Islamic Finance in Southeast Asia and Anti-Money Laundering Law

by Asst. Prof. Dr. Mohd Yazid Bin Zul Kepli

Basic steps for money laundering

To fight money-laundering activities, it is very important for the parties to understand how money-laundering activities operates. The following are some of the common methods:

Getting the illegal money: The money will be obtained using illegal means. The size and amount will depend much on the nature of the illegal means adopted. For example, an organized Mexican drug cartel can make hundreds of millions since the size of the operation is very big. On the other hand, a small times drug dealer may distribute a small amount of drugs and the money obtained is accordingly smaller in amount. Selling illegal goods like pirated DVDs and Blue-rays can also generate a huge amount of profit.

This money can be considered to be ‘black money’ because it is tainted by illegality. This ‘black money’ cannot be deposited in bank straight away as this will trigger suspicion and flag on the part of banks and other financial institutions.

Examples of illegal means that are known to generate substantial amount of profit include bribery and corruption, robbery and theft, prostitution syndicate, kidnapping, ransom and blackmail, bootleg (pirated goods), fake banknotes, piracy, drugs, illegal gambling and scams.

a.        First stage: Placement

Placement, the first step in the money laundering process, occurs when dirty money first enters the legitimate financial system by being deposited into a financial institution. This initial step is the most vulnerable to law enforcement detection because it involves the physical disposal of cash.[1]This is the usual situation although there are exceptions. For example, a drug dealer purchases an antique collection from a private sale at the price of RM10 million using the black money. The black money has now passed to the legitimate antique seller, unaware of the origin of the money.

The cash obtained from the illegal means isintroduced into the financial system i.e. deposited into bank account as profit from legitimate business. However, it not always necessary to proceed with money laundering in order to use the black money. The black money can also be used by criminals for various purposes without the need to launder the money. For example, the money can be used to pay salary to illegal immigrants or to workers working for the syndicate. The black money can also be used to purchase illegal items like assault weapons to be used in their operation. In addition to that, the black money can also used for bribery purpose. If this is the intention, the criminal or syndicate will not proceed with placement. The second stage, placement is only relevant when the money is to be channeled in the legal financial system. If the money is going to be used for underground activities, money laundering is not necessary.

Placement is not just the movement of cash into a bank account, even though this is the process that is most frequently considered. The idea is to move the funds from their original cash source into some other form that will enable the money launderer to undertake further layering and therefore disguise these amounts.

b.        Second stage: Layering

The second step of the money laundering process, layering, occurs when the launderer separates the illicit proceeds from their source through a series of financial transactions. This step is called "layering" because the layers of financial transactions disguise the drug proceeds' owner and obscure the money trail.[2]

The party involved will carry out complex financial transactions in order to mix and camouflage the illegal source.

In a more complex scheme, the money launderer will move the funds between a number of accounts in a number of different jurisdictions and through a series of companies to ensure that the trail is as complicated as possible. This will essentially obscure the audit trail and sever the link with the original criminal proceeds. The funds can actually ‘spin’ up to ten times prior to being integrated into the banking system.  Law enforcement finds that detecting money laundering is particularly difficult when the countries involved in the layering process are tax havens or strict bank secrecy jurisdictions.[3]

c.         Third stage: Integration

Integration: The third and final step of the money laundering process is integration. During integration, the illicit funds return to the legal economy and appear as legitimate business proceeds. The paper trail created through the layering process complicates law enforcement's task of determining which funds within the legitimate economy are illegal.

The cash from the illegal means can no longer be distinguished from legal ones after integration.

By this stage, there is no longer any trace or indication that the assets or cash originated from illegal sources.

10.2    Money laundering methods and loopholes

Below are some of the known methods:

1.     Purchase of assets like classic paintings, antiques, stamps and coins, investment products, boats, chips at casino, lottery tickets, premium bonds, shares in private companies, commodities or precious metals. By purchasing these assets, the illegal money will be transferred to the seller. If the transaction is private, it will be more difficult to detect.

