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 mana ement, lack of ood overnance, unethical behaviors and lack of ilm or knowled e were the main determinants influencin the likelihood of fraud. This study reveals that fraud led to denyin the ri hts of would be recipients, wasta e 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 mana ement usin advance technolo ical 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 mana in 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 ,obli atory alms- out of their wealth throu h which you may cleanse and purify them. /al0Tawbah$ 1234. Islamic "hilanthropy can be ran es 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 percenta e of amounts of their wealth to a needy with main ob5ective of achievin socioeconomic 5ustice. ,"rof. Dr. Ahmad Ak unduz, 8212- in his study declares zakat as a brid e, whereby the )uslim helps his brother )uslim to pass over it. Thus, from this people may assist one another which the fund and 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 reli ious, 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 )essen er, peace be upon him said, +@very act of oodness is (adaqah.6 ,)uslim A81:B,?obert Cooney, 822D- 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 sta nation 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 mana ement 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, 8218did mentioned that, the practice of this fund lobally needs to be investi ated 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 si nificantly 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 mana ement fund need to be effective and efficiently mana e to et the benefit from it and develop our socio economic as a whole. (ame oes to the waqf fund where the mana ement and development of this fund have been a tremendous concern for the )uslim scholars since lon . The phenomenon of

corruption in the waqf mana ement can be discerned across history throu h misuse, mismana ement, lootin , encroachment, and unlawful seizure upon awqaf properties. Aware to this issues, this paper is oin to discuss and hi hli hted some cases of fraud worldwide, determinant of fraud and how to minimize fraud cases in mana in done by other researcher and a discussion amon the researchers itself. and distributin of Islamic "hilanthropy funds. The discussion will be based on the previous study

Fraud from Islamic Perspective: Review of the Literature Definitions and Concepts In Islamic le al te9ts fraud ,tadlis or khilaba), lesion or misrepresentation (ghabn), ross misrepresentation (ghabn fahish), deception (shushsh), imbalance (gharar), and trickery ,taghrir) are used interchan eably 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< ta hrir 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 ta hrir can either be the deceptive act or statements. %rom this definition, ta hrir can be divided into two types that are ta hrir fi<li such as false act and manoeuvres and ta hrir 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 ta hrir that the act of fraudulent must be cunnin to the de ree that it would deceived any ordinarily prudent person and the defrauded person have suffered darar ,material dama e- 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 to a contractual imbalance (gharar) between the contractin parties. Tadlis as a le al 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 5ud in 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 knowled e or to undertake and e9cessively hi h 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 mi ht aid4 you /to4 consume a portion of the wealth of the people in sin, while you know /it is unlawful46 ,al0>aqarah 8$1HHThis verse provided the eneral meanin of fraud where Allah swt has prohibited )uslim to consume other<s wealth un5ustly. Therefore, any activities that lead to such action are considered as fraud. Islam prohibits every type of fraud and deception, whether the fraud in activities of buyin and sellin or in any other matter between people. All )uslim are ur ed to be honest and truthful in all situations in everythin they do. +woe to those who deal in fraud, those who, when they have to receive by measure from men, e9act full measure, but when they have to ive by measure or wei ht to men ive less than due. Do they not think that they will be called to account on a )i hty Day, a Day when ,allmankind will stand before the Cord of the 'orldsI ,al0)utaffifin H3$ 10D-

