Bar 'RM2' firms from securing multi-million ringgit projects, proposes MACC

The Finance Ministry should prevent “RM2 companies” from obtaining multi-million ringgit government projects, proposed the MACC.

Mohamad Faizal Sadri said while owning such companies is not illegal, these firms, however, are utilised by politically-exposed persons (PEP) to mask their involvement in procuring tenders.

"The big question mark is how RM2 companies are able to secure these projects through the tender process,” said the MACC anti-money laundering division deputy director.

"The question is whether there is a nexus between them (the beneficial owner of the RM2 company) and the committee that awards the projects? There are invisible hands, someone pulling the strings from the outside.

"If the company is related to a PEP, related to some politician or prominent figure and on the board that awards tenders, this will cloud their decision. They (the tender committee) will work under undue influence or under duress," he said.

Faizal was speaking at a forum titled “Unmasking Beneficial Ownership” organised by Transparency International Malaysia (TI-M) in Kuala Lumpur today.

The MACC officer said it is also questionable how a company with only a RM2 paid-up capital could successfully complete a project worth hundreds of millions of ringgit.

According to Faizal, such cases of abuse only benefit those who use the companies as their vehicle.

He said the issue of RM2 companies being used as proxies had also been discussed by MACC during its meetings with the Companies Commission of Malaysia (CCM) and Bank Negara.

"What we want, whether it is effective or not, is for the ministry to play the role of gatekeeper to minimise risk.

"(We are proposing that) RM2 companies cannot be used for the government procurement process. We don’t want someone in a high position toying with this and using these companies as vehicles.

"We want companies entering the procurement process to declare if they are acting (for) entities. You have to declare whether you have beneficial owners or not," he stressed.

He said if interests are declared, the ministry could utilise the CCM database to run cross-checks between the tender applicants and companies' registrations.

He said the ministry also needs to develop its human resources capacity with expertise to deal with such companies.

For example, he said, they must be able to sound the alarm if the same companies or those controlled by the same people are awarded multiple government projects.

"Through years of experience, they (MOF officers) must be able to identify (such firms) just like compliance officers in financial institutions who [...] can be easily triggered on suspicious transactions.

"We are talking about the leakages of funds of the people of Malaysia. We are talking about every single sen and dollar (sic). Everything counts," he added.

The term "RM2 companies" refer to businesses opened with a capital of only the minimum RM2 when first registered with the CCM whereas beneficial ownership refers to those who have ultimate control over a company without being mentioned on record as the owner. - Mkini