2.     As national asset or property: This method can only be done by a select few. For dictators or leaders of states that have full control over their state, they will treat government’s money and assets as their own in the sense that they can use them as they please without restrain. It is possible for this group to mix the national or government’s assets with the money that they obtained from illegal means. This method is only possible if they can deal with the national or government assets as they please. Since the state possesses immunity, it would be more difficult to disrupt their money-laundering activities. This is money laundering at national level.

3.     Unregulated political fund

4.     As money from legitimate bank’s business: A large scale syndicate can possess enough fund to purchase a bank or a financial institution and use the bank or financial institution as a front for their money laundering activities.  This will involve a series of fictional transactions and investments.

5.     As profit from big business: A simple example is owning a casino. Since there is no proper recording on casino’s actual transactions, it is always possible for criminal syndicate to own a casino and mix the money with the actual profit made by the casino. The casino can be used for large-scale money-laundering activities. 

6.     Real estate: Real estate may be purchased with illegal proceeds, and then sold. The proceeds from the sale appear to outsiders to be legitimate income. Alternatively, the price of the property is manipulated; the seller will agree to a contract that under-represents the value of the property, and will receive criminal proceeds to make up the difference.

7.     Precious metals and gems: The syndicate can purchase precious gems like diamonds from illegal market (smuggled etc) and mix them with the legitimate diamonds. After the gems or diamonds are mingled, these stones will be smuggled to certain centers like Bangkok where a certificate of authenticity often appears out of the blue. The syndicate will need a partner in Bangkok and oversea.

8.     As winning from gambling: This method carries some risk with it. The criminal can gamble with the money obtained from illegal means with the hope that he will win some. If he manages to win some money from the gambling activity, the money won will seems legitimate. For example, a group of criminals go to a casino and gamble with RM500,000.00. They lose RM200,000.00. The balance RM300,000.00 might appear to be from their winnings while gambling. A casino often issues a cheque to this effect.

9.     Buying gambling winning on premium: This technique requires some assistance from someone who works for the lottery company (to identify the identity of the winner). Let us say that someone won a lottery for RM500,000. The criminal can approach the victor and offer to purchase the winning ticket at RM550,000. The victor will be amused and will usually sell the ‘coupon’ or other proof of winning for cash. The criminal can then claim the RM500,000 as a legitimate money, obtained from his winning. At the same time, the original victor will be the one suspected for money laundering as his RM550,000 is not accountable.

10. As profit from small business: The black money is deposited as profit from a real legitimate business. In order to do this, the criminal will open a company i.e. Laundromats, car wash or bar. The money will then be mixed with the real profit from the legitimate business. However, there are limitations to this. The amount cannot be too big. If the amount is too big and unrealistic, this will trigger suspicion. For example, if the criminal is careless in mixing the black money with the profit from a legitimate bar business, the transaction will be difficult to be defended as the amount of booze ordered might be too small compared to the huge profit claimed to be from the business.

11. As profit from stock market: One of the most common patterns involves officials who have gathered high amounts of bribes during their term of office. After their resignation, these former officials prefer to establish private businesses or put the 'black money' into the stock market. Thereby, the original source of the money is concealed and any revenues are disguised as profits from business activities or equity trading.' However, it has been stressed that - almost as a general rule - these officials make no secret of their success' in order to construct a plausible explanation for their sudden wealth and to dispel any suspicions that their funds might not originate from business activities but instead from corruption.[4]

12. As profit from dealing with shell company: Shell company refers to company that is actually non-existent. The company only exists on paper. The purpose of the shell company is to generate false invoice and receipts to show that a series of real transactions has occurred and the money comes from the transaction. Usually, the address will be fictional.

13. As trust fund or as profit from trust fund’s investment: The black money will be disguised as a trust fund. The criminal will have full control over the ‘trust fund’. In order to avoid suspicion, the black money will be gradually included as part of the profits made by the legitimate investment handled by the trust fund. The criminal will not be listed as beneficiary but in reality, he will have full control over the fund.

14. Round tripping: Money is deposited in a controlled foreign corporation offshore, preferably in a Tax haven where minimal records are kept, and then shipped back as a Foreign Direct Investment, exempt from taxation.

