[BITList] Received from KL

[FS]

This is what is happening around here - looks like 50 million on engines 
is pocket change.

Syed Akbar Ali is one of the more pleasant and likeable mamaks. He has 
an independent and inquisitive mind. Here he exposes the real reasons 
why there is a clamp-down on money changers. It seems that some 45 
UMNOputras used their 'connections' to get "Money Changer's Licences". 
But they cannot compete against the real mamak money changers. So they 
use their "influence" to get Bank Negara to come down hard on these 
mamak money changers and revoke their licences. Then these 45 "money 
changers" will have no competition, charging exorbitant rates for 
changing money.

Some of you will remember that Robert Kuok sold all his shares in the 
sugar business in Malaysia about 3 weeks ago. As long as he was in the 
sugar business in Malaysia, the Malaysian government refused to allow 
the price of sugar to go up. Just two weeks after he sold all his 
shares, the government made an announcement that it would remove the 
tariff and allow the price of sugar to find its own level so that the 
Malaysian population would be discouraged from taking too much sugar in 
their cakes and drinks. What a dumb excuse for screwing the Malaysian 
public, including the Malays! The UMNOputras who took over immediately 
want to raise the price of sugar so that they will become rich quickly. 
When your cup of teh tarik reaches RM 1.50 or 2.00, will you say they 
are looking after the interests of the Malays, as they claim in BTN 
courses? So do you think the Chinese are working against your interests?

Commodity prices are now rising again because of inclement weather. 
Sugar prices are sure to go up but by what margin? With more than 60 
years experience in sugar trading, Robert Kuok knows how to handle the 
sugar commodity business. Commodity trading requires skills honed over 
years of exposure. So how will our Johnny-come-latelys handle the next 
surge in sugar prices? Your teh tarik is going to cost you RM2.50 per 
cup in a year's time. All hell will break loose.

Remember what they did to MAS? They took a guy from Shell who had some 
exposure to oil trading and made him the CEO. He was supposed to do 
wonders to MAS with his experience in oil trading. You know what 
happened when oil prices soared to US165/barrel and then collapsed after 
that.

CH


Action Against Money Changers : Turf War

Tuesday, December 15, 2009

http://syedsoutsidethebox.blogspot.com/

By Syed Akbar Ali

Bank Negara acts on errant money-changers

KUALA LUMPUR, Wed: Bank Negara Malaysia has revoked 41 money-changers' 
licences so far this year. This includes contravention of Section 30 of 
the Act, which prohibits money-changers from transferring funds outside 
Malaysia, whether on their own behalf or on behalf of third parties.

In the statement, Bank Negara reminded members of the public to use the 
services offered by commercial banking institutions or the 45 non-bank 
remittance service providers approved by the central bank to transfer 
funds abroad.

The list of commercial and Islamic banks as well as approved non-bank 
remittance service providers can be obtained from the Bank Negara 
website at http://www.bnm.gov.my/microsites/fxadmin/index.htm. -- BERNAMA

Bernama has even provided the website where people can find the licensed 
money remitters. Well there is always more than meets the eye.

I run my business in the Masjid India area, which is undoubtedly the 
Money Changers capital of Malaysia. I know a little bit of what is 
really going on.

By law money changers can only change foreign currencies. By Bank Negara 
regulations, money changers cannot have more than RM250,000 worth of all 
currencies at any one time on their premises. It is meant to be a small 
business. And Money Changers are not allowed to open branches.

However some years ago, for some strange reason Bank Negara allowed two 
corporate players (one was Berjaya Group and the other was an outfit 
started by an ex banker Dato Amin something) to run a branch network of 
Money Change outlets. Bank Negara has never explained this double 
standard. Why were the corporate players given multiple licenses or 
allowed to open money change branch outlets when others were not allowed 
to do the same?

And quite predictably, despite being located in choice locations like in 
airports, both the corporate players Berjaya and the other guy soon 
closed shop.

A vast majority of Money Changers are Indian Muslims but a sizeable 
number of license holders are also Malays (which usually end up being 
farmed out). The mamaks have long dominated this business and there are 
good reasons for it. Few can match their speed and honesty in providing 
this service.

