minimizing fraud an islamic perspective -amendment 17042013

8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013

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Minimizing Fraud : An Islamic Perspective

Abstract

The intention of this paper is to analyze fraud from Islamic perspective and its occurrence in

the muslim community. A literature review on various types of fraud since the early era of

Islam were identified and discussed. Occurrence of fraud in Islamic based institutions such as

zakat, waqf, sadaqah and other charities were analyzed. Despite the noble intention of these

philanthropic institutions, elements of fraud due to unsystematic manaement, lack of ood

overnance, unethical behaviors and lack of ilm or knowlede were the main determinants

influencin the likelihood of fraud. This study reveals that fraud led to denyin the rihts of

would be recipients, wastae and inefficiency and rampant white collar crime if left

unattended. !ence, the study proposes several treatments in minimizin fraud. This include

effective and efficient human resource manaement usin advance technoloical system,

establishin of ood overnance by introducin a roup of committee and board of directors

and other determinants that can be imply by the institutions in minimizin an occurrence of

fraud cases to be occurred in manain those Islamic "hilanthropy funds.

#eyword$ %raud, &akat, 'aqf, (adaqah,

Introduction

The primary function of Islamic charities is to help the communities in providin a better life

to those in needs. In a sense, Islamic charities provide )uslims with an opportunity to put into

practice the commands of *od and fulfill their duties as )uslims and also ettin a blessin

from Allah s.w.t which says, +Take sadaqah obliatory alms- out of their wealth throuh

which you may cleanse and purify them /al0Tawbah$ 1234. Islamic "hilanthropy can be

ranes from the wa5ib +zakat6- to the mustahabb favored- like waqf and sadaqah.

Al 7uran and Al !adith dictate that zakat is one of the five basic pillars in Islam and Allah

made it compulsory for )uslims to contribute a specific percentae of amounts of their

wealth to a needy with main ob5ective of achievin socioeconomic 5ustice. "rof. Dr. Ahmad

Akunduz, 8212- in his study declares zakat as a bride, whereby the )uslim helps his

brother )uslim to pass over it. Thus, from this people may assist one another which the fundand benefit from it may flow between its members.



'hile lookin at the other e9ample of Islamic "hilanthropy funds which is waqf, )d.

)okhter Ahmad and )d. (afiullah, 822:- in their study has define ;'aqf< as an important

Islamic institution which it is one of the reatest sources of charity devoted for the overall

development of the )uslim society. The role of waqf contribution is to nourishin =

flourishin of various reliious, educational, economic, social, and cultural dimensions of

Islam. >esides that, Abul !assan and )ohammad Abdus (hahid,8212- have refer 'aqf as a

ift of money, property or other items of charity, which have been held and preserved for the

confined benefit of certain philanthropy. Thus waqf property is prohibited from bein used or

disposed of outside of the specific purpose for which it is held. This type of properties

includes real estate, stocks, cash money, books, and chattel etc.

?eferrin to sadaqah, it has been define as an Islamic term that means voluntary charity, such

as a charitable act, charitable ivin, or money iven in charity with the intention of seekin

the pleasure of Allah s.w.t The *lorified and @9alted-. Allah<s )essener, peace be upon

him said, +@very act of oodness is (adaqah.6 )uslim 81:B-

?obert Cooney, 822- mentioned in his study that Islamic charities provide a visible e9ample

of how Islam can be put to work to improve society and alleviate socioeconomic stanation in

the )uslim world. Ariff hidayat Ali , 822:- also mentioned that an application of the

concept of +charity6 or +benevolent6 in Islamic "hilanthropy fund may ive rise to several

implements in Islam. !owever, fraud cases in manaement of Islamic "hilanthropy fund has

become a lobal issues especially for the payers itself and it has been discussed in a few

studies previously.

A few researcher have come out with this issue in their studies. %or e9ample, Dr. Adel (area, 8218-

did mentioned that, the practice of this fund lobally needs to be investiated in order to

emphasize the need for this fund as financial system to evaluate the rowth of economy. It is

because, she beleives that pay zakat for e9ample, means rowth of faith and then rowth of

zakat fund and then zakat contribute sinificantly to economic rowth, redistribution of

income and wealth and reducin the phenomenon of inflation as well as reducin the poverty

and other social and economic problems. That is why zakat manaement fund need to be

effective and efficiently manae to et the benefit from it and develop our socio economic as

a whole. (ame oes to the waqf fund where the manaement and development of this fundhave been a tremendous concern for the )uslim scholars since lon. The phenomenon of

http://inceif.academia.edu/AriffhidayatAli




corruption in the waqf manaement can be discerned across history throuh misuse,

mismanaement, lootin, encroachment, and unlawful seizure upon awqaf properties.

Aware to this issues, this paper is oin to discuss and hihlihted some cases of fraud

worldwide, determinant of fraud and how to minimize fraud cases in manain and

distributin of Islamic "hilanthropy funds. The discussion will be based on the previous study

done by other researcher and a discussion amon the researchers itself.

Fraud from Islamic Perspective: Review of the Literature

Definitions and Concepts

In Islamic leal te9ts fraud tadlis or khilaba), lesion or misrepresentation (ghabn), ross

misrepresentation (ghabn fahish), deception (shushsh), imbalance (gharar), and trickery

taghrir) are used interchaneably as to mean fraud. >esides there are few words that also

refer to fraud but less commonly used such as khallab, khiyanah, ihtiyal, tahayul, tadlil, iham,

nasb, and khadi<a which all vary in meanin from fraud, trickery, deception, lesion,

misrepresentation, swindlin to imbalance (iti %aridah, 8218-. Accordin to &arqa< tahrir is

defined as the act of deceivin another by deployin misleadin means in the form of actions

or words, thus, inducin the other to transact where he would nit have transacted had such

means not been deployed. In other word tahrir can either be the deceptive act or statements.

