January 25, 2022
The Center to Combat Corruption and Cronyism (C4 Center) welcomes the decision of the High Court to order former Deputy Prime Minister and current UMNO President, Ahmad Zahid Hamidi, to enter a defence for all 47 counts of criminal breach of trust, bribery and money laundering linked to tens of millions of ringgit of funds from Yayasan Akalbudi.
C4 Center views this as a major development in uncovering the abuse of charitable foundations by politically-linked individuals. Over the past few years, several foundations have been at the center of major corruption scandals involving high-ranking political figures, including a former Prime Minister, a former Chief Minister of Sabah, and a former Minister of the Federal Territories.
According to C4 Center’s report, “Foundations and Donations: Political Financing, Corruption, and the Pursuit of Power” published last year, foundations are particularly vulnerable to abuse by politicians for the following reasons:
- Foundations can be used to covertly raise funds during election campaign and non-campaign periods as they are far from the view of the electorate and oversight institutions such as the Electoral Commission.
- There is no law to ensure donations to politically-linked foundations are publicly disclosed. Foundations are also not legally obliged to publicly declare their donations to political parties or politicians.
- Current laws overseeing election campaign financing do not pay heed to the flow of funds from foundations.
- There is no disclosure about the sponsors of charitable foundations and how funds are channeled by them to parties or politicians.
The case of Zahid Hamidi and Yayasan Akalbudi was a subject of study in C4 Center’s report. It is hoped that the court case will answer several lingering questions surrounding Yayasan Akalbudi, including:
- How did Yayasan Akalbudi, a private company registered under the Companies Commission of Malaysia (CCM), face no consequences for failing to file an AGM report or audit with CCM since its establishment?
- How were Yayasan Akalbudi’s funds able to be channeled for Zahid Hamidi’s personal use, despite it being a foundation set up to receive and administer funds for the eradication of poverty?
- What was the purpose of the RM9.3 million transfer from Yayasan Akalbudi to Yayasan Al-Falah (which is helmed by Zahid’s brother) three weeks after the UMNO-led Barisan Nasional lost power in the 2018 general election?
This case illustrates the severe vulnerabilities of charitable foundations to abuse, and reiterates the need to reform political financing in Malaysia. This reform is all the more urgent in light of an impending general election where large flows of funds are expected to drive campaigns. With this, C4 Center calls for:
- Parliament to immediately table a political funding law before GE15. A draft of this law has existed since the Pakatan Harapan administration yet has still not been made public.
- Asset declaration laws to be drafted as soon as possible to prevent the flow of secret and illicit wealth, especially within charitable foundations.
- The introduction of proper regulations on political donations, including the following:
a) A list of permissible and non-permissible donors must be established.
b) Parties and election candidates must disclose the identities of donors who donate above a minimum amount.
c) Donations made to political parties must go directly into the party’s account.
d) Maximum donation limits must be introduced.
- A registry of charitable foundations to be published online and available to be scrutinised by the public.
- All politicians to declare their connections to charitable foundations, both in their personal capacity and through family members.