Crowdfunding

Need for laws to ensure transparency and accountability of funds raised

The raising of funds through social media platforms, commonly known as "crowdfunding", is becoming rapidly popular to raise money for a cause or an event - charitable or otherwise.

A recent example is that of marathoner Soh Rui Yong, who started a crowdfunding campaign to raise funds after he was ordered to pay $180,000 to former teammate Ashley Liew over defamatory statements.

The rise of crowdfunding has prompted complex professional, ethical and practical questions that the community, courts and Government must carefully work through.

This is to ensure that what is done with good intentions does not have the unintended consequence of undermining the rule of law and public confidence in our judiciary or even allowing foreign interference in our domestic politics.

The immense rallying power of fund-raising appeals can be significant, raising substantial amounts of donations.

An example reported in the news is the case of Kwek Yu Xuan, the world's tiniest baby who was born about four months premature and weighed only 212g, and whose parents raised $300,000, largely online, to support her intensive treatment and lengthy hospital aftercare stay.

It is heartening to see Singaporeans respond generously to these appeals.

However, the reach and scale of these online appeals highlight the need for laws that promote accountability to maintain a high level of trust and integrity, to prevent people abusing online giving platforms to cash in on Singaporeans' generosity.

With millions of dollars raised online each year for a vast range of causes, there seems to be little legislation regulating the practice of crowdfunding to ensure the transparency and accountability of funds raised through platforms in Singapore.

This runs the risk of enabling people with less noble goals to take advantage of well-intentioned donors, and even to manipulate the legal system to their advantage.

The possibilities range from money laundering through a crowdfunding campaign, to the use of crowdfunding to promote frivolous litigation, to the use of foreign actors using a "fabricated crowd" to disguise the identity of the true funder to manipulate our domestic politics and undermine our political sovereignty.

Currently, there is no legislation or authority regulating the practice of crowdfunding in Singapore.

Crowdfunding platforms that have adopted the Code of Practice for Online Charitable Fund-raising Appeals pledge to ensure the veracity of their campaigns and accountability of funds raised through their platforms.

I'm concerned because crowdfunding by its nature may appeal to less sophisticated people who will invest in a project they have great empathy for.

Typical crowdfunding donors may not be able to discern if a cause is real or fraudulent.

Many scam artists may tell compelling stories that captivate the crowd, presenting their investments on paper to meet the very basic disclosures of crowdfunding.

To this end, would it be possible for the Government to update existing laws so there are more mechanisms in place to make it a requirement for people who seek crowdfunding to disclose as much information as possible?

Ewen Lim Wei Shen

A version of this article appeared in the print edition of The Straits Times on October 06, 2021, with the headline 'Need for laws to ensure transparency and accountability of funds raised'. Subscribe