15. As replacement for legitimate salary: A criminal can use the black money to pay salary to the employees in a legitimate business. For example, the salary for the employee, on paper, is only RM5000 per month. In reality, the agreement with the employee is for a payment RM10,000 per month. The additional RM5,000 will come from money obtained from illegal means. In order to use this method, the difference in the fictional and original amount cannot be too large. Otherwise, the employees will be suspected for money laundering as his lifestyle will not be defendable.

16. As payment or salary for illegitimate works: Technically, this method is not really a placement, as the money will not be placed in the legitimate financial system. However, the money is indirectly included in the legitimate financial system as increased profit from a legitimate business. For example, a criminal owns a large palm-oil plantation. The criminals employ 50 illegal immigrants, in addition to the 20 original workers in the palm-oil plantation. The agreed salary for one illegal immigrant is RM2000 per month. The total payment for the 50 illegal immigrants will be RM100,000 per month or RM1.2 million per year. The only money deposited in the banks will be the huge profit obtained from the legitimate palm-oil business. This is more difficult nowadays as jurisdictions like Cayman Island are also tightening their laws on money laundering.

17. Bulk cash smuggling: Physically smuggling cash to another jurisdiction, where it will be deposited in a financial institution, such as an offshore bank, with greater bank secrecy or less rigorous money laundering enforcement.

18. Fictional loan: The black money can be disguised as a loan.

19. Cash smuggling using pilot or ambassador

20. Money changing is a popular way to launder money due to lack of reporting requirement.

21. Alternative Remittance System: One has to mention money laundering through so-called 'underground banks' (as a peculiarity of money laundering. 'Underground banks' can be considered as a variety of 'ethnic banking' which is found throughout the entire Asian region. 'Ethnic banking' is also called 'hawala', and 'hundi' displays considerable sub-regional differences that cannot be explained here. Nevertheless, all these varieties can be understood as 'alternative remittance systems' (ARS) or 'informal value transfer systems' and share some commonalities.[5] The concept is simple. There are four parties; the customer, two agents and the receiver. The customer will approach the first agent and ask him to send money to the receiver in another country. For illustration, let us say that the amount is RM20,000. The first agent will contact the second agent (usually a family member of the first agent) and instruct the second agent to give the requested amount to the receiver. The money will come from the account of the second agent so there is no actual movement of fund from the customer or from the first agent. Since there is no record, it will be difficult to trace the sources or movement of the fund. The agents will be paid commission. Technically, this is not really a placement but this method is often used to avoid scrutiny in moving illegitimate fund. However, the size is limited as any sudden large movement of fund can raise suspicion.

10.3    Organizations working against money laundering

10.3.1 Financial Action Task Force (FATF)

Formed in 1989 by the G7 countries, the FATF is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering. The FATF Secretariat is housed at the headquarters of the OECD in Paris. In October 2001, FATF expanded its mission to include combating the financing of terrorism. FATF is a policy-making body, which brings together legal, financial and law enforcement experts to achieve national legislation and regulatory AML and CFT reforms. Currently, its membership consists of 34 countries and territories and two regional organizations. In addition, FATF works in collaboration with a number of international bodies and organizations. These entities have observer status with FATF, which does not entitle them to vote, but permits full participation in plenary sessions and working groups.

FATF has developed 40 Recommendations on money laundering and 9 Special Recommendations regarding terrorist financing. FATF assesses each member country against these recommendations in published reports. Countries seen as not being sufficiently compliant with such recommendations are subjected to financial sanctions.

FATF’s three primary functions with regard to money laundering are:

·      Monitoring members’ progress in implementing anti-money laundering measures.

·      Reviewing and reporting on laundering trends, techniques and countermeasures.

·      Promoting the adoption and implementation of FATF anti-money laundering standards globally.

