Malaysia in the same category as Nigeria?

An article appeared in the NY Times: Online Currency Exchange Accused of Laundering $6 Billion.

The operators of a global currency exchange ran a $6 billion money-laundering operation online, a central hub for criminals trafficking in everything from stolen identities to child pornography, federal prosecutors in New York said on Tuesday.

The currency exchange, Liberty Reserve, operated beyond the traditional confines of United States and international banking regulations in what prosecutors called a shadowy netherworld of cyberfinance. It traded in virtual currency and provided the kind of anonymous and easily accessible banking infrastructure increasingly sought by criminal networks, law enforcement officials said.

In it the following observation:

The exchangers, the indictment said, “tended to be unlicensed money-transmitting businesses without significant government oversight or regulation, concentrated in Malaysia, Russia, Nigeria and Vietnam.”

It is really a shame that Malaysia is named in the same sentence as a country like Nigeria with its rather infamous repuation.

The first hit that I get when I google "Liberty Reserve Malaysia" is this website.

In the top it says:

"Urgent News: Due to the closure of LibertyReserve.com, we now can no longer provide exchange service for Liberty Reserve."

In the bottom however it seems to contradict itself:

"Disclaimer: LibertyReserveMalaysia.com is in no way affiliated nor endorsed by LibertyReserve.com."

I can't seem to find Liberty Reserve on Bank Negara's website of fraude alerts.

But this blog entry seems to indicate that they were included on the list of illegal investment companies.

Malaysia really should step up hugely its efforts in enforcement.

Three articles from the "Baker Institute Blog", dealing with the issue of corruption:

What’s the problem, Malaysia?
Malaysia: At election time, corruption remains a central issue
Malaysia: Looking forward

"Handshakes" system joins the dots in the capital market

".... the executive chairman and CEO of [Singapore listed] Ocean Sky Edward Ang Boon Cheow and independent director Albert Ng Ya Ken, who sits on the audit and remuneration committees, are brothers-in-law"

One of the amazing findings of "Handshakes" (giving a new meaning to the word "independent"), a system developed by two ex-Singapore Exchange regulators that promises to bring a whole new level of transparency to the capital market in Singapore. The website can be found here, it's credo:

"From forgotten IPO prospectuses to daily announcements, Handshakes draws relationship maps that connect People, Listed Companies and Major Financial Transactions, all in one browser window."

Another example of a finding:

"Type in China Sky and Fiberchem, and one is able to find out that besides sharing the same principal banker, Quanzhou City Commercial Bank, they also shared the same audit partner from Deloitte & Touche, and that a Chinese entity - Deluxe Dragon International - which used to own Fibrechem pre-IPO and was its top 20 shareholder, ended up as a subsidiary of China Sky in 2008."

Mr Neo and Mr Poon (right) see Handshakes driving the Singapore capital market into a more advanced state than the rest of the world.

The above information comes from a frontpage article in the The Business Times (Singapore), which continues:


"Handshakes" has electronically uploaded information disclosed in some 16,000 documents going as far back to 1997. It is able to show all the past and current associations any entity or person has with others.

The idea came about while both were toiling at their jobs in SGX, trying to enforce compliance by listed companies with the listing rules. For example, they had to ensure the suitability of directors and ascertain that placements and purchases of assets to and from related parties were disclosed.

The company now has 10 people in Singapore and another 10 people in a neighbouring country [I hope Malaysia] doing the data entry. Some 700 new documents are added every day, said Mr. Neo. It adopts a maker-checker system to ensure data accuracy.


The service costs money, a simple report S$ 500 while a more extensive search may cost S$ 1,000 to S$ 2,000. Understandable, the website is run by a for-profit company. David Webb delivers a similar service free of charge, as a way to give back to society.

Hopefully regulators, researchers and journalists (both in Singapore and Malaysia) will be subscribers to this service, and many nuggets of information will be found and revealed to the public.

AirAsia and AirAsia X

[1] AirAsia announced its quarterly results. They were not that great, but also not that bad, increased spending on fuel was a drag. Revenue was up by 11%, operating profit by only 3%. PBT was down since the previous gain on foreign exchange was this time reversed in a loss.

My worry, about which I have written before, is the very aggressive growth plans that this company has. Its capital commitments are simply unbelievable:

RM 64,829,008,000.00

As if this was not yet enough, "AirAsia still wants jets after record orders".

Simply unbelievable ....

Of course, when all goes well, this could work out very nicely for its shareholders.

But what if competition heats up (as is happening at this very moment), or a recession strikes, fuel prices / exchange rates or interest rates fluctuate wildly, the company runs into regulatory problems, etc. or a combination of these (when it rains it pours)?

The airline industry has not exactly been a bed of roses for its investors, it is a cutthroat industry where many companies having gone bankrupt.


[2] AirAsia X filed a new IPO draft document on the SC website, I wrote before about the first draft (unfortunately it has been taken of the website).

AirAsia X managed to book a profit over 2012, but only with the help of deferred tax accounting and gains on foreign exchange, without these 2012 would also have been a loss (like all previous years). To me, it completely hasn't proven its business model on the long haul flights.

Since the results of AirAsia X were not exactly rosy, the company also published its EBITDA numbers (Earnings Before Interest, Tax, Depreciation and Appreciation), showing profits every year.

Charles Munger has a very clear opinion about EBITDA:

"Every time you see the word EBITDA in a presentation, you should replace it with BULLSHIT EARNINGS, because that's what they are!"

And Warren Buffett added:

"Yeah, why not put all expenses in the footnotes and say that "sales equals profits". Depreciation is real and it's the worst kind of expense. They will, as depreciable assets, need to be replaced."

Let's take AirAsia's as an example, the yearly depreciation is about RM 600 million, interest payments about RM 400 million, for a total of more than RM 1 billion. Not counting these huge amounts, well, let's say I full agree with what Munger said.

EBITDA is one of those financial engineering inventions from the US that better is left alone.

[3] On a side note, AirAsia X's CEO Azran Osman Rani spoke out (or rather: twittered) against racism, for which he ran into troubles. Needless to say, what he did was excellent, and it is a pity not more Malaysian VIPs speak out on important, national issues like racism, corruption and cronyism, controlled mainstream media, the persistent budget deficit, etc..

Hollywood stars shocked by Singapore car prices

I wrote before about this subject.