posted 2 months ago

In the rapidly evolving digital landscape, online scams have become a prevalent threat, targeting unsuspecting individuals across various platforms.

Some common online scams include:-

  1. Investment Scams

One of the most pervasive online scams involves fraudulent investment schemes promising quick and lucrative returns. Victims are often enticed by the prospect of high profits, only to find themselves defrauded of their hard-earned money.

  1. Job Scams

Job seekers are increasingly vulnerable to scams posing as legitimate employment opportunities. Fraudsters may request personal information or advance payments for non-existent jobs, exploiting the eagerness of individuals seeking employment.

  1. E-commerce Scams

The rise of online shopping has brought about a surge in e-commerce scams. Fake websites, counterfeit products, and non-delivery of goods are common tactics used by scammers to dupe unsuspecting consumers.

  1. Money Muling

Money muling involves using unsuspecting individuals to transfer illegally obtained funds. Being unwittingly involved in such activities can have severe legal consequences. Understanding the legal implications is vital for those who may unknowingly be facilitating financial crimes.

  1. Illegal Loans

Scams involving illegal loans often target individuals in financial distress. These scams can lead to a cycle of debt and legal repercussions for victims.

  1. Love/Romance Scams

Love scams prey on emotions, with perpetrators building fake romantic relationships to exploit victims financially.

 

Reporting to Relevant Agencies

In the unfortunate event of falling victim to an online scam, it is crucial to take swift and strategic action to mitigate further damage and pursue legal remedies. Here’s a comprehensive guide on the steps to take in the aftermath of a scam:-

  • If you suspect you have been scammed, contact your bank or credit card company immediately. Inform them of the fraudulent transactions and follow their guidance on disputing charges. They may be able to freeze or reverse the transactions, thereby limiting your financial losses.
  • Initiate an official investigation by filing a police report, providing crucial information to law enforcement agencies.
  • It is also advisable to file a report with Bank Negara Malaysia, providing them with comprehensive information about the scam. This ensures that the financial regulatory body is aware of the incident and can take appropriate measures.
  • Report the incident to the relevant enforcement agency[1].
  • (d) Report the incident to the relevant enforcement agency[1].
No. Type of Scam Relevant Government Agencies
1. Property fraud / Money The Royal Malaysian Police (PDRM)
2. (i)       Scratch and Win

(ii)     Fraud Purchase

(iii)   Purchase Consumer Goods

(iv)   MLM

(v)     Copyright / Intellectual

Ministry of Domestic Trade and Consumer Affairs Tribunal for Consumer Claims Malaysia (TCC)
3. (i)       Skim Cepat Kaya Scams

(ii)     Gold Investment Scheme/ Cash

(iii)   Forex (Foreign Exchange)

(iv)   Illegal Deposit Taking

(v)     Bitcoin

Bank Negara Malaysia
4. (i)       ​Claim back inve​stment/loss/ issues in the company

(ii)     The collision Contract Request to get the views of any legal practitioner qualified for civil action.

Request to get the views of any legal practitioner qualified for civil action.

 

Victims should diligently preserve all records and documentations related to the scam. This includes bank-in slips, deposit slips, agreements, vouchers, and any communication received from the company or perpetrator. These documents serve as crucial evidence should legal action be pursued. Additionally, note down details of any officers or key persons you may have interacted with during the scam. This information could prove invaluable for law enforcement in their efforts to identify and apprehend the culprits.

Legal Remedies

A legal action on the ground of fraudulent misrepresentation can be initiated by the affected parties. Fraudulent misrepresentation is where a false statement is dishonestly made to you, upon which you have relied upon and in consequence of the reliance, you have suffered loss and damages. The Federal Court in the case of ALW Carworkshop Sdn Bhd V AXA Affin General Insurance Bhd has adopted the test of fraudulent misrepresentation as follows:

“The question was not whether the defendant in any given case honestly believed the representation to be true in the sense assigned to it by the court on an objective consideration of its truth or falsity, but whether he honestly believed the representation to be true in the sense which he understood it albeit erroneously, when it was made”.

