RM2 BIL CORRUPTION 'JACKPOT' SHOCKER: Malaysian Customs must clean up its act

WITH two multi-billion ringgit scandals involving customs officers and smuggling syndicates uncovered in the last three years, the Customs Department, which is one of the oldest government departments, should leave no stone unturned in carrying out a massive internal clean-up.

Last Friday's expose about the arrests of 24 members of a syndicate, including 12 customs officers – two of whom have the title Datuk and one of them a state customs director – shows how high up in the hierarchy smuggling syndicates have penetrated and which in turn has cost the country billions in lost revenue.

This time around, high quality liquor and cigarettes were stored at the Port Klang Free Zone and later released with the connivance of officers after being grossly under-declared.

It took a special taskforce led by the Malaysian Anti-Corruption Commission (MACC) some three years of painstaking investigations to uncover and bust what one newspaper described as "the biggest scandal involving civil servants the country has seen".

It's actually not the biggest. The one that the MACC busted in April 2011 was even bigger, leading to the arrests of 62 customs officers working in five ports and mostly at Port Klang, the country's biggest, and who had allowed syndicates to smuggle RM10 billion worth of goods out of the country.

Soon after this, MACC's Consultative and Corruption Prevention Panel, one of five independent advisory watch-dog bodies within the MACC, of which I am a member, called up the customs top brass for a briefing on how all this could have happened.

I was shocked when told that the work processes, equipment and working conditions at the Customs Department were obsolete and "archaic" despite the fact that it is Malaysia's second biggest revenue collector after the Inland Revenue Board, averaging over RM30 billion annually.

This prompted the journalist in me to ask some probing questions at the session and basically we were told the department had long asked for modern work processes that include automation, electronic equipment and online payment systems but a unit within the civil service that deals with such matters rejected the move.

I remember telling the briefing that this agency was "penny wise, pound foolish" because the cost of modernising work processes in the department was only a fraction of its revenue collection and if this could minimise opportunities and space for rogue officers to betray the nation, why not?

To cut a long story short, I am told that the government later approved some RM600 million for the department for this purpose and various improvements to the work systems started to be put in place in stages from about two years ago.

A former top-ranking customs officer told me this week that with these improvements, customs would be able to address the long outstanding issue of the "tax gap" (the revenue that the department should collect and what it actually collects) He added that the gap can be huge.

On the latest scandal, customs assistant director Amiruddin Mohd Akhir told the New Straits Times that the cases could have happened due to loopholes in the department's procedures and that, all processes, including the sealing of goods before transport, are done manually and this allows for tampering as a syndicate can easily open them.

"This is where there will be a huge discrepancy in the amount of goods brought in through our free trade zone ports and the amount of taxes we collect. We also know then that these goods do not end up where they were supposed to," he said.

The ex-top ranking officer rebuked Amiruddin for saying that soon all consignments coming from the free zone would be equipped with Radio-Frequency Identification (RFID) tags and tracking software as they are delivered to their destinations to allow the department to monitor their movements electronically and enable the department to detect if they are sent elsewhere.

He told me the electronic system for tracking the thousands of containers was in place since September 2012 and implemented after a one-year trial run. But why it did not prove effective was due to the decision by the department that the usage of the system be on a voluntary basis following the reluctance of agents to pay the cost of having the electronic seal (e-seal) of RM10 per movement of goods from origin to destination.

Asked why the department did not stand firm by making its usage compulsory, he said: "This was due to a lot of human intervention."

"Smugglers and fraudsters are happy with this (voluntary) policy because the loopholes remain open as what's happening now. If the system is viewed as not good then it can be improved," he said referring to the discovery of the latest scandal. He said the system could no longer operate on a voluntary basis under which at present those who complied with it were only several multinationals otherwise it continued to be open to abuse with collusion between agents and customs officers.

"The electronic tracking system using seal with RFID capability can address this issue of revenue leakages for goods moved in transit because of minimal human intervention. But do you think that fraudsters including those in cahoots would support this system if it plugs the loopholes and deprives them of the opportunity of making big bucks," he asked.

The former top-ranking officer praised the MACC for doing an "excellent job", adding that the Customs Department must be rid of rogue officers and that the war against smugglers must begin with "internal cleansing within the organisation" as a top priority.

"I feel sad for what happened as it has tarnished the image of the department and those in service who serve with integrity and honour and to a certain extent those who have retired. But personally, the haul-up is long overdue," he said.

Customs director-general Datuk Seri Khazali Ahmad in the aftermath of the latest scandal has vowed a clean-up within the department with an immediate reassessment of work processes.

He and his management team must walk the talk on this clean-up exercise. We all know that it's impossible to eradicate smuggling, known as the world's second oldest profession, but at the very least, it must not be allowed to happen with impunity and worse, with the help of customs officers. And even the MACC readily admits that syndicates that have been busted are just the tip of the iceberg. -Sundaily