TH ‘profit’ distributions legally belong to depositors, says FT mufti dept

 The department says the issues highlighted by the RCI were the responsibility of Tabung Haji’s management at the time, not depositors or the public.

The federal territories mufti department said depositors were unaware of Tabung Haji’s internal financial situation from 2014 to 2020.

PETALING JAYA:

Tabung Haji’s annual profit distributions, or hibah, from 2014 to 2020 legally belonged to depositors because they were unaware of the institution’s internal financial situation at the time, says the federal territories mufti department.

The department said all issues of mismanagement, non-compliance with the law, and reports of “creative accounting” were the responsibility of TH’s management at the time, not depositors or the public.

It said the money was not considered unlawful or “syubhah” (suspect) wealth that had to be returned, as depositors received the money under contracts whose terms had been fulfilled.

“The pilgrimages of those who used hibah funds from the relevant period of time remain valid,” it said in a statement today.

According to the royal commission of inquiry (RCI) report on TH, the institution concealed the true state of its finances for years, reporting a RM3.4 billion profit for 2017 when it should have recorded a RM1.4 billion net loss under proper accounting standards.

The RCI said the discrepancy stemmed from changes in impairment policies, unrecorded losses from troubled investments, and the use of “creative accounting” to justify annual profit distributions to depositors.

The department said the contracts between TH and its depositors were “wadi’ah yad dhamanah” (guaranteed safekeeping) contracts, under which TH was considered to have borrowed money from depositors to be used for investment and other purposes.

According to Bank Negara Malaysia, “wadi’ah yad dhamanah” refers to safekeeping contracts under which depositors grant permission to utilise assets placed in custody, while the custodian guarantees the assets.

The department said TH could not guarantee any profits at the time and that hibah was transferred to depositors on a voluntary basis.

“As such, once declared hibah is credited to a depositor’s account, it is considered to have undergone ‘qabd’, meaning the transfer is complete and the funds legally belong to the depositor,” it said.

In Islamic finance, “qabd” refers to the taking of possession of funds or assets received.

The department said it was appropriate for TH to shift to “wakalah” contracts in December 2019, under which the institution distributes returns based on actual net investment profits rather than on a voluntary hibah basis.

“As such, if TH records no profits or incurs a deficit in the future, it will not be able to distribute any returns. This helps prevent imprudent practices, strengthen financial prudence, and ensure greater transparency,” it said. - FMT