 

To raise a claim in fraudulent misrepresentation, one has to prove the following:

(a) A false representation was made, either by words or by conduct. Note that mere silence is not sufficient;

(b) The person who made statement either knew that it was false, had no belief in its truth or was reckless as to whether it was true or false;

(c) The person making it know that you will rely upon the representation;

(d) You acted upon the representation; and

(e) You suffered loss or damage as a result.

The person who has been defrauded would say:

‘I would not have entered into this bargain at all but for your representation. Owing to your fraud, I have not only lost all the money I paid you, but, what is more, I have been put to a large amount of extra expense as well and suffered this or that extra damages.’

On the assessment of damages, in both cases of Yap Boon Hwa v Kee Wah Soong[2] and Sim Thong Realty Sdn Bhd v Teh Kim Dar @ Tee Kim[3], the Court of Appeal agreed with the Judgment of Lord Denning in the English case of Doyle v Olby (Ironmongers) Ltd and others[4] that the fraudster is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement.

Four main points established in Doyle v Olby relevant to governing the assessment of damages for fraudulent misrepresentation were adopted and approved by the Court of Appeal (supraas listed below:-

(a) Firstly, the measure of damages where a contract has been induced by fraudulent misrepresentation is reparation for all the actual damage directly flowing from or caused by entering into the transaction.

(b) Secondly, in assessing such damages it is not an inflexible rule that the affected party must bring into account the value as at the transaction date of the asset acquired.

(c) Thirdly, damages for deceit are not limited to those which were reasonably foreseeable.

(d) Fourthly, the damages recoverable can include consequential loss suffered by reason of having acquired the asset.

Therefore, the victim of fraudulent misrepresentation shall be entitled to compensation for all the actual loss, including consequential loss, directly flowing from the transaction induced by the deceit, subject to the victim substantiating the same.

Claim against financial institution

In situations where a financial institution is negligent in preventing the scam, the victim of such scam may consider commencing an action against the financial institution, especially when the scammer has siphoned off the money through the bank.

Generally, the bank owes a duty to protect its customers against fraud by exercising reasonable skill and care. Various guidelines have been put in place by Bank Negara to ensure that there are fraud detection and prevention system in place such as “Know Your Client” and “Anti-Money Laundering protocols.

In Perwira Habib Bank (M) Bhd v. Wong Keng Fatt[5], the court enumerated a list of circumstances where the bank would be liable of its duty to exercise reasonable skill and care, and such circumstances are where:-

(a) the bank executes the order or instruction knowing it to have been dishonestly given or procured;

(b) the bank shuts its eyes to the obvious fact of the dishonesty;

(c) the bank acts recklessly in failing to make such inquiries as an honest and reasonable man would make; or

(d) the bank has been ‘put on inquiry’ in the sense that an ordinary prudent banker would have reasonable grounds for believing that there is an attempt to misappropriate money or that there is something otherwise amiss and does not carry out inquiries that were reasonable in the circumstances.

It is crucial to emphasize that, under normal circumstances, courts often assert that customers bear sole responsibility for transactions with merchants, be it for investment or other purposes. The role of the bank is seen as facilitative, involving seeking authorization and executing the customer’s instructions. However, when the bank neglects its duty to exercise reasonable care, particularly in the listed circumstances, it may be held accountable for the financial losses suffered by the victim.

In conclusion, while financial institutions are expected to uphold standards of diligence and care in protecting their customers, it is equally vital for individuals to remain vigilant and exercise caution when providing personal and financial information. As a helpful reminder, ‘if something seems too good to be true, it probably is.

Seeking legal advice and prompt reports to the relevant agencies are crucial in tackling the complexities of scams and to safeguard your interest as well as to maximize the chances of recovering losses.

[1] https://www.ssm.com.my/Pages/Services/Other-Services/e-Complaint.aspx

[2] [2020] 1 MLJ 37

[3] [2003] 3 MLJ 460

[4] [1969] 2 WLR 673

[5] [2014] MLJU 1822


About the authors

Chan Jia Ying
Senior Associate
Civil & Commercial Dispute Resolution, Taxation & Debt Recovery
Harold & Lam Partnership
[email protected]

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