And most of the time the Money Changers bust the RM250,000 cash limit. 
Recently the Court discharged a case involving a Money Changer and 
allowed him to cart home over RM4.8 million in cash. The guy coolly put 
the money in cardboard boxes and pushed it out on a trolley. Some Money 
Changers may handle much more than that in just one day.

The reason is because the RM250,000 sum is too small a figure for 
today’s business. The fact is even banks and corporates who want to 
change foreign currency in a hurry call upon the Money Changers. This 
happens frequently in Singapore. Say someone has a million US Dollars 
and they want to change it to Ringgit, one phone call to a Money Changer 
can setttle the problem instantly. If a Money Changer does not have 
enough cash, he will call his network and ‘syndicate’ the amount within 
minutes.

But the biggest business for the Money Changers (not all of them though) 
is remitting money overseas. This is an illegal business. This is not 
allowed by Malaysian law. But for decades now, Indonesian workers go to 
the Money Changers and send money home to Indonesia. The Money Changers 
provide an unbeatable service. Now the Banglas, Nepalis and even 
Filipino workers do the same.

Their networking is such that an Indon here can ask his wife to go to 
the Bank or to some designated disbursement point in Indonesia and wait 
at the agreed time. The Indon then goes to the Money Changer here, pays 
the amount of Ringgit and it is sent in Rupiah to his wife. For a small 
extra fee the Money Changer will call their counterpart in Indonesia and 
the Indon can speak directly to his wife and she can confirm instantly 
that she has received the funds.

My friends tell me that the amount of visible relief you can see on an 
Indon’s face when he hears his wife saying she has received the money is 
worthy of a Kodak moment. Despite being such a screwed up country, the 
mamak Money Changer networks can penetrate the deepest points in 
Indonesia to provide a real service for the Indon workers here. 
Lhokseumawe in Sumatra, Puruwokerto in Java and Menado in Sulawesi are 
part of their lingo.

But the most important part of their service is that they deliver full 
value. When an Indon sends money home through the Banks, they levy very 
high charges here in Malaysia. The worst cut is in Indonesia where the 
paying Bank again takes a big cut. An Indon worker can lose up to 10% of 
the amount remitted in service charges paid to the Banks here and in 
Indonesia. In my definition that is riba or unjust profiteering. You are 
sucking the blood of poor labourers.

On the other hand the Money Changers charge a one time fee of about RM10 
– RM20 per transaction only. Whether the Indon sends over RM500 or 
RM1000, he still incurs only RM20 “service fees”. (In Klang it went as 
low as RM3 per remittance transaction). His wife still gets the full 
RM500 or RM1000 worth in Rupiahs in Indonesia. This is why the Money 
Changers are so popular with the Indons. Considering that there are over 
a million Indons working here, that is a lot of money being sent.

Bank Negara has always known of their illegal remittance businesses but 
has “closed one eye” for a long time. This is because Bank Negara 
recognises that the Money Changers provide a highly needed service. A 
few years ago the Money Changers themselves got tired of operating under 
the radar and getting harrased by Bank Negara. They wanted Bank Negara 
to issue them licenses so that they could remit money overseas as a 
legal business.

Some of them approached me and I helped them prepare a Working Paper 
which was submitted to Bank Negara Malaysia. Subsequent to that Bank 
Negara has issued what are known as ‘Remittance Licenses’. This includes 
the foreign players like the American company Western Union which now 
operates throughout the country. A few Money Changers have also formed 
companies and have been issued these remittance licenses.

However this being Malaysia many of the 45 licenses were issued to 
people with “links” and “cables” who obviously did not know what the 
business was all about. Needless to say they are mostly floundering and 
some have not taken off. And more importantly these ‘licensed 
remittance’ outfits are not popular with the market (the Indons, the 
Banglas etc. Maybe their charges are too high or there is too much red 
tape involved). And the fact is you cannot instantly penetrate an 
industry which has been dominated by the mamaks since the First World 
War or earlier.

Market talk is many of these 45 licensees who are floundering are now 
using their substantial “muscle” with Bank Negara to come down hard on 
the Money Changers who are still doing the business illegally. Hence the 
clampdown and the newspaper headlines involving Money Changers. This is 
just a turf war where legal “muscle” is being used to edge out the mamak 
Money Changers by a group of newbies who are in strange territory. They 
want to even out the playing field.

Let me give some advise : you cannot beat them. Please take my word on this.

Then there are more nefarious reasons why the illegal money remittance 
business will always survive. We have heard it in Parliament. The 
Menteri Besar of Negeri Sembilan (who was a Bank manager with Maybank 
for many years and must know Malaysia’s Remittance Regulations) has been 
sending money (not much lah, only about RM10.0 million, ie eight or nine 
cardboard boxes full) to Singapore through the Money Changers. Mohd 
Hassan said he did not know that it was illegal to do so. And what the 
hell, the money was only to buy property in Singapore. Has anyone asked 
how he got the freaking RM10.0 million?

Then it was reported that the wife of a Minister has also been sending 
about six million pounds sterling through the Money Changers. That is 
about RM34 million? Where do they get this amount of money? Has anyone 
asked this question? Was that from the Minister's monthly salary?

This is why illegal money remittance will always be in demand. When you 
have corruption in the land, all this “hot money” needs to fly hurriedly 
to safe locations like Singapore and the UK. You cannot expect the 
Minister’s wife or the MB to go to a ‘licensed remitter’ and fill up 
Borang XYZ and declare that they are sending RM10.0 million or RM34 
million here and there.

But again all this is peanuts compared to other regular money 
remittances which really does not want to attract attention. There are 
hundreds of millions if not billions of ringgit amounts being remitted 
overseas by importers and traders – to avoid import duties. This has 
been going on since the time of the Melaka Empire. Here is how it works.

Say a major carpet trader or textile importer imports stuff from China 
or Korea. Lets say there are import duties to be paid here. To avoid or 
reduce the import duties, they underdeclare the value of the goods. Say 
a shipment of carpets is worth RM1.0 million. To pay less import duty 
here, the importer underdeclares the value say by half ie RM500,000. So 
he only pays import duty on RM500,000 instead of on RM1.0 million. He 
thereby cheats the Government of revenue on RM500,000.

To do this, his agent in Korea or China must be in cahoots with him to 
prepare Bills of Lading, export documents etc all showing a lower value 
of the goods. Often the bigger traders have “purchasing offices” in 
Korea etc whose only purpose is this : to prepare undervalued export 
documents. Then he will remit money legally through his Bank here to 
make a payment of RM500,000 based on the undervalued Bills of Lading 
etc. But he still has to pay the remaining RM500,000 to his supplier in 
Korea or China.

How does he do that legally through the Banks considering that his 
import documents only show a value of RM500,000? He cannot. This is 
where the ‘illegal remitters’ provide a service. Here the mamak Money 
Changers may or may not be involved because the traders also have their 
own trusted networks. And frequently this network is race based.

The Chinese trust their Chinese remittters. The Gujeratis trust their 
Gujerati remitters, the Punjabis trust the Punjabi remitters etc. Many 
years ago I knew of a man (not a mamak) who provided this service for 
many textile and carpet importers who were of his own race.

These people are not Money Changers. They may operate out of their homes 
or some trading company or so. They often have bank accounts in 
Singapore (where they ask very very few questions) and they also move 
cash around (not in cardboard boxes though). Another time there was this 
Dato who wanted to move about 10.0 million pounds sterling from the UK 
to Kuala Lumpur in a hurry.

Considering the amount of skullduggery that goes on, my wife and I have 
steered well clear of this “money” business. We are quite happy with our 
jewellery business where the greatest excitement is when someone tries 
to unload fake gold or well dressed characters walk in (like this 
morning) and try to sell large amounts of gold for cash. We just say no. 
Why take the risk of buying stolen property?

But so long as we have “hot money” flowing around the world, so long as 
we have corruption in the land, so long as we have stifling economic 
regulations, stifling duties and taxes, then that is how long the 
illegal money remittance business will go on. In places like Singapore 
they make it simpler. They simply make a lot of this legal. And they are 
duty free too.