%rom this definition, tahrir can be divided into two types that are tahrir fi<li such as false act

and manoeuvres and tahrir qawli such as lyin (iti %aridah, 8218-.

Another definition of fraud can be derived from another scholar, (anhuri, as a deceitful act

that caused another to fall into mistake and that persuaded him to contract. !e also stated that

the fraud must be sufficient to deceive the other contractin party and must constitute an

impetus to contract. (iti %aridah, 8218-. Eoulson added in this definition of tahrir that the

act of fraudulent must be cunnin to the deree that it would deceived any ordinarily prudent

person and the defrauded person have suffered darar material damae- so that the fraudulent

act can be actionable. (iti %aridah, 8218-.

Tadlis can also be defined as fraud. It causes misrepresentation or lesion ghabn- and leads toa contractual imbalance (gharar) between the contractin parties. Tadlis as a leal term,



means a dishonest and deliberate action leadin the contractin party to commit a mistake

thereby convincin him to enter into a contract. Islamic scholars associate fraud with its

consequence when 5udin it as a defect. The consequence should indicate ghabn or lesion on

one of the parties< concerned otherwise fraud simply has no effect. In other word, the fraud

must have caused habn or loss to the contractin party and the loss incurred must come from

the act of the fraud #haled >en5elayel, 8218-.

>esides that, the term harar also refer to fraud. *harar is uncertainty, hazard, chance or risk.

Islam prohibited harar in term of uncontrollable risk because it can lead to a speculation.

*harar can be further defined as +where there is a matter that is concealed by one party,

where it this concealment- can raise a sense of inequality as well as tyranny to another party6

Ahmad Ehe Faacob = (idek Abdullah, n.d-. In business, harar e9ist when a party

undertakes a venture blindly without sufficient knowlede or to undertake and e9cessively

hih risky transaction. The presence of harar element in the contract makes the outcome not

known or hidden which may lead to a fraud Ahmad Ehe Faacob = (idek Abdullah, n.d-.

Legal Evidence Related o the Action of Fraud

Al!"uran

+And do not consume one anotherGs wealth un5ustly or send it /in bribery4 to the rulers in

order that /they miht aid4 you /to4 consume a portion of the wealth of the people in sin, while

you know /it is unlawful46 al0>aqarah 8$1HH-

This verse provided the eneral meanin of fraud where Allah swt has prohibited )uslim to

consume other<s wealth un5ustly. Therefore, any activities that lead to such action are

considered as fraud. Islam prohibits every type of fraud and deception, whether the fraud in

activities of buyin and sellin or in any other matter between people. All )uslim are ured

to be honest and truthful in all situations in everythin they do.

+woe to those who deal in fraud, those who, when they have to receive by measure from men,

e9act full measure, but when they have to ive by measure or weiht to men ive less than

due. Do they not think that they will be called to account on a )ihty Day, a Day when all-

mankind will stand before the Cord of the 'orlds al0)utaffifin H3$ 10-



>ased on the above verse, Allah swt condemn to those who are dealin with fraud with a

reater punishment. Amon them are the people who are insincere when ives measurement.

The act of ivin a less weiht than due or ivin a less amount than one should receive is

considered fraud and who enae in it will face severe punishment from Allah swt.

Al!#unnah

+It is not permissible to sell an article without makin everythin about it- clear, nor is it

permissible for anyone who knows about its defects- to refrain from mentionin them6

reported by al0hakim and al0bayhaqi-

Once, when passin by a rain merchant, the "rophetGs curiosity was aroused. !e thrust his

hand into the heap of rain and found it wet. 'hat is this, O merchant he asked. It is

because of rain, the man replied. The "rophet peace be on him- then said to him, 'hy did

you not put it on top so that the people could see it !e who deceives us is not of us.

?eported by )uslim-

In another report it is said that he passed by a heap of rain which was made to look ood by

the merchant. The "rophet peace be on him- put his hand into it and found it to be bad. !e

told the merchant, (ell the ood and the bad separately. !e who deceives us is not of us.

?eported by Ahmad-

In both hadith, prophet )uhammad saw forbade the seller to hide any defects that e9ist in

their sellin item. The act of hidin the defects of the oods by the seller may lead to a fraud

and in5ustice. That is why the )uslims of earlier times strictly observed the practises of

e9posin defects of what they sold, tellin the truth and ivin ood advice. @9amples of that

action are as followed$ 'hen Ibn (irin sold a sheep, he told the buyer, I would like to tell

you about a defect it has$ it kicks the fodder. And when al0!assan bin (alih sold a slave irl

he told the buyer, Once she spat up blood. Althouh she had done this only once al0!assanGs

)uslim conscience required that he mention the fact, even if it resulted in his receivin a

lower price. Fusuf Al07aradhawi, n.d-

Amon the act of fraud is market manipulation na5ash-. Ibn GJmar e9plained that na5ash

sinifies someoneGs biddin for an item in e9cess of its price without havin any intention of



actually buyin it, but merely in order to induce others to bid still hiher. )any times this is

pre0arraned for the purpose of deceivin others. Fusuf Al07aradhawi, n.d-

>eside prohibit the market manipulation, prophet )uhammad also forbade people from oin

out of town to buy merchandise which was on its way to the market, instead, tellin them to

wait until it was brouht to the marketplace. ?eported by )uslim, Ahmad, and Ibn )a5ah-