>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 wei ht than due or ivin a less amount than one should receive is considered fraud and who en a e 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 al0bayhaqiOnce, 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 merchantI. 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 itI !e who deceives us is not of us.. ,?eported by )uslimIn 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 AhmadIn 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.. Althou h 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.dAmon the act of fraud is market manipulation ,na5ash-. Ibn GJmar e9plained that na5ash si nifies 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 hi her. )any times this is pre0arran ed 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 brou ht to the marketplace. ,?eported by )uslim, Ahmad, and Ibn )a5ahThis prohibition is relevant to make sure that the seller is not defrauded by the lack of knowled e 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 )uslimThe "rophet forbade any kind of transaction which is uncertain or which involved an unspecific quantity to be e9chan ed 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. Accordin ly, 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 cau ht, 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$pes of fraud There are a few types of fraud that can be relate to the institutions malpractice such as dishonesty, falsehood and breach of pactKpromises, khiyanah ,disloyalty-, and bribery ,al0 rishwah-. >esides that, there also a few of act that can be considered as fraud which are sale of al0 harar and hoardin ,ihtikar-. Dishonest$ Citerally dishonesty means lack of honesty or inte rity 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 stron ly 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. And there are those who bury old and silver and spend it not in the way of Allah. Announce unto them a most rievous penalty.6 ,Al0Taubah :$3MIn this verse, Allah ives a warnin to those who devourin people the wron way with a severe punishment. %alsehood or misstatement about merchandise or services will harm the customer alon with the producer and the trader as well ,)uhammad Akbar #han, 8211-. The person who falsified the truth in zakat collection for e9ample will lead to the wron doin in zakat distribution. That is why this kind of action considered as a fraud and condemned in Islamic practice. &hi$anah 'dislo$al( #hiyanah can be derived as treachery and infidelity. #hiyanah also mean disloyal. #hiyanah involves deception breach of a reements and promises and failin a trust as well as infidelity. #hiyanah is an immoral characteristic. It may occur in re ard to money or as a violation of trust. It may occur in re ard 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 the Day of Oud ment, restore what he misappropriatedP then shall every soul receive its due,0 whatever it earned,0 and none shall be dealt with un5ustly6. ,Ali Imran 3$1D1+O ye that believeL >etray not the trust of Allah and the )essen er, nor misappropriate knowin ly thin s 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$QHAll the verses above show that act of khiyanah are condemned in Islam and the treacherous will face severe punishment in hereafter. #hiyanah can be considered as fraud because it will harm the people who put their trust to the person or on the contract si ned. )riber$ '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 ille ally iven to someone in position of authority to influence his sense of 5ustice, due process and discretion ,Fusuf Ibrahim Arowosaiye, 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 al0TibraniThe practice of bribery is stron ly condemned in Islam because it has a tendency to encoura e 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 terminolo y 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 disa reements 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 al0 harar 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 lar e 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 levera in 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 wron fully shed someoneGs bloodI. )Gaqal replied that he did not. .Do you know of any instance,. GJbaidullah continued, .in which I interfered with the prices of the )uslimsG oodsI. )Gaqal a ain 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 )essen er of Allah ,peace be on him-. I heard the )essen er 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 )essen er ,peace be on him-I. asked GJbaidullah, and )Gaqal replied, .)ore than once or twice. ,?eported by Ahmad and al0TabaraniAccordin 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 ?) H2D.8H million in 822B. Thus, it<s e9plained a ood and stron collection of zakat fund in )alaysia throu hout the years. !owever lookin at the zakat distribution fi ure, the performance is not as ood as the zakat collection fund. Thus, it ives a stron si nal that the zakat institution is facin a ma5or problem in distributin the fund. 'hy has this problem happenedI ?ealizin the importance of the implementation of zakat in the )uslim society, proper zakat mana ement is crucial to achieve these ob5ectives. Do the zakat institutions in )alaysia mana e the zakat fund efficiently and have they achieved all the ob5ectivesI ,!airunnizam et. al- in their study also mentioned that +)ohamed Dahan, 1::HP (anep et. al 822DP )uhammad (yukri, 822DP and Abdul !alim et. al, 822H6 did also mention that there are many problems involved in zakat mana ement 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 #atisfaction on 4a+at #tate #elangor 8 9P &uala Lumpur Pulau Pinang &edah Perlis Pera+ :ohor /ela+a 6 #embilan Pahang erengganu &elantan otal Contribution 5E# 832 ,3MRMD ,3DRD8 ,3:RHB ,MMR1QB ,MBR3H ,33RB8 ,M:RQH ,QDRHM ,Q8R13B ,QQR18D ,3:R12:B ,M8R67 MM8 ,DQRH3 ,DMR:D ,D2R118 ,QDR1B: ,Q3RBH ,DBRBM ,Q1RMQ ,MMRBD ,MBR11M ,MQR1:8 ,D2R1M:1 ,QHR7 AL DB8 18: 1QH 1:: 33D 11D 1MD 123 1D2 8Q1 31H 8QHH ,122R-

%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.DR 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.

able ;: 6ational .a+ah* Alms* and #ada<ah Collection 0110011= 5ear of .a+ah 8228 8223 822M 822Q 822D 822B 822H otal Amount ')illion Annual >rowth '?( 8M.B BD :D.: 8D.8H :H.3 8M.38

Rupiah( DH.3: ,J(D B.82 mHQ.8H ,J(D H.:H m1Q2.2: ,J(D 1Q.H2 m8:Q.Q8 ,J(D 31.11 m3B3.1B ,J(D 3:.8H mBM2.22 ,J(D BB.H: m:82.22 ,J(D :D.HM m-