The most fundamental, of the Forty Recommendations is that governments should criminalize the act of money laundering itself, not just predicate offenses, such as drug trafficking. "' Furthermore, money laundering should be included in a government's range of serious offenses in order to have a maximum deterrent effect. ' Countries should also provide adequate resources to law enforcement to investigate, identify, and confiscate illicit criminal proceeds.'In addition, countries should establish a Financial Intelligence Unit (FLU) and designate specific law enforcement authorities that are responsible for anti-money laundering efforts.[6]

While the monitoring mechanisms apply to member countries only, the FATF has also initiated perhaps its most notable program: the identification of "non-cooperative countries or territories," or NCCTs.' This program effectively extends the FATF's applicability to non-member countries. In June 2000, after four months of review, the FATF issued its first list of NCCTs.[7]

10.3.2 United Nations, International Monetary Fund and World Bank

The United Nations has recognized four major consequences of money laundering: it is bad for business, bad for development, bad for the economy, and bad for the rule of law.'[8]

The United Nations Office on Drugs and Crime maintains the International Money Laundering Information Network, a website that provides information and software for anti-money laundering data collection and analysis.

UN Resolution 1373 creates the UN Counter-Terrorism Committee, an international mechanism for monitoring implementation of antiterrorism funding measures, and requires member states to exchange information about terrorist funding. Most importantly, Resolution 1373 makes the antiterrorism effort legally binding by invoking Chapter VII of the UN Charter. Chapter VII authorizes the Security Council to take all necessary action to see that all the Resolution's objectives are met.[9]

The World Bank has a website in which it provides policy advice and best practices to governments and the private sector on anti-money laundering issues.

In the Asian and Pacific region, criminal proceeds tend to originate from a number of different sources. The Golden Triangle encompassing the region including Myanmar, Thailand and Laos has ben notorious as a center for the trafficking of drugs.[10]

10.3.3 Egmont Group

Recognizing the benefits inherent in the development of a network, in 1995 a group of Financial Intelligence Units (FIUs) met at the Egmont Arenberg Palace in Brussels and decided to establish an informal group whose goal would be to facilitate international cooperation. Now known as the Egmont Group, these FIUs meet regularly to find ways to cooperate, especially in the areas of information exchange, training and the sharing of expertise.

10.4    International legal framework for combating money laundering:

1.     Statement on Prevention of Criminal Use of Banking System for the Purpose of Money Laundering: Issued by the Basel Committee on Banking Supervision in 1988

2.     United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention): culminated by the United Nations Drug Control Program (UNDCP) in 1998. This is the first international treaty to call on states to criminalize money laundering.

3.     Global Program against Money Laundering (GPML): The Law Enforcement, Organized Crime and Anti-Money-Laundering Unit of UNODC is responsible for carrying out the Global Program against Money-Laundering, Proceeds of Crime and the Financing of Terrorism, which was established in 1997 in response to the mandate given to UNODC through the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988. The broad objective of the Global Programme is to strengthen the ability of Member States to implement measures against money-laundering and the financing of terrorism and to assist them in detecting, seizing and confiscating illicit proceeds, as required pursuant to United Nations instruments and other globally accepted standards, by providing relevant and appropriate technical assistance upon request.

4.     Forty Recommendations on Money Laundering: This recommendation is made by the  Financial Action Task Force (TATF): an intergovernmental group established by G-7 in Paris in 1989.

5.     The Convention of Laundering, Search, Seizure and Confiscation of the Proceeds from Crime: adopted by the Council of Europe in 1990 in Strasbourg. An interesting feature of this Convention is that the Council may invite any non-member state to also accede to the Convention. 

6.     Core Principles of Banking Supervision: Issued by the Basel Committee in 1997.

7.     Political Declaration and Action Plan Against Money Laundering: adopted by the UN General Assembly in June 1998 at its 20^th Special Session devoted to ‘countering world drug problem together’. The 40 recommendations were adopted in this Political Declaration.

8.     United Nations Convention Against Transnational Organized Crime: adopted in Palermo, Italy in August 2000.  Recognizing that it was insufficient to approach the problem with purely local solutions, the Convention sets out measures for strengthening international cooperation in such matters as extradition, mutual legal assistance, transfer of proceedings and joint investigations.

