Benchmark Visit from Philippines

The Accounting Research Institute (ARI) welcomes two Board of Director members of the Philippine Association of Islamic Accountants (PAIA), Brother Amanoding ESMAIL,  CPA and Sister Soraida ESMAIL, CPA who took time off to visit ARI today.  A collaborative meeting was held between the duo and ARI fellows to discuss: (i) involvement of ARI in the activities of the International Council of Islamic Finance Educators - ICIFE, (ii) ARI's collaboration in co-organising an International Conference on Islamic Finance Profession and Professionals, to be held in Manila in July 2016,  (iii) the establishment of Mindanao Halal Corporation, and (iv) training programs on Islamic Finance for members of the PAIA.

In 2013, the Accounting Research Institute, Universiti Teknologi MARA (UiTM) and the Philippine Association of Islamic Accountants signed a Memorandum of Understanding (MoU) to signify interest and efforts to collaborate, specifically in the area of Islamic Finance research.  One of the first collaborative projects organised by both entities was the organisation of an International Conference on Islamic Finance in 2014 in Cagayan, Mindanao.

ARI Strategic Planning 2016-2020

The Accounting Research Institute (ARI) organizes a two-day Strategic Planning workshop for 2016 - 2020.
Thank you Associate Professors Dr Adibah and Dr Ahmad Naqiuddin who facilitated the two-day workshop.  ARI focuses on its five strategic thrusts: (i) Research and Development, (ii) Human Capital, (iii) Income Generation, (iv) Networking & Linkages and (v) Institutional and Research Governance

Money Laundering and Terrorism Financing are Serious International Offences

Many countries globally have legislated the offences of money laundering (ML) and terrorism financing (TF) and consider both as serious or predicate offences.  Many legislation on ML/TF provide wide-ranging investigation powers including powers for law enforcement agencies and Public Prosecutor to freeze and seize properties that are involved or suspected to be involved in money laundering or terrorism financing offences, and the power of the court to forfeit properties derived from the proceeds of serious crimes.  

Money laundering and the financing of terrorism can have devastating economic and social consequences for countries, especially those in the process of development and those with fragile financial systems. The economy, society, and ultimately the security of countries used as money-laundering platforms are all imperiled. Here are just a few examples of how illicit financial flows can affect the economy and institutions of the host country (excerpts of various sources):

• Financial institutions that accept illegal funds cannot rely on those funds as a stable deposit base. Large amounts of laundered funds are likely to be suddenly wired out to other financial markets as part of the laundering process, threatening the institution’s liquidity and solvency. A financial institution’s reputation and integrity can be irrevocably harmed if involved in money laundering or financing terrorism.
• Local merchants and businesses may find that they cannot compete with front companies organized to launder and conceal illicit funds. Many such front companies offer their services and goods at below-market rates and even at a loss. Because their primary objective is the laundering of money, they do not need to compete in the marketplace and make a profit for their owners.
• Money laundering may also distort some economic sectors and create instability in their markets. Money launderers may channel funds to sectors or areas where funds are unlikely to be discovered whether or not investment is needed or real returns are offered. The often sudden departure of investments from those sectors may impair the industries involved.
• Currencies and interest rates can be distorted by money launderers’ investment practices, based as they are upon factors other than market returns.
• Money laundering and terrorist financing do nothing for the reputation of the host country. The loss of investor confidence that follow revelations of large-scale involvement in such activities can sharply diminish opportunities for growth. Once a country’s reputation is tarnished, it  takes years to repair.

Research on International Financial Crime

A new book, Research Handbook on International Financial Crime has been published recently by the University of Cambridge, UK.  The book posits  that a significant proportion of serious crime is economically motivated. Almost all financial crimes will be either motivated by greed, or the desire to cover up misconduct. This Handbook addresses financial crimes such as fraud, corruption and money laundering, and highlights both the risks presented by these crimes, as well as their impact on the economy. The contributors cover the practical issues on the topic on a transnational level, both in terms of the crimes and the steps taken to control them. They place an emphasis on the prevention, disruption and control of financial crime. Essentially, the book discusses, in eight parts, the nature and characteristics of economic and financial crime, the enterprise of crime, business crime, the financial sector at risk, fraud, corruption, the proceeds of financial and economic crime, and enforcement and control.  Researchers and academics interested to explore research in financial criminology will find this book to be an invaluable resource. Practitioners, including lawyers, accountants, auditors, forensic accountants, compliance and risk managements officers, law enforcement officers, and policy makers will also find the points raised to be of practical use.