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

>esides that, a study by ,Dr Nasim (hah (hirazi, 1::D- 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

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 mana ement of waqf. In )alaysia, waqf is mana ed 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 OA#I) in 8222 recorded that there are 82,B3Q.D1 acres of re istered waqf lands. ,Ahmad &amri Osman, 8212In the administration of waqf in )alaysia, 'aqf affairs are the responsibility of the Islamic ?eli ious Eouncil of each state. The courts reco nized 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 mana e 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 mana ed within D states which are$ (elan or, #edah, "enan , %ederal Territory, )elaka and Oohor >ahru. able @: /anagement of wa<f land in /ala$sia

#tates /anagement #cheme% ,ow being /anaged (elan or )a5lis A ama Islam (elan or ,)AI(- (elan or (hare (cheme #edah )a5lis A ama Islam #edah ,)AI#- 'aqf Oemba "enan Development of )a5oodsaw 'aqf %ederal Territory?ole as sole trustee )elaka Oabatan A ama Islam )elaka ,OAI)Oohor )a5lis A ama Islam Oohor ,)AIOOoin venture in a ricultural = farmin with ov a encies
Source: $uraidah "ohamed 3sa et5 Al, 3nternational 0onference on Socialit# and 6conomics %e1elo'ment, )*++

,&uraidah et. al, 8211- mentioned in their paper that 'aqf )ana ement of (elan or which is mana ed by )AI( has introduced a scheme called (elan or (hare (cheme. Eollection from this scheme is put into a Eash 'aqf *roup %und. (elan or (hare 'aqf is a cash waqf method introduced by )AI( as a way to better the economy of the )uslims in (elan or. %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 A ama Islam #edah to encoura e the public to do ood deeds is throu h a pro5ect called +'aqf Oemba6. )a5lis A ama 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 mana ement is mana e throu h Development of )a5oodsaw 'aqf. And for 'aqf )ana ement 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 throu hP)osqueP @ducation centresP Old folk<s = Orphana eP (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 mana ement is related to waqf properties in )alaysia, )AI# also practised the same system as )AI( ,(elan or-. Addition to that, a survey conducted by ,)d. )okhter Ahmad et. al-, and show the followin dia ram which will >an ladesh$ able A: 9a<f Estate in )anglades 6ame of the Division 6umber of B9a<f Estate%s otal amount of Land 'In Acre%s( ive us a clear picture of the re istration level of 'aqf estates

Dhaka Ehitta on ?a5shahi #hulna (ylhet >arisal Total

3,28B M,MB2 3,33B 3M1 QQ3 1,:B8 13,B22

38,QMB.MD 1,MD,D33.1M 1,83,D88.2D8 M,832.12 8,3D,:::.BQ D1,:2M.B8 D,2Q,:3B.838

Source: (ffice of the Wa7f Administrator, -angladesh

Car e numbers of 'aqf estates are still lyin

unre istered. There is no such vi orous

campai n from the part of 'aqf administration to brin these 'aqf estates under re istration procedure. Thou h sometimes the mutawallis are not comin forward for enrollment, but e9tensive and effective campai n throu hout the country could make the scenario different. Accordin to >an ladesh G'aqh law, ;'aqf< Administration receives QR of the income of the re istered G'aqf estates as annual subscription and meets its official and other e9penses from this income. The followin fi ure shows that in the fiscal year of 822H02: the annual subscription collection was also not quite satisfactory. This fi ure shows that almost MQ.DDR of the annual subscription remains unrealized.

6ame of the Division Dhaka Ehitta on ?a5shahi #hulna (ylhet >arisal Total

Claimed Annual #ubscription C Reali4ed Annual #ubscription 'In @? 'In )angladesh a+a( 1,H2,MB,3HD 1,8Q,81,QD8 1,1M,3H,HD: 8B,BH,Q12 8Q,D:,::8 M:,8Q,BHQ Q,88,H8,12M )angladesh a+a( 1,13,:3,M8: H2,M:,MQD QB,:8,B:D D,H1,:M: 13,H8,QM2 11,2:,1Q: 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 Oan 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 ?e al )er er (dn >hd to

build the )AI) comple9 caused the department to spend ?)13.HQ million from zakat money.The chronolo y is )AI) had si ned an a reement 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 si nin of the a reement with a cost of ?) 12.1D million. As a return of favour, ?)(> had been iven a ri ht to build a land at "T H3, and )AI) would transfer "T H3 to ?)(> once the )AI) Eomple9 was completed. Jpon receivin "T H3, ?e al )er er 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, 822D despite its failure to complete the )AI) Eomple9. It then sold a small lot, Cot 12D 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 Oihad on its news on %ebruary D, 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 Oan 1Q 8213. Jniversity of @n ineerin = Technolo y had confirmed some irre ularities in disbursement of scholarships while the provincial &akat = Jshr Department has termed the alle ations unfounded and baseless followin which the university syndicate decided to seek le al advice from the overnment as to whether findin s of the &akat department mi ht be taken as final decision. In this cases, District &akat Officer had issued two cheques amountin to ?s M32,22H and ?s 31,MDM in the name of Ehairman )athematics Department, Jniversity of @n ineerin = Technolo y 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 @n ineerin = Technolo y Tice Ehancellor re ardin disbursement, the TE Ct *en ,?etd- )uhammad Akram #han directed Ehairman "hysics Department, "rof Dr #haleeq ur ?ehman to carry out a probe into the complaint. (ome irre ularities 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, 822D- have write an articles title + The mira e pf terrorist financin $ the case of Islamic charities strate ic insi hts have hi hli hted that Islamic charities have e9plicitly raised money for causes that threaten current J.(. overnment policy. *o forward to cases of fraud in waqf mana ement, there are studies reported that >an ladesh is no e9ception in this case. )ost of the awqaf properties in >an ladesh are either unre istered, not properly recorded and left idle, ne lected 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 char es or sold out for insi nificant prices. The trend of waqf endowments in >an ladesh is pathetically ne ative 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 orphana e. !e was surprised to see only M members on duty out of total 83 members. )r. #husro "asha revealed that to contain irre ularities in Aneesu l*hurba, all the staff of the orphana e 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 hi h 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 >an alore, 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 irre ularities took place between 8221 and 8218 in the transfer of overnment land to private parties throu h mutation. )utation is a le al process throu h 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 fla rantly violated while sellin or transferrin wakf land to private individuals. .About HQR of properties misused are in >an alore,. )embers of the >>)" standin committee on accounts paid a surprise visit to the civic bodyGs chief accounts office on )onday and were shocked to see that even files marked as .ur ent. from the additional

chief

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.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 DH lakh has been issued to horticulture win without the commissionerGs approval. A lot of files were missin . Two Eircles.net on M Au ust, 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, re istered under >ombay "ublic Trust Act as >0:D 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 QD2 (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 thou ht 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, *ir aum. It has *round plus one floor structure havin H shops and : rooms which are all rented. This was sold for ?s. H3 lacs to (hriOethmal Oain. %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 18D (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 ille al 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 Ouly 82, 8218 also mentioned that there are more than five million such auqaf. Apart from Jttar "radesh ,J"-, 'est >en al, #erala, Andhra "radesh and #arnataka with more than 1Q2222 each, others are dispersed throu hout the country. Jnfortunately many waqf properties are also under unlawful occupation with connivance ofmutawallis, 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 mana in of these Islmic "hilantrophy fund. This paper is oin to hi hli ht a few determinant in fraud cases to occurred and later to su est the way in minimizin those issues.

!uman ?esource or staff shall be the main problem in the mana ement of Islamic "hilantrophy fund which there are shorta e 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 mana e and monitor and also to control the mana ement of those fund and thus to avoid a fraud cases. Other than that, the institution need to focus on inte ratin 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 ri id enforcement of law and re ulation in mana in those funds, people who have the authority toward those fund will take this opportunity to manipulate, mismana e or takin an advan ate towards the amount of fund. ,Dr )u5ahid Fusof ?awa, 8221- in his article has hi hli hted the issues of the enforcement also is too fle9ible and not ri id. Thus mana ement should aware on this issues so that there will be no window of opportunity for them to mismana e the fund that have been diamanahkan to the institution itself. (ystematic and effiecincy of the system also shall ive an affect towards the mana emnt of those particular fund. It is because, a ood system should be able to detect any defect or mismana emnt of those funds. %or e9ample in mana in 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 mana ement done by unqualified mutatawali or supervisors. The waqf land are even mana ed by non0)uslims, many are left idle and there are waqf properties iven out orally without any re istration and documentation, thus affectin its development.

'hile focusin to the mana in of zakah fund, connection ap issues especially in term of information between zakat institution and zakat recipients has been hi hli hted in ,!airunnizam 'ahid et. al, 822H-. In this case, &akat institutions have been blamed because it cannot reco nize e9actly the zakat recipients. This mi ht 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 unor anized. ,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 mana in those Islamic "hilantrophy fund. ?efer to the issues of human resources of staff who mana e 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 arran e trainin sessions for its officers and employees to orient them about the basic (hariah and modern rules = re ulations of Islamic "hilanthropy fund mana ement. A variety of technical trainin pro rams may be launched to assist the unskilled labor force to ensure they have a knowled e on mana in those particular funds and to focus on inte ratin the Islamic principles, moral and ethical aspect followin to the shariah which to avoid any

mismana ement or fraud cases to be occurred. It is because, this scenario of farud cases can create dissatisfaction amon the society at lar e with re ards to the zakat mana ement in )alaysia and subsequently it 5eopardizes the reputation of the institution in the country. ,Dr )u5ahid Fusof ?awa, 8221Then, conventional system of mana in Islamic "hilanthropy fund whether for collection, distribution or mana ement for a development also shall be vital issues that need to be solved in minimizin fraud or mismana ement whereby the technolo y must be improved whereby the system is needed to control and monitor the operational process of mana in particular funds. %or e9ample, lookin those at zakat collection and distribution system,

improvements in the technolo y has widely been used by hi her0technolo y applicants especially in urban states like (elan or and #uala Cumpur. %or instance, (elan or, the state that offers the hi hest number of zakat payment system, ease the zakat payers to pay zakat online. A total of 11 zakat payment systems were offered in (elan or, includin the internet bankin , short0messa es0services ,()(-, AT) machine, kiosk machine, credit card, phone0 bankin and e0debit system. %urthermore, people in #uala Cumpur and (elan or can also be considered as the most technolo y0literate in )alaysia. !ence, zakat collection and distribution in (elan or is amon the hi hest in )alaysia. ?elated to the abovementioned issues, an updated and inte rated system of technolo y 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 mismana ement 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 insi nificant in affectin the efficiency of zakat institutions in )alaysia ,althou h 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 technolo y and the effectiveness of mana in Islamic "hilanthropy fund and thus minimizin any mismana ement or fraud cases to be occurred. Other than that, enforcement issues shall be established strictly in minimizin fraud or

mismana ement 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 mismana ement or fraud cases whereby this will also assist in the enforcement law of mana in Islamic "hilanthropy fund. ,Norazlina Abd. 'ahab = Dr. Abdul ?ahim Abdul ?ahman- in their study su est that, audit committee is one of the element that si nificantly affect efficiency of zakat institutions in )alaysia. the aim of auditin is to increase efficiency or financial or administrative accountability of an or anization. Audit committee is defined as a roup of individuals responsible for reviewin and monitorin all internal and e9ternal audit functions of an or anization. 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

reports to the board of directors, they have to be independent. The audit committee is still relatively new in the zakat institutions. >esides that, the empirical results from a study by ,'en0Fen !su and

"on pitch "etchsakulwon , 8212- reveal that the characteristics of corporate overnance do influence the efficiency performance of the institution. (pecifically, board independence is positively correlated with allocative, cost, and revenue efficiency, su estin that board independence enhances a firmGs efficiency. >oard dili ence can improve the efficiency performance of firm because the board has more opportunities to monitor the performance of mana ement. On the other hand, corporate overnance may be su ested as the way to solve zakat

mana ement problem in the )alaysian zakat institution. *ood overnance is participation from interested party in zakat mana ement. The participation should come from the rulers, the zakat payers, the zakat recipients and also the )uslim society as a whole. The zakat institution should ive a space to the public to ive their opinions throu h direct channel prepared by the institution such as e0mail, seminar on zakat, question and answer to the mana ement and others. Additional to that, ,!airunnizam et.al 822:- in their study said that ,)uhammad (yukri, 822D- ur ed the zakat institution in )alaysia to practice the concept of localization. !is ar ument is based on several issues. %irst, the statistics of zakat distribution in )alaysia show deficiency where most of the zakat fund was not fully distributed to the zakat recipients. Only around B2 to BQ per cent zakat fund have been distributed in )alaysia from 8221 until 822B and almost 8Q to 32 percent were left idle. The si nificant reasons referrin to the problem were the emer in connection ap between zakat institution and zakat recipients. ,?adiah Abdul #ader, 8212- also in her study support a study done by ,!airunnizam et.al 822:- and she did proposed a few ways which areP concept of ;localization< that has been applied in the prophet state overnment as mentioned before. *overnment revenue has been distributed efficiently in zakat and other ta9es. Althou h it was a small overnment formed in the various states ,includin amil-, zakat collection has been distributed immediately after collection.

