RCI Recommends Forensic Audit Into 14 Tabung Haji Investments

KUALA LUMPUR, July 29 (Bernama) -- The Royal Commission of Inquiry (RCI) into the management and operations of Lembaga Tabung Haji (TH) has recommended a forensic audit into 14 past investment decisions that resulted in significant asset impairments at the Islamic pilgrimage fund.

The RCI, which investigated TH's management issues between 2014 and 2020, identified the investments requiring further scrutiny in a report released today.

The 14 investments identified for forensic audit were PT TH Indo Plantations; Emrail Sdn Bhd; Wellspring Worldwide Ltd; Deru Semangat Sdn Bhd; Trurich Resources Sdn Bhd; Abraj Sdn Bhd; Putrajaya Perdana Bhd; Al-Rawda Real Estates Development & Project Management Co Ltd; Alfareeda Residential Fund; TH Plantations Bhd; TH Properties Sdn Bhd; Alam Maritim Resources/TH Marine; TH Hotel & Residences Sdn Bhd; and FGV Bhd.

The RCI report was presented to then Yang di-Pertuan Agong Al-Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah Shah on Aug 30, 2022, by the commission members led by chairman Tun Md Raus Sharif.

The report also urged the relevant authorities to take firm and immediate action on every police report or complaint involving alleged misconduct at TH.

It said TH’s disciplinary procedures, including the duration of staff suspensions, should be streamlined and expedited to ensure the process is effective, efficient, fair and transparent.

"Investment transactions that remain under dispute in courts or arbitration proceedings must be closely monitored by the management and board to ensure all processes run smoothly and deliver the best outcome for TH.

"Out-of-court and arbitration settlements should be enhanced so disputes can be resolved quickly without compromising TH’s interests," it said.

The RCI also stressed that TH’s investment functions, including investment management and profit distribution, must be carried out independently and professionally.

"Both functions, namely fund management and haj management, should remain within the same entity as there are elements of cross-subsidisation, as currently practised," it said.

It said TH’s investment management function should remain within the organisation as a department, which could be named 'Dana Haji', responsible for TH’s investments and regulated by the Securities Commission Malaysia.

The commission also stressed that TH should focus on fund management activities and avoid involvement in high-risk investments, particularly those the institution classifies as strategic investments.

Meanwhile, the RCI encouraged Urusharta Jamaah Sdn Bhd (UJSB) to make early redemption of sukuk issued following the transfer of assets from TH to UJSB.

"TH assets were transferred to UJSB at RM19.9 billion, compared with their market value at the time of RM9.7 billion, representing a premium of RM10.2 billion above market value.

"In consideration of the asset transfer, UJSB issued fully subscribed zero-coupon Sukuk Murabahah comprising Sukuk Series 1 amounting to RM10 billion, Sukuk Series 2 amounting to RM9.6 billion, and a cash payment of RM300 million."

The RCI said income accrued from UJSB's sukuk contributed nearly 26 per cent of TH's annual income and accounted for more than one-third of the annual profit distributed to depositors.

"The failure or constraints in meeting UJSB’s obligations pose the biggest risk to TH and could worsen its financial position in the future, as well as expose the country’s financial ecosystem to a larger financial crisis.

"The government must give serious attention by ensuring an annual allocation of RM1.73 billion is provided, as agreed by the Cabinet, for the early redemption of UJSB’s sukuk," the RCI said.

The commission was informed that UJSB was in discussions with the Ministry of Finance (MOF) to seek consideration for a government guarantee and had also begun negotiations with TH on the terms of a new Government Guaranteed Sukuk.

-- BERNAMA