KUALA LUMPUR: In an unprecedented joint action, the authorities in Malaysia and Singapore have raided the offices of gold trading companies operating under the name of Genneva in the two countries.

According to a statement by Bank Negara Malaysia (BNM), the central bank and the Royal Malaysian Police, Ministry of Domestic Trade, Cooperatives and Consumerism and the Companies Commission of Malaysia conducted a joint raid on Genneva Malaysia Sdn Bhd.

It did not specify the grounds for the action but said the raid was based on suspected offences under the laws administered by the various enforcement agencies.

The Singapore Commercial Affairs Department raided Genneva Pte Ltd in that country. It cannot be established if Genneva Malaysia and Genneva in Singapore are linked.

“The public is advised to be cautious in investing their money to avoid becoming victims of activities that are illegal and in breach of the law,” said BNM’s statement.

Genneva Malaysia, which claims to have 50,000 customers and RM3 billion in turnover, has been on BNM’s Financial Consumer Alert list, comprising companies or websites that are neither authorised nor approved under the central bank’s laws and regulations, since July 13 this year.

According to a statement by the Gold Bullion Entrepreneurs Association of Malaysia, the gold trading business is an unregulated industry.

According to Genneva’s website, its business model is based on the syariah principle of “Al-Bai” (sale and purchase).

Customers are given physical gold, which they can then sell back to Genneva based on a pre-agreed set of conditions, retain the gold or sell it to a third party.

In Singapore, according to reports, gold is sold to customers at a premium of 20% to 30%. Customers are then offered a discount of around 2% of the initial price.
They are then given the option to sell back the gold after a pre-agreed period for the original price, pocketing the discount.

If this is the case, over a year the customer could see a return of as much as 24%.

According to an article in Singapore’s Business Times published on Sept 25, at least one customer has won an interlocutory judgment against Genneva Singapore in the Subordinate Court.

It was reported that a number of other customers are also exploring launching a lawsuit against the company for allegedly failing to honour its agreement to buy back the gold. According to the Business Times article, over the past few months the customers have not been able to sell back their gold.

The article also revealed that the company was registered in Singapore in 2008 with four directors, three of whom are Malaysian. They are Marcus Yee Yuen Seng, Ng Poh Weng and Chin Wai Leong.

According to press clippings on Genneva, the company has 11 offices throughout Malaysia, with a strong presence in Singapore, China, Indonesia and the Philippines. Its chairman is Tengku Muhaini Sultan Ahmad Shah, the Sultan of Pahang’s daughter.

In Genneva’s frequently asked questions section on its website as to how the company generates profit to share with its clients, the company answers: “[An] experienced and dynamic management team with more than 100 years of combined experience in gold trading, gold mining and marketing.”

This article first appeared  in The Edge Financial Daily, on Oct 2, 2012.