This prohibition is relevant to make sure that the seller is not defrauded by the lack of

knowlede about the current price of his merchandise. If anyone does buy some of his

merchandise in this manner, the seller has the option of cancellin the transaction after

arrivin at the marketplace. ?eported by )uslim-

The "rophet forbade any kind of transaction which is uncertain or which involved an

unspecific quantity to be e9chaned or delivered. This includes the sort of transaction in

which there is no uarantee that the seller can deliver the oods for which he receives

payment. Accordinly, the "rophet forbade acceptin money for a stallionGs or male camelGs

coverin, for fish in the water or birds in the air which one has not cauht, or for the offsprin

of a camel still in the femaleGs womb, since there is an element of uncertainty as to the

outcome in all such transactions. The reason for the prohibition is to avoid quarrellin over

who was to bear the loss if occurred amon the seller and the buyer. Therefore, the sales of

oods and items that already e9ist durin the transaction can avoid such issues. Fusuf Al0

7aradhawi, n.d-

$pes of fraud

There are a few types of fraud that can be relate to the institutions malpractice such as

dishonesty, falsehood and breach of pactKpromises, khiyanah disloyalty-, and bribery al0

rishwah-. >esides that, there also a few of act that can be considered as fraud which are sale

of al0harar and hoardin ihtikar -.

Dishonest$

Citerally dishonesty means lack of honesty or interity which is disposition to defraud or

deceive. A dishonest act is equivalent to fraud. Dishonesty is one of the worst forms of fraud.

A dishonest person is always prone to defraud others whenever and wherever possible.

Amon the dishonest act or fraudulent activities accordin to the Jnited 'ay of (outh!ampton ?oads are embezzlement, misappropriation, misapplication, destruction, removal,



or concealment of property, alteration or falsification of paper or electronic documents,

includin the inappropriate destruction of paper or electronic documents, false claims andKor

misrepresentation of facts, theft of an asset, trade secrets or intellectual property,

inappropriate use of computer systems includin hackin and software piracy, bribery,

kickbacks, or rebates, conflict of interest or commitment.

Falsehood and breach of pact%promises

%alsehood can be defined as an untrue statement, an absence of truth or accuracy and the

practise of lyin. %alsehood is stronly condemned in Islam as mentioned in !oly 7uran,

+O ye who believeL There are indeed many amon the priests and anchorites, who in

falsehood devour the substance of men and hinder them- from the way of Allah. Andthere are those who bury old and silver and spend it not in the way of Allah. Announceunto them a most rievous penalty.6

Al0Taubah :$3M-

In this verse, Allah ives a warnin to those who devourin people the wron way with a

severe punishment. %alsehood or misstatement about merchandise or services will harm the

customer alon with the producer and the trader as well )uhammad Akbar #han, 8211-. The

person who falsified the truth in zakat collection for e9ample will lead to the wron doin in

zakat distribution. That is why this kind of action considered as a fraud and condemned in

Islamic practice.

&hi$anah 'dislo$al(

#hiyanah can be derived as treachery and infidelity. #hiyanah also mean disloyal. #hiyanah

involves deception breach of areements and promises and failin a trust as well as infidelity.

#hiyanah is an immoral characteristic. It may occur in reard to money or as a violation oftrust. It may occur in reard to honour, power, or position. Allah said in !oly 7uran,

+No prophet could ever- be false to his trust. If any person is so false, !e shall, on theDay of udment, restore what he misappropriatedP then shall every soul receive itsdue,0 whatever it earned,0 and none shall be dealt with un5ustly6.

Ali Imran 3$11-

+O ye that believeL >etray not the trust of Allah and the )essener, nor misappropriateknowinly thins entrusted to you.6

Al0Anfal H$8B-



+If thou fearest treachery from any roup, throw back their covenant- to them, so as to be- on equal terms$ for Allah loveth not the treacherous.6

Al0Anfal H$QH-

All the verses above show that act of khiyanah are condemned in Islam and the treacherous

will face severe punishment in hereafter. #hiyanah can be considered as fraud because it will

harm the people who put their trust to the person or on the contract sined.

)riber$ 'al!rishwah(

>ribery is an offer or promise of whatever nature iven to someone in order to influence him

or persuade him to do somethin which is unlawful in the circumstances in favour of the

iver. It can also be understand as an incentive that is illeally iven to someone in position of

authority to influence his sense of 5ustice, due process and discretion Fusuf IbrahimArowosaiye, 822H-. "rophet )uhammad saw said in his hadith

+Allah has cursed one ivin bribe and one receivin bribe as well as the o between6.

Narrated by Ahmad al0Tibrani-

The practice of bribery is stronly condemned in Islam because it has a tendency to encourae

dishonest practices. *ivin of ifts to people who occupy public office or position of

authority, by the consensus of scholars are not to be accepted because it can be part of bribery

as said by Ealiph Jmar to all his overnors +>eware of ifts because they form part of bribe6.

Fusuf Ibrahim Arowosaiye, 822H-.

#ale of al!gharar 'uncertaint$* ris+s* speculation(

The sale of harar in Islamic terminoloy refers to the sale of a commodity or oods which is

not present at hand, or the sale of an article or oods which the consequence is not yet known,

or a sale involvin risks or hazard where one does not know whether at all commodity will

later come into e9istence. This type of sale is prohibited in Islam because it may ive rise to

dispute and disareements between the concerned parties )uhammad Akbar #han, 8211-.

