Minimizing Fraud : An Islamic P erspective 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 influenc inthe likelihoo d of fraud. This study revea ls that fraud led to denyinthe rihts of would be recipients , wasta e and inefficiency and rampan t whit e collar crime if left unattend ed. !ence, the study propose s several treatme nts in minimizinfraud. Thi s include eff ecti ve and efficient huma n reso urce manaement usinadva nce tech noloica l sys tem, establishinof ood overnance by introducina roup of committee and board of directors and other determinants that can be imply by the institutions in minimizinan occurrence of fraud cases to be occurred in manainthose Islamic "hilanthropy funds. #eyword$ %raud, &akat, 'aqf, (adaqah, Introduction The primary function of Islamic charitie s is to help the communi ties in providina 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 ettina blessinfrom Allah s.w.t which says, +Take sadaqah obliatory alms- out of their wealth throuh whi ch you may cleanse and puri fy them/al0 Tawbah$ 1234. Islamic "hi lant hropy 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 achievi nsocioeconomic 5ustice. "rof. Dr. Ahmad Akunduz, 8212- in his study declares zakat as a bride, whereby the )uslim helps his brother )us lim to pass over it. Thus, from this people may assist one another which the fund and benefit from it may flow between its members.
26
Embed
Minimizing Fraud an Islamic Perspective -Amendment 17042013
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013
'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
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,
8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013
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,
8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013
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-
8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013
(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(
8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013
>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
8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013
?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
'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,
8/13/2019 Minimizing Fraud an Islamic Perspective -Amendment 17042013