!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, pen hulu, chief of villa e, Oawatankuasa #ema5uan dan #eselamatan #ampun ,O###- or Tilla e 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 villa e tradition of contributin zakat to reli ious teachers. Conclusion D boleh ditambah lagiE Islam promote 5ust distributon and ethis in everythin we do. Those practisin fraud or mismana ement should be penalized for their ienefficiency and those who are ethical in mana in this fund shall be rewarded for thir credibility and ood value in mana in Islamic "hilantrophy fund which to ensure the effectiveness and effficeincy of mana in 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 mana e these Islamic "hilantrophy fund. It is because, proper implementation mana ement of those funds, will ultimateley improve the socio economic and the life of )uslim society itslef.

References 1- Abul !assan = )ohammad Abdus (hahid 0 )ana ement And Development Of The Awqaf Assets, (eventh International Eonference U The Tawhidi @pistemolo y$ &akat and 'aqf @conomy, >an i 8212 8- Ahmad &amri Osman 0 Accountability Of 'aqf )ana ement$ Insi ht %rom "ra9is Of Non overnmental Or anisation ,N o-, (eventh International Eonference U The Tawhidi @pistemolo y$ &akat and 'aqf @conomy, >an i 8212

3- Ariffhidayat Ali 0 'aqf Eontinued ?elevance As The Third (ector In Terms Of )obilizin ?esources %or "roductive Jse In An Islamic @conomic (ystem U INE@I%, (ept 822: M- Dr. Adel (area 0 &akat as a >enchmark to @valuate @conomic *rowth$ An Alternative Approach, Tol. 3 No. 1H /(pecial Issue U (eptember 8218, International Oournal of >usiness and (ocial (cience Q- Dr )u5ahid Fusof ?awa, )asalah institusi zakat dalam perspektif pembayar zakat, 8: Au ust 8211 D- Dr Nasim (hah (hirazi, Tar ettin 0 Eovera e = Distribution of zakat to !ousehold<s Income$ the case of "akistan, Oournal of @conomic Eorporation Amon Eountries 1B, 30M ,1::D-, 1DQ01HD B- !airunnizam 'ahid, (anep Ahmad, ?adiah Abdul #ader 0 "en a ihan &akat oleh Institusi &akat kepada Capan asnaf$ #a5ian di )alaysia, 822: H- !airunnizam 'ahid = ?adiah Abdul #ader, Cocalization of )alaysian &akat Distribution$"erceptions Of Amil And &akat ?ecipients, (eventh International Eonference U The Tawhidi @pistemolo y$ &akat and 'aqf @conomy, >an i 8212 :- )d. )okhter Ahmad, )d. (afiullah 0 )ana ement of 'aqf @states in >an ladesh$ Towards a (ustainable "olicy %ormulation, 822: 12- )ohamad (alleh Abdullah, )alaysia Needs Transformation Of 'aqf )ana ement, J(), 11- Norazlina Abd. 'ahab1Dr. Abdul ?ahim Abdul ?ahman 0 @fficiency of &akat Institutions and Its Determinants 0 Hh International Eonference on Islamic @conomics and %inance 18- ?obert Cooney, The )ira e of Terrorist %inancin $ The Ease of Islamic Eharities (trate ic Insi hts, Tolume T, Issue 3 ,)arch 822DIslamic

13) 'en0Fen !su and "on pitch "etchsakulwon 0 The Impact of Eorporate *overnance

on the @fficiency "erformance of the Thai Non0Cife Insurance Industry 0 The *eneva "apers ,8212- 3Q, (8HU(M:. doi$12.12QBK pp.8212.32P published online 8: (eptember 8212 1M- &uraidah )ohamed Isa, Norhidayah Ali = ?abitah !arun 0 A Eomparative (tudy of 'aqf )ana ement in )alaysia, 8211 International Eonference on (ociality and @conomics Development, 8211

1Q- Ahmad Ehe Faacob = (idek Abdullah ,n.d-. +"rinciples of Islamic Eommercial >ank6 in 8undamental of 3slamic -anking. )elaka$ Jniversiti Teknolo i )A?A.
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