10.5    Legal and Regulatory Framework on money laundering in Malaysia

The financial system in Malaysia is one of the targeted modes of channeling proceeds of crime. It was observed from recent years that combinations of three common methods were being used to carry out money-laundering activities. The first is the increased use of repository accounts whereby immediate withdrawals are made once deposits have been received. The other two methods consist of fast movement of money across borders and the involvement of third parties in laundering activities.[11]In order to curb money-laundering, proper legislation is necessary.

In conformity with prevailing global aspirations, and in order to fortify steps against terrorists and other illegal money laundering activities, the Malaysian Government introduced the Anti-Money Laundering Act, 2001 (AMLA). The Central Bank of Malaysia, Bank Negara Malaysia (BNM) has been appointed as the competent authority for the purpose of combating money laundering activities under the above act which came into effect on 15 January 2002.

The Bank maintains close working relationships with the Attorney General's Chambers as well as with other enforcement agencies such as the Polis Diraja Malaysia, Companies Commission Malaysia, Cooperatives Commission of Malaysia, Securities Commission Malaysia, Malaysian Anti- Corruption Commission, the Royal Customs of Malaysia, Ministry of Domestic Trade, Co-operatives and Consumerism and CyberSecurity Malaysia (formerly known as National ICT Security and Emergency Response, NISER).

Below are the relevant legislations and guidelines on money laundering in Malaysia:

a.     Anti-Money laundering and Anti Terrorism Financing Act (AMLATFA)

b.     Standard Guidelines on Anti-Money Laundering and Counter Financing of Terrorism (issued by Bank Negara)

c.      10 Sectoral Guidelines(issued by Bank Negara)

d.     Mutual Assistance in Criminal Matters Act 2002 (MACMA)

10.5.1 AMLATFA

AMLATFA 2001 is not a piece of legislation that can be neglected by invoked Reporting Institutions (RIs). It is the responsibility of the Anti-Money Laundering & Counter Financing Terrorism Officer of the respective RIs to ensure all staffs are properly trained depending on their job functions. Usually, a workshop is designed to assist the participants to build a sound understanding of AMLATFA 2001. Participants will also learn the correct way of reporting suspicious transaction report (STR) to Bank Negara Malaysia.

Money Laundering and Anti-Terrorism Financing Act was enacted in 2001 to provide the legal framework to combat money laundering and came into force in January 2002 with banks covered from the outset.[12] A 2007 Amendment Act extended the Anti-Money Laundering Act, as it then was, to cover terrorism financing. The purpose of the Act, as stated in the Preamble, is to provide for the offence of money laundering, the measures to be taken for the prevention of money laundering and terrorism financing offences and to provide for the forfeiture of terrorist property and property involved in, or derived from, money laundering and terrorism financing offences, and for matters incidental thereto and connected therewith . Procedures for banks to carry out fall squarely under “the measures to be taken for the prevention of money laundering and terrorism financing offences”.

AMLA is retrospective and extra-territorial. Article 7(1) of the Malaysian Federal Constitution does not allow a person to be tried under a retrospective criminal law, whereas s 2(1) of AMLA states, ‘This Act shall apply .. before or after the commencement date.’ In the ongoing case of Wasli Mohd. Said [2006] 5 MLJ 172 being heard in the Session Court in Kota Kinabalu, Sabah, the accused faces 97 charges of money laundering under s 4(1) of AMLA. He has also been charged with the predicate corruption charges under s 3(b)(ii) of the repealed Prevention of Corruption Act 1961 as the current Anti-Corruption Act 1997 did not come into force until after the alleged crime took place in 1996. As AMLA did not come into force until 2002 this retrospective attribute has clearly been utilized.

AMLA is also extra-territorial, not limited to offense in Malaysia. The Mutual Assistance in Criminal Matters Act 2002 (MACMA) can be used to enforce court orders under AMLA in other jurisdictions, and vice versa.

10.5.2 Standard Guidelines on Anti-Money Laundering and Counter Financing of Terrorism (The Guidelines)

The Guidelines are issued pursuant to sections 13, 14, 15, 18, 19 and 93 of the AMLATFA. The Guidelines are formulated to address the requirements that must be complied with by reporting institutions under the AMLATFA to effectively combat money laundering and financing of terrorism activities.