The contract that involved uncertainty that can harm the consumers also prohibited in Islam.

@9amples of sale of al0harar as stated in prophet )uhammad sayin are the sale of birds in

the air, the of fish in the sea, the sale of fruits and rains that still not harvest yet.



,oarding 'ihti+ar(

Citerally hoardin mean an accumulated store hidden away for future use. Technically

hoardin means the purchase of lare quantities of a commodity with the intent of pushin up

the price. An investor hopin to increase the price of a commodity can do so by leverain his

or her demand for it, and buyin physical inventory as well as purchasin futures contracts for

that commodity. The activity of hidden the commodity with intend to manipulate the price is

severely condemn in Islam. A very important hadith concernin hoardin and manipulatin

prices has been narrated by )Gaqal bin Fassar, a companion of the "rophet peace be on him-.

The Jmayyed overnor, GJbaidullah bin &iyad, came to visit )Gaqal when he was bedridden

due to a rave illness. After inquirin about his condition, GJbaidullah asked him, Do you

know of any instance of my havin wronfully shed someoneGs blood )Gaqal replied that he

did not. Do you know of any instance, GJbaidullah continued, in which I interfered with the

prices of the )uslimsG oods )Gaqal aain replied that he did not know. Then )Gaqal asked

the people to help him to sit up, which they did. !e then said, Cisten, O GJbaidullah, and I

will tell you somethin which I heard from the )essener of Allah peace be on him-. I heard

the )essener of Allah peace be on him- say,

+'hoever interferes with the prices of the )uslimsG oods in order to raise them

deserves that Allah should make him sit in the %ire on the Day of ?esurrection.G Did

you hear this from AllahGs )essener peace be on him- asked GJbaidullah, and)Gaqal replied, )ore than once or twice

?eported by Ahmad and al0Tabarani-

Accordin to the above hadith, scholars concluded that hoardin is prohibited under two

conditions$ first, that hoardin at a iven time is in5urious to the people of that country, and

two, that the hoarderGs aim is to force the price up in order to make more profit Fusuf Al0

7aradhawi, 8221-. Therefore any activities that lead to such action are strictly forbidden

accordin to Islamic law.



#tatistical Data of Collection and Distribution of Philanthrop$ Fund

Appendi9 A table 1 is refer-. !airunnizam et.all, 8212- in their study have provided a

statistical data that shows the performance of collection and distribution of zakat fund in

)alaysia from year 822M until 822B.

able -: Collection and Distribution of .a+at in /ala$sia 0112!0113

Sources: Hairunnizam Wahid & Radiah Abdul ader, !ocalization of "ala#sian $akat

%istribution:erce'tions f Amil And $akat Reci'ients, *+*

Table 1 indicates that zakat collection has increased from ?)MQ2 million in 822M to ?)

H2.8H million in 822B. Thus, it<s e9plained a ood and stron collection of zakat fund in

)alaysia throuhout the years. !owever lookin at the zakat distribution fiure, the

performance is not as ood as the zakat collection fund. Thus, it ives a stron sinal that the

zakat institution is facin a ma5or problem in distributin the fund. 'hy has this problem

happened ?ealizin the importance of the implementation of zakat in the )uslim society,

proper zakat manaement is crucial to achieve these ob5ectives. Do the zakat institutions in

)alaysia manae the zakat fund efficiently and have they achieved all the ob5ectives

!airunnizam et. al- in their study also mentioned that +)ohamed Dahan, 1::HP (anep et. al

822P )uhammad (yukri, 822P and Abdul !alim et. al, 822H6 did also mention that there are

many problems involved in zakat manaement especially in terms of zakat distribution.



Addition to that, !airunnizam 'ahid et. al, 822:- in their study also made a survey towards

a satisfaction response of )alaysian citizen on the zakat contribution. The respondent is come

from about 8QHH )uslim respondent in "eninsular )alaysia

able 0: Response on the satisfaction towards 4a+at contribution in /ala$sia

%rom the table, it<s e9plained that ma5ority of the respondent did not satisfied with the zakat

distribution done by respective zakat administrator which is about QB.R of them is not

satisfy rather than satisfy which is M8.8R. There a few states that the ma5ority of respondent is

not satisfy toward the distribution of this fund. Thus, zakat administrator should take this

seriously in ensurin that everyone is satisfy and proceed to contribute to pay a zakat in

future.

'hile in Indonesia, the collection and distribution is increasin from time to time. Table 3

shows the statistical data of collection and distribution of zakah fund from a year 8228 until

822H.

#atisfaction on

4a+at

Contribution

#tate 5E# 67 7AL

#elangor 8 9P &uala Lumpur 832 3MR- MM8 QR- B8

Pulau Pinang M 3R- H3 MR- 18:

&edah 8 3:R- : 2R- 1QH

Perlis HB MMR- 118 QR- 1::

Pera+ 1QB MBR- 1B: Q3R- 33

ohor 3H 33R- BH BR- 11

/ela+a B8 M:R- BM Q1R- 1M

6 #embilan QH QR- MQ MMR- 123

Pahang HM Q8R- B MBR- 12

erengganu 13B QQR- 11M MQR- 8Q1

&elantan 18 3:R- 1:8 2R- 31H

otal 12:B M8R- 1M:1 QHR-

8QHH

122R-



able ;: 6ational .a+ah* Alms* and #ada<ah Collection 0110‐011=

Source: The ational -oard of $akah (**.-

>esides that, a study by Dr Nasim (hah (hirazi, 1::- has show the statistical data of

collection and distribution of zakah fund from a year 1:H2 until year 1::Mof "akistan.

