Fraud and prevention mechanism at zakat institution

Zakat is an important agenda in the development of the Muslim economy. In Malaysia, zakat institution (ZI) is responsible for zakat management and administration. Like other business entities, ZIs are exposed to various risks and mismanagement issues. This challenge requires ZI to develop and apply comprehensive methods to reduce the incidence of fraud in the organization and ensure the confidence of zakat payers and beneficiaries of zakat is not affected. As the impact of fraud is severe, it is important for ZI to introduce fraud prevention methods so that the credibility of ZI is always preserved. This article is intended to discuss fraud prevention methods for ZI that is considered as a unique entity in Malaysia. To achieve this goal, several types of fraud and the fraud prevention methods adopted in conventional organizations were identified and evaluated. Since ZI is an Islamic social finance institution, fraud prevention methods are different from other financial institutions. Therefore, this article also proposes a fraud prevention mechanism that fits into the structure and function of ZI as an agent of the economic transformation of the ummah. Finally, this article also identifies areas of research that can be carried out in relation to the issue of forensic accounting and ZI.