The Guidelines are applicable to the reporting institutions including branches and subsidiaries outside Malaysia carrying on any activity listed in the First Schedule of the AMLATFA. Foreign branches and subsidiaries must comply with the Guidelines and where there is a conflict between the Guidelines and the regulatory requirements of the host country, the more stringent requirement must be adopted to the extent that is permitted by the host’s country’s laws and regulations.

Detailed implementation for all Part 4 reporting institutions is given by the Standard Guidelines on Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT), (UPW/GP1) issued by Bank Negara in November 2006 and amended February 2009. These have force of law as they are issued pursuant to s83 of AMLATFA.

10.5.3 10 Sectoral Guidelines

Bank Negara also currently issues 10 Sectoral Guidelines, to be read together with the Standard Guidelines, for particular types of reporting institutions. UPW/GP1[1] ‘Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Sectoral Guidelines 1 for Banking and Financial Institutions’ cover banks.

10.5.4 Mutual Assistance in Criminal Matters Act 2002 (MACMA)

MACMA is basically an Act governing procedural law. MACMA is divided into two main parts.  Part two covers requests by Malaysia and part three covers requests to Malaysia. Part two is short - only ten sections. By comparison, part three covers 26 sections. This is because a request to another country will be conducted under the relevant legislation of that country. The most important thing to note is that all requests to or from Malaysia must be made through the Malaysian Attorney General ('AG') who will consider all requests. 

The Object of MACMA is for Malaysia to provide and obtain international assistance in criminal matters, including –

·      providing and obtaining evidence and things;

·      the making of arrangements for persons to give evidence, or to assist in criminal investigations;

·      the recovery, forfeiture or confiscation of property in respect of a serious offence or a foreign serious of-fence;  

·      the restraining of dealings in property, or the freezing of property, that may be recovered in respect of a serious offence or a foreign serious offence;

·      the execution of requests for search and seizure;

·      the location and identification of witnesses and suspects

·      the service of process

·      the identification or tracing of proceeds of crime and property and instrumentals derived from or used in the commission of a serious offence or a foreign serious offence;

·      the recovery of pecuniary penalties in respect of a serious offence or a foreign serious offence; and

·      the examination of things and premises.

MACMA is a very useful tool in the fight against money laundering, in that it creates a mechanism for collecting evidence and enforcing orders in other jurisdictions and vice versa. However, the use of the Act in Malaysia has been partly hampered as a result of the Eric Chia case.[13] In this case, the accused stood trial in the Kuala Lumpur Sessions Court for criminal breach of trust under s 409 of the Malaysian Penal Code for allegedly dishonestly approving the payment of RM76.4m into the account of Filsham Enterprise Incorporated in American Express Bank Ltd in Hong Kong. The main criticism by the court is that it is not as well drafted as the Anti-Money Laundering and Anti-Terrorism Financing Act 2001. Whereas AMLATFA uses language such as 'notwithstanding any other law', MACMA does not. As a result, it was open to legal challenge. Although ultimately the case was decided on the issue of court jurisdiction rather than on the issue of the Act itself, the fact is that judges can refuse to admit evidence gathered outside Malaysia under the procedures of the other jurisdictions. It therefore has resulted in the situation that unless MACMA is amended, it can be challenged in a way that is not possible with AMLATFA.[14]

10.6    List of Obligations

Below are some of the obligations that must be observed by banks in relation to AMLA:

Obligation 1: Record keeping

Obligation 2: Retention of records

Obligation 3: Know Your Customer (KYC) or Customer Due Diligence (CDD)

Obligation 4: Reporting suspicious activity

Obligation 5: To have compliance programme

Obligation 6: To ensure independent audits to check effectiveness of AML/CFT measures

Obligation 7: To comply with and assist the investigation of relevant supervisory authority (Bank Negara)

Obligation 8: Not to tip-off

OBLIGATION 1: Record Keeping

It is very important for the bank to keep proper records of all customer due diligence measures that the bank has carried out, including customer identification documents and related materials. By having comprehensive records, the bank will be able to show that it has complied with the money laundering regulations. This is crucial to protect the bank’s interest if there is an investigation into one of its customers.