able 2: Collecton of .a+at b$ $pe of Asset in Pa+istan

5ear of

.a+ah

otal Amount ')illion

Rupiah(

Annual >rowth

'?(

8228 H.3: J(D B.82 m- ‐

8223 HQ.8H J(D H.:H m- 8M.B

822M 1Q2.2: J(D 1Q.H2 m- B

822Q 8:Q.Q8 J(D 31.11 m- :.:

822 3B3.1B J(D 3:.8H m- 8.8H

822B BM2.22 J(D BB.H: m- :H.3

822H :82.22 J(D :.HM m- 8M.38



Sources: %r asim Shah Shirazi, Targetting / 0o1erage & %istribution of zakat to Household2s

3ncome: the case of akistan, +..4

*oin to the issues of waqf in )alaysia, it comes under close observation in recent years.

(everal initiatives have been implemented in an effort to improve the manaement of waqf. In

)alaysia, waqf is manaed by overnment0like entity, while in some other countries it may

fall under the purview of N*O or "rivate Eorporation. In )alaysia, it is estimated that over

3Q,B8B hectares of waqf land all over )alaysia and a research done by A#I) in 8222

recorded that there are 82,B3Q.1 acres of reistered waqf lands. Ahmad &amri Osman, 8212-

In the administration of waqf in )alaysia, 'aqf affairs are the responsibility of the Islamic

?eliious Eouncil of each state. The courts reconized shariah as the overnin law of

property for )uslims includin waqf. The overnment of )alaysia has formed a department

for zakat, waqf and ha55 on the 8Bth )arch 822M with the aim of makin the administration

systematic and effective. This department however does not have an authority to administer

and manae waqf properties but rather plays a role as a plannin coordinator and observes the

waqf matter.

Appendi9 > Table Q- shows how waqf land in each state has been manaed within states

which are$ (elanor, #edah, "enan, %ederal Territory, )elaka and ohor >ahru.

able @: /anagement of wa<f land in /ala$sia



#tates /anagement #cheme% ,ow being /anaged

(elanor)a5lis Aama Islam (elanor )AI(-(elanor (hare (cheme

#edah )a5lis Aama Islam #edah )AI#- 'aqf emba

"enan Development of )a5oodsaw 'aqf

%ederal

Territory?ole as sole trustee

)elaka abatan Aama Islam )elaka AI)-

ohor )a5lis Aama Islam ohor )AI- oin venture in aricultural = farmin with ov aenciesSource: $uraidah "ohamed 3sa et5 Al, 3nternational 0onference on Socialit# and 6conomics

%e1elo'ment, *++

&uraidah et. al, 8211- mentioned in their paper that 'aqf )anaement of (elanor which is

manaed by )AI( has introduced a scheme called (elanor (hare (cheme. Eollection from

this scheme is put into a Eash 'aqf *roup %und. (elanor (hare 'aqf is a cash waqf method

introduced by )AI( as a way to better the economy of the )uslims in (elanor. %or that

purpose, the )uslims can purchase shares offered by )AI( as sole trustee and waqf the share

units in the name of Allah (.'.T. for the betterment and welfare of )uslims. 'hile, a new

approach introduce by )a5lis Aama Islam #edah to encourae the public to do ood deeds is

throuh a pro5ect called +'aqf emba6. )a5lis Aama Islam will purchase a propertyKland

and then will divide it accordin to 5emba and later on, sold to the public. The public in return

will purchase the land that is divided for them to waqf. An estimation of one 5emba is between

?)Q.22 to ?)32.22, this pro5ect is still used till now. 'hereas, in "enan waqf manaement

is manae throuh Development of )a5oodsaw 'aqf. And for 'aqf )anaement in %ederal

Territory, this unit<s role as sole trustee for all eneral waqf in %ederal Territory and is

responsible to develop waqf lands for the benefit of )uslims throuhP)osqueP @ducation

centresP Old folk<s = OrphanaeP (helter centresP A 3M storeys ;A6 class office buildin

which will be rented out ready in April 8211-P Dialysis centresP (ervice apartments and 'aqf

(hare (cheme. )AIN<s manaement is related to waqf properties in )alaysia, )AI# also

practised the same system as )AI( (elanor-.

Addition to that, a survey conducted by )d. )okhter Ahmad et. al-, and show the followin

diaram which will ive us a clear picture of the reistration level of 'aqf estates

>anladesh$

able : 9a<f Estate in )anglades

6ame of the Division 6umber of B9a<f Estate%s otal amount of Land 'In Acre%s(



Dhaka 3,28B 38,QMB.M

Ehittaon M,MB2 1,M,33.1M

?a5shahi 3,33B 1,83,88.28

#hulna 3M1 M,832.12

(ylhet QQ3 8,3,:::.BQ

>arisal 1,:B8 1,:2M.B8Total 13,B22 ,2Q,:3B.838Source: ffice of the Wa7f Administrator, -angladesh

Care numbers of 'aqf estates are still lyin unreistered. There is no such viorous

campain from the part of 'aqf administration to brin these 'aqf estates under reistration

procedure. Thouh sometimes the mutawallis are not comin forward for enrollment, but

e9tensive and effective campain throuhout the country could make the scenario different.

Accordin to >anladesh G'aqh law, ;'aqf< Administration receives QR of the income of the

reistered G'aqf estates as annual subscription and meets its official and other e9penses from

this income. The followin fiure shows that in the fiscal year of 822H02: the annual

subscription collection was also not quite satisfactory. This fiure shows that almost MQ.R

of the annual subscription remains unrealized.

6ame of the Division Claimed Annual #ubscription

@? 'In )angladesh a+a(

Reali4ed Annual #ubscription 'In

)angladesh a+a(

Dhaka 1,H2,MB,3H 1,13,:3,M8:

Ehittaon 1,8Q,81,Q8 H2,M:,MQ

?a5shahi 1,1M,3H,H: QB,:8,B:

#hulna 8B,BH,Q12 ,H1,:M:

(ylhet 8Q,:,::8 13,H8,QM2

>arisal M:,8Q,BHQ 11,2:,1Q:

Total Q,88,H8,12M 8,HM,2:,38:Source: Re'ort 'resented to the arliamentar# Standing 0ommittee of the . th arliament for the

"inistr# of Religious Affairs, -angladesh

7ccurrence of Fraud in Philanthrop$ Funds

In )alaysia, !arakah daily on an Q, 8211 report that The )alaysian Anti0Eorruption

Eommission has been taken to task for failin to act on )elaka Ehief )inister )ohd Ali

?ustam for possible fraud, as reported by the AuditorGs *eneral in its annual report for 822:.The AuditorGs report in 822: has noted that the failure of a company ?eal )erer (dn >hd to



build the )AI) comple9 caused the department to spend ?)13.HQ million from zakat

money.The chronoloy is )AI) had sined an areement with ?)(> on December 13,

8228. ?)(> was required to build the )AI) Eomple9 at "T 11QQ in >andar >ukit >aru,

)elaka in the span of 1H months after the sinin of the areement with a cost of ?) 12.1

million. As a return of favour, ?)(> had been iven a riht to build a land at "T H3, and

)AI) would transfer "T H3 to ?)(> once the )AI) Eomple9 was completed. Jpon

receivin "T H3, ?eal )erer divided the land into Q small lots, Cot 12Q to Cot 12:, with the

approval from )elaka<s Cand and )ines Office on December 1M, 822 despite its failure to

complete the )AI) Eomple9. It then sold a small lot, Cot 12 on %ebruary B, 822B to >E

Cim @nterprise at ?)12.Q million, and Cot 12Q to )alaysia Open Jniversity on October H,

822B, at ?)12.M million

In "akistan, it is reported that they frequently come across reports of fraud, waste and abuse in

the system of zakat. %or e9ample, )oney ihad on its news on %ebruary , 8218 revealed one

of the scam victim case amountin S1,322 was transferred out of his account to zakat

foundation account without his consult on an 1Q 8213.

Jniversity of @nineerin = Technoloy had confirmed some irreularities in disbursement

of scholarships while the provincial &akat = Jshr Department has termed the alleations

unfounded and baseless followin which the university syndicate decided to seek leal advice

from the overnment as to whether findins of the &akat department miht be taken as final

decision. In this cases, District &akat Officer had issued two cheques amountin to ?s

M32,22H and ?s 31,MM in the name of Ehairman )athematics Department, Jniversity of

@nineerin = Technoloy and this was meant for distribution amon needy and deservin

students of the department under )O?A (cholarship. !owever, last year on a complaint of

some students to Administrator &akat "un5ab with a copy to Jniversity of @nineerin =

Technoloy ice Ehancellor reardin disbursement, the E Ct *en ?etd- )uhammad

Akram #han directed Ehairman "hysics Department, "rof Dr #haleeq ur ?ehman to carry out

a probe into the complaint. (ome irreularities in disbursement of the scholarships to students

is occurred and recommended to proceed for action in accordance with law. 0 Alleged fraud

in .a+at scholarships 'plan to buang this(



?obert Cooney, 822- have write an articles title + The mirae pf terrorist financin$ the case

of Islamic charities strateic insihts have hihlihted that Islamic charities have e9plicitly

raised money for causes that threaten current J.(. overnment policy.

*o forward to cases of fraud in waqf manaement, there are studies reported that >anladesh

is no e9ception in this case. )ost of the awqaf properties in >anladesh are either

unreistered, not properly recorded and left idle, nelected and unmaintained or undeveloped,

underdeveloped, and devoid of any dynamic futuristic developmental plan. (ome of these

valuable awqaf properties, especially the lands, are bein leased out with nominal chares or

sold out for insinificant prices. The trend of waqf endowments in >anladesh is pathetically

neative at present, as most of the waqf endowments have been made in the past.

(iasat news on )arch 82, 8213 reported that waqf >oard Ehairman )aulana (yed *hulam

Afzal >iabani have made surprise visit to Aneesul *hurba orphanae. !e was surprised to see

only M members on duty out of total 83 members. )r. #husro "asha revealed that to contain

irreularities in Aneesu l*hurba, all the staff of the orphanae will be deputed in 'aqf board

and new staff will be appointed for Aneesul *hurba. There was no proper record of the funds,

donations, rice, food rains, sheep and oat donated by the philanthropists. It was also

revealed that every year a stall is allocated in !yderabad Numaish for orphans of Aneesul

*hurba so that the handicraft made by them can be put on sale but sadly this stall is also sold

at a hih price and the money oes into the pockets of the staff members.The poor orphan

children told that they are forced to wash the clothes. They also revealed that they are badly

thrashed by a staff member.

In >analore, A #arnataka overnment0appointed committee which surveyed wakf board

lands in the state has stumbled upon a multicrore scandal. The estimated loss to the e9chequer

is likely to be around ?s 8 lakh crore. The committee established that ma5or irreularities took

place between 8221 and 8218 in the transfer of overnment land to private parties throuh

mutation. )utation is a leal process throuh which the overnment land is transferred or

sold to individuals, institutions, persons or firms after a proper verification of documents. This

process, sources said, was flarantly violated while sellin or transferrin wakf land to private

individuals. About HQR of properties misused are in >analore, )embers of the >>)"

standin committee on accounts paid a surprise visit to the civic bodyGs chief accounts officeon )onday and were shocked to see that even files marked as urent from the additional

http://timesofindia.indiatimes.com/topic/wakf-board-lands






chief secretary in the urban development department were atherin dust.

There is a possibility of misuse of funds as revenue receipts and e9penditure do not match,

(hivakumar said. There is no bank reconciliation audit, no trial balance and no

computerization of the accountin system. A cheque for ?s H lakh has been issued to

horticulture win without the commissionerGs approval. A lot of files were missin.

Two Eircles.net on M Auust, 8212 reported that there are many waqf properties in

)aharashtra, and in the entire country, which have been sold by )uslim trustees themselves

for personal ains. %or e9ample, take some cases from )aharashtra in brief$ Nearly 1122

(q.)t. waqf land, reistered under >ombay "ublic Trust Act as >0: and in )aharashtra

'akf Act, 1::Q, )(>'K)J)K0HBK02H was sold to a builder for redevelopment for ?s.11

lacs and 8 flats of Q2 (q.%t.

Then, the story in #ausa, )umbra of Thane district is very interestin. About Q8 acres of

wakf land was leased to a Non0)uslim farmer and he used to farm there for the last Q2 years.

!e used to donate one third of his earnin to the mosque but when he fell ill and thouht he

will die he returned the land to the trust. >esides, the 881 (q. Fard land havin E.(.NO.B:1

of )oosa !a5i !asham Eharitable Trust "T? No. >03Q8 )umbai- is situated at #hetwadi,

*iraum. It has *round plus one floor structure havin H shops and : rooms which are all

rented. This was sold for ?s. H3 lacs to (hriethmal ain. %inally the cases of (ayaadi Abdul

#adir!akimuddin(aheb%ateha Trust "T? No. >012:8 )- sold its property bearin E.(.NO.

18Q8 which is of 18 (q.Fard. The Trust sold it for ?s.1Q lacs to (terlin @nterprises. The

property is recorded in (chedule 1. It is a *round plus 3 story buildin and in a dilapidated

condition.

%inally, Arab News on April 8, 8213 reported about the illeal deals of 'aqf properties.

Accordin to Ahmed over 822 properties across the state have been sold to private players at

throwaway prices by the 'aqf chairman. Its report on uly 82, 8218 also mentioned that there

are more than five million such auqaf . Apart from Jttar "radesh J"-, 'est >enal, #erala,

Andhra "radesh and #arnataka with more than 1Q2222 each, others are dispersed throuhout

the country. Jnfortunately many waqf properties are also under unlawful occupation with

connivance of mutawallis, sometimes by the )uslims themselves.



Determinant of Fraud in Islamic Philantroph$ Fund

>ased on the abovementiond cases of fraud which have been reportd worldwide, its been

believed that there are some determinant that may contribute to a fraud cases in the manain

of these Islmic "hilantrophy fund. This paper is oin to hihliht a few determinant in fraud

cases to occurred and later to suest the way in minimizin those issues.

!uman ?esource or staff shall be the main problem in the manaement of Islamic

"hilantrophy fund which there are shortae of staff and e9perts in the institution relative to the

numerous tasks under their responsibilities. This limitation may lead to opportunity of frad

cases to be occured. It is because, a person will have bi opportunity to involve in fraud as the

authority definitely is under that person. (o in diminishin this scenario to be occured, a few

aaspect need to be done. %or e9ample by hirin more staff, there will be more eyes to manae

and monitor and also to control the manaement of those fund and thus to avoid a fraud cases.

Other than that, the institution need to focus on interatin the Islamic principles, moral and

ethical aspect in their daily life.

>esides that, an enforcement issues also shall be a determinant for a fraud to be occured as

when there is no riid enforcement of law and reulation in manain those funds, people

who have the authority toward those fund will take this opportunity to manipulate, mismanae

or takin an advanate towards the amount of fund. Dr )u5ahid Fusof ?awa, 8221- in his

article has hihlihted the issues of the enforcement also is too fle9ible and not riid. Thus

manaement should aware on this issues so that there will be no window of opportunity for

them to mismanae the fund that have been diamanahkan to the institution itself.

(ystematic and effiecincy of the system also shall ive an affect towards the manaemnt of

those particular fund. It is because, a ood system should be able to detect any defect or

mismanaemnt of those funds. %or e9ample in manain of waqf land, )ohamad (alleh

Abdullah, 822:- in his paper indicates that the problem is when the authority body who

inherit the waqf property but without any inventory with the manaement done by unqualified

mutatawali or supervisors. The waqf land are even manaed by non0)uslims, many are left

idle and there are waqf properties iven out orally without any reistration and

documentation, thus affectin its development.



'hile focusin to the manain of zakah fund, connection ap issues especially in term of

information between zakat institution and zakat recipients has been hihlihted in

!airunnizam 'ahid et. al, 822H-. In this case, &akat institutions have been blamed because it

cannot reconize e9actly the zakat recipients. This miht be the diffulti to assess those needy

and poor especially for those who live in rural area. The ma5or problem is the insuffiecient

data of information due to the convensional collection and distribution system which make the

data collected become unsystematic and unoranized. Dr )u5ahid Fusof ?awa, 8221-.

/inimi4ing Fraud in the /anagement of Philanthrop$ Fund

In preventin or minimizin this particular issues, we should evaluate this issues attributively

in order to ensure the problem or determinant can be answer ob5ectively and thus minimize

the fraud to be occured in manain those Islamic "hilantrophy fund.

?efer to the issues of human resources of staff who manae those particular funds, result from

a study done by Norazlina Abd. 'ahab et. al- has indicate that, in order to improve its

efficiency, respective institutions do not necessarily need to hire more staff with unnecessary

number of staff. !owever, the quality and qualification of staff should be paid more attention

by the institutions. Thus, the institution whether &akah or 'aqf Administration- may arrane

trainin sessions for its officers and employees to orient them about the basic (hariah and

modern rules = reulations of Islamic "hilanthropy fund manaement. A variety of technical

trainin prorams may be launched to assist the unskilled labor force to ensure they have a

knowlede on manain those particular funds and to focus on interatin the Islamic

principles, moral and ethical aspect followin to the shariah which to avoid any

mismanaement or fraud cases to be occurred. It is because, this scenario of farud cases can

create dissatisfaction amon the society at lare with reards to the zakat manaement in

)alaysia and subsequently it 5eopardizes the reputation of the institution in the country. Dr

)u5ahid Fusof ?awa, 8221-

Then, conventional system of manain Islamic "hilanthropy fund whether for collection,

distribution or manaement for a development also shall be vital issues that need to be solved

in minimizin fraud or mismanaement whereby the technoloy must be improved whereby

the system is needed to control and monitor the operational process of manain those particular funds. %or e9ample, lookin at zakat collection and distribution system,



improvements in the technoloy has widely been used by hiher0technoloy applicants

especially in urban states like (elanor and #uala Cumpur. %or instance, (elanor, the state

that offers the hihest number of zakat payment system, ease the zakat payers to pay zakat

online. A total of 11 zakat payment systems were offered in (elanor, includin the internet

bankin, short0messaes0services ()(-, AT) machine, kiosk machine, credit card, phone0

bankin and e0debit system. %urthermore, people in #uala Cumpur and (elanor can also be

considered as the most technoloy0literate in )alaysia. !ence, zakat collection and

distribution in (elanor is amon the hihest in )alaysia.

?elated to the abovementioned issues, an updated and interated system of technoloy shall

track or monitor the operational process and ensurin the standard operation of procedure is

bein followed by the staff and there will be no fraud cases or mismanaement to occur since

all the transaction will be monitored and have their own track record. !owever, a study done

by Norazlina Abd. 'ahab et. al- indicates that the e9istence of operational website and

computerized zakat collection system are found insinificant in affectin the efficiency of

zakat institutions in )alaysia althouh the results of e9istence of website are consistent to

positively improve the efficiency of zakat institutions-. Thus, a further analysis or research

can be done to study the relationship between technoloy and the effectiveness of manain

Islamic "hilanthropy fund and thus minimizin any mismanaement or fraud cases to be

occurred.

Other than that, enforcement issues shall be established strictly in minimizin fraud or

mismanaement to be occurred. In this enforcement issues, a few aspect can be done in

minimizin fraud. %or e9ample, audit committees can be established in order to minimize

mismanaement or fraud cases whereby this will also assist in the enforcement law of

manain Islamic "hilanthropy fund. Norazlina Abd. 'ahab = Dr. Abdul ?ahim Abdul

?ahman- in their study suest that, audit committee is one of the element that sinificantly

affect efficiency of zakat institutions in )alaysia. the aim of auditin is to increase efficiency

or financial or administrative accountability of an oranization. Audit committee is defined as

a roup of individuals responsible for reviewin and monitorin all internal and e9ternal audit

functions of an oranization. An audit committee is established to oversee the financial

reportin process includin but not limited to- supervisin internal auditors, monitorin

internal controls and ensurin adequate compliance with the standards. (ince the committee



!airunnizam et. al 8212- also proposed that the process of localization should be done by

local committees accordin to the hierarchy of e9istin administration such as district office,

penhulu, chief of villae, awatankuasa #ema5uan dan #eselamatan #ampun ###- or

illae Development and (ecurity Eommittee, the mosque committees and others.

!istorically, zakat payment in )alaysia durin the pre0colonial era was not administrated

formally and it used to be uided more by the villae tradition of contributin zakat to

reliious teachers.

Conclusion boleh ditambah lagi

Islam promote 5ust distributon and ethis in everythin we do. Those practisin fraud or

mismanaement should be penalized for their ienefficiency and those who are ethical in

manain this fund shall be rewarded for thir credibility and ood value in manain Islamic

"hilantrophy fund which to ensure the effectiveness and effficeincy of manain those fund

for the benefit of our socio economic.

!owever further studies is required to confirmed the determinant and way to minimized fraud

cases usin a model that will clearly e9plain those issues which been believes that it will

provide a uidance for everyone especially the institution who particularly manae these

Islamic "hilantrophy fund. It is because, proper implementation manaement of those funds,

will ultimateley improve the socio economic and the life of )uslim society itslef.

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minimizing fraud an islamic perspective -amendment 17042013

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