Oversight Panels of MACC

The Malaysian Anti-Corruption Commission (MACC) is a government agency in Malaysia that investigates and prosecutes corruption in the public and private sectors. The agency was originally modeled after top anti-corruption agencies, such as the Independent Commission Against Corruption (ICAC) of Hong Kong and New South Wales, Australia.  Since its establishment in 2009, the MACC has been steadily discharging its duties and responsibilities as the primary agency tasked with weeding out corruption in Malaysia. In order to ensure MACC’s independence, transparency and professionalism, five separate and independent oversight bodies were formed to monitor the functions of the MACC an act as a check-and-balance. Members of these panels represent the general public and include senior former government officials, politicians (both from the government and the opposition), professionals, academicians, lawyers and individuals of high standing in society.

There are currently five independent bodies that monitor the MACC to ensure its integrity and to protect citizens’ rights. The five bodies are namely: the Anti-Corruption Advisory Board, the Special Committee on Corruption, the Complaints Committee, the Operations Review Panel, and the Corruption Consultation and Prevention Panel.  The existence of these independent oversight committees is a reflection of the MACC’s impartiality and independence, compared with the ACA. The Accounting Research Institute (ARI) is greatly honoured that two of its research fellows/ associates are in these independent oversight bodies.  Professor Dr Normah Omar is member of the Operation Review Panel and Professor Dr Syed Noh Syed Ahmad is member of Corruption Consultation Panel. 

Role of Universities in the Fight Against Corruption

This is an interesting excerpt from University World News titled A ‘whole-of-university’ approach: Role of Universities to fight corruption

It is important to highlight that, at university level, curricula typically lack components that would contribute to a non-tolerance of such conduct.  There are good reasons for higher education to take on these challenges.

• First, on a global level, corruption is considered one of the major obstacles for meaningful democracy, economic wealth and human well-being.
• Second, apart from direct costs, both petty and grand corruption erodes social trust and contributes to reinforcing dysfunctional norms in a society. As social trust is needed in most undertakings of collective action, this can in turn undermine the ability of states to collect taxes.
• Third, societies governed by corrupt systems and unethical norms provide a breeding ground for economic crisis. Whatever the underlying causes of economic and financial crisis, many governments react by introducing austerity measures.

The combination of crisis and austerity is likely to amplify unemployment, poverty and inequality, which in turn – directly or indirectly – may lead to increased morbidity, mortality and human suffering.  Adding to that, austerity measures often strike particularly hard against those unconnected with the causes of the crisis, which may further lead to an erosion of both trust and legitimacy in our democratic institutions.

From the numerous interactions from which we infer our trust in others, it is clear that reaching out only to students of law and public policy will fail to have the desired effects. To name but a few: your banker is likely to be an economist; engineers are often central in public procurement; doctors, nurses and administrators alike are all points of contact in the health sector.

Thus, for universities to optimise their roles as drivers of change towards social capital, health and well-being, a ‘whole-of-university’ promotion is needed.  Recognising the university sector’s potential, as well as its responsibility to help shape the moral contours of society for the better, we ask institutions of higher education to:

Endorse a cross-faculty approach to include components of ethics and anti-corruption in curricula.
• Teach teachers to encourage and facilitate the incorporation of ethics issues within their classes.
• Appreciate the opportunity to shape professional identities, which set the boundaries of future acceptable behaviour.
• 'Talk the talk' and 'walk the walk' – that is, in addition to educating on ethical behaviour it is crucial that universities – as agents providing a public good – themselves act accordingly, ensuring impartiality in teaching, student assessment and research and that matters regarding awards of degrees, employment and promotions are based on transparent and objective criteria.

Through this initiative, higher education can play its part in the global fight against corruption.

http://www.universityworldnews.com/article.php?story=20141113110707222

Research Projects for 2016

On the second day of the Retreat, researchers presented their research proposals.  For each proposal, the outcome must include producing at least 2 Masters or 1 PhD students, four indexed publications, one of which must be in Q1/Q2, 1 innovative product with intellectual property, 1 international networking with research program and sourcing of grants of at least RM100,000.  The Islamic-based  Business Model  in Enhancing Good Governance and Wealth Creation research cluster presented five research projects on Islamic microfinance, iBiz Waqaf, social enterprise economics, Islamic philanthropy and shariah audit.  The Corporate Integrity, Ethics and Risk Management research cluster proposes four projects on anti-corruption in public sector, Public sector governance, corporate integrity system and risk management & governance.  The Anti-Money Laundering and Anti-Fraud Mechanisms to Mitigate Financial Leakages research cluster  showcases four projects: FATF standards Implementation by designated non-financial businesses and professions (DNFBP), AML/CFT in financial institutions, Predicting Fraudulent and Non-Fraudulent Companies Using Multilayer Perceptron of ANN and Money Laundering typologies involving cases on indirect tax evasion and 

smuggling.  Meanwhile, the Methodologies in Financial Fraud Detection and Prevention research cluster showcases five projects, all involving the use of ICT and other computerized technologies to detect and predict the occurrences of financial fraud.  One research project led by Professor Dr Takiah specifically examines the behavioural aspects of fraud and fraudsters. 

ARI Research Retreat

Members of the Accounting Research Institute (ARI) participated in a recent research retreat in Seremban Negeri Sembilan 0n 18-20 December 2015.  Premised on the research theme Islamic Financial Criminology, ARI develops four research clusters namely (i) Islamic-based  Business Model  in Enhancing Good Governance and Wealth Creation, (ii) Corporate Integrity, Ethics and Risk Management, (iii) Anti-Money Laundering and Anti-Fraud Mechanisms to Mitigate Financial Leakages and (iv) Methodologies in Financial Fraud Detection and Prevention.  Within each research cluster, there are between 3-4 research projects.  ARI research niche Islamic Financial Criminology is aimed to support Malaysia's aspiration to become an Islamic Finance Hub by 2020.  ARI believes that a sustainable Islamic Finance Industry is built on three very important thrusts: Firstly the need to introduce new Islamic finance products which are beyond Islamic Banking.  ARI is focusing on i-Waqaf, Islamic microfinance, Social Enterprise Economics and Islamic Philanthropy.  Secondly, the need to place proper governance mechanism to the industry.  As such, ARI gives a lot of focus on research related to corporate integrity, shariah audit, risk management and anti-corruption mechanisms.  Thirdly to develop methodologies to mitigate financial leakages.  Methodologies such as the use of Big Data, Data Analytic, Artificial Neural Network (ANN) and Data Mining will be explored as possible research topics.
 

 

International Conference on Islamic Economics, Governance and Social Enterprise - Day 2

Day 2

Day 2 of IConIGS 2015 started with more participants presenting in parallel sessions.  After the morning break, Professor Rafiqul Islam Molla, Advisor to the Islamic International University Chittagong, Bangladesh presented a special paper on Social Enterprise Economics.  the voluntary sector or community sector (also non-profit sector or "not-for-profit" sector) is the duty of social activity undertaken by organizations that are not for-profit and non-governmental. This sector is also called the third sector in contrast to the public sector and the private sector. Civic sector or social sector are other terms for the sector, emphasizing its relationship to civil society.  Following Professor Molla's special address, there was a plenary session.  Moderated by Prof Dato' Dr Mustafa Mohamed Hanefah, the session was facilitated by two plenary speakers, namely Mr Md Khairuddin Hj Arshad, Chief Operating Officer of Bank Rakyat, Malaysia and Mr Zainal Abidin, Director of Social Enterprise Dompet Dhuafa, Indonesia.  Whilst Mr Khairuddin discusses the role of the financial sector in enhancing the  development of social enterprise; Mr Zainal Abidin shares his personal experiences in the setting up of social enterprise economics.  Later in the afternoon, participants were invited to participate in an Office Bearer meeting, to discuss the association's activities for the next two years. Participants were reminded that the Social Enterprise economics, together with micro-finance, non-profit organisations and the cooperatives constitute main components of the third sector.   Note that, in general, 

International Conference on Islamic Economics, Governance and Social Enterprise - Day 1

Day 1

A two-day International Conference on Islamic Economics, Governance and Social Enterprise (IConIGS) 2015 was successfully held on 14-15 December, 2015 in Melaka City, Malaysia.  The conference is jointly organized by the Accounting Research Institute (ARI) & Zakat Research Institute (IKaZ) of Universiti Teknologi MARA Malaysia; International Islamic University of Chittagong, Bangladesh;  Universiti Sains Islam Malaysia (USIM), Universitas Islam Negeri Maulana Malik Ibrahim, Malang, Indonesia;  University of Riau, Indonesia; Malaysian Accountancy Research and Education Foundation and Universiti Sultan Zainal Abidin (UniSZA), Malaysia.  The main aim of the conference is to bring together academics, practitioners and industrial experts to a common forum on the issue of social business, social enterprise, non-profit organizations and development of philanthropy. The conference provides an excellent opportunity for exchange of ideas and information among researchers, academicians, practitioners and students. The conference is expected to provide meaningful findings and recent updates on the issues of social business, social enterprise and non-profit organizations in general.  Following last year's conference decision in Chittagong, Bangladesh, an International Association of Social Enterprise Economics (IASEE) was established and registered in Malaysia.  IASEE was launched by Melaka State Exco, Y.B.  Datuk Wira Latiff bin Datuk Thamby Chik  after the official opening ceremony at the Avillon Hotel Melaka.  Prior to the opening event, representatives of the main organisers and sub-organisers gave short speeches about their universities and research centres.