Record keeping is an essential feature of money laundering legislation. There is an obligation on banks and firms to maintain appropriate money laundering deterrence records and controls in relation to the firm’s business, with the idea being that maintaining an adequate audit trail is an essential element of combating money laundering.

Not only must records exist, but generally, firms and banks must take reasonable care to keep adequate records appropriate to the scale, nature and complexity of the business.

S13 deals with ‘Record Keeping by Reporting Institutions’. It is important to keep records of transactions so that an investigator from any Malaysian law enforcement agency is able to follow the ‘paper trail’ of any laundered criminal assets. The specific information that the legislation requires is:

(3) The record referred to in subsection (1) shall include the following information for each transaction:

(a) the identity and address of the person in whose name the transaction is conducted;

(b) the identity and address of the beneficiary or the person on whose behalf the transaction is conducted, where applicable;

(c)  the identity of the accounts affected by the transaction, if any;

(d) the type of transaction involved, such as deposit, withdrawal, exchange of currency, cheque cashing, purchase of cashier’s cheques or money orders or other payment or transfer by, through, or to such reporting institution;

(e) the identity of the reporting institution where the transaction occurred; and

(f)  the date, time and amount of the transaction,

In 13(1), it implies that records only need to be kept that relate to transactions “exceeding such amount as the competent authority may specify”. Whether these are the same amounts as are specified in S14 is unclear. In subsection (4), transactions by one person within a certain time must be counted as one transaction. This is to avoid ‘smurfing’, where transactions are broken up in order to attempt to avoid the reporting requirements ofS14.[15]

For safety, the following records should be properly maintained:

·         Customer information

·         Transactions

·         Internal and external suspicion reports

·         Investigation records

·         MLRO annual reports

·         Information not acted on

·         Actions taken resulting from agency requests

·         Training and compliance monitoring

·         Information about the effectiveness of training

Obligation 2: Retention of records

There is an obligation to keep a record of suspicious activity. However, it is not sufficient to record it. The record must be properly maintained for a period of 6 years. Section 17 of AMLATFA 2001 specifies the policy on retention of records. Documents relating to STRs and CTRs must be kept for a minimum of six years, along with any associated material.

Section 17

(1) Notwithstanding any provision of any written law pertaining to the retention of documents, a reporting institution shall maintain any record under this Part for a period of not less than six years from the date an account has been closed or the transaction has been completed or terminated.

(2) A reporting institution shall also maintain records to enable the reconstruction of any transaction in excess of such amount as the competent authority may specify, for a period of not less than six years from the date the transaction has been completed or terminated.

            Section 18     

(1)” No person shall open, operate or authorise the opening or the operation of an account with a reporting institution in a fictitious, false or incorrect name”.

The section refers to a ‘person’ involved with an account in a reporting institution which is a wider term and can include any of the bank’s staff, the customer or customers, as well as the bank itself.

            The Act’s definition of a false name is given in (4):

For the purposes of this section-

(a) a person opens an account in a false name if the person, in opening the account, or becoming a signatory to the account, uses a name other than a name by which the person is commonly known;

(b) a person operates an account in a false name if the person does any act or thing in relation to the account (whether by way of making a deposit or withdrawal or by way of communication with the reporting institution concerned or otherwise) and, in doing so, uses a name other than a name by which the person is commonly known; and

(c) an account is in a false name if it was opened in a false name, whether before or after the commencement date of this Act.

A Regulation (PU(A)104/2007) has been issued for s17 which requires additional material on the account to be kept and to be available for Bank Negara to access:

(1)” A reporting institution shall ensure that any records under Part IV of the Act including account holderidentification records are maintained and any information relating to such records are made available on a timely basis when required by the competent authority”.

Section 6.1 of the Guidelines also elaborate on retention period:

            6.1 Retention Period

6.1.1 The reporting institution should keep the relevant records including any material business correspondences and documents relating to transactions, in particular, those obtained during customer due diligence procedures, for at least six years after the transaction has been completed or after the business relations with the customer have ended.

6.1.2 In situations where the records are subject to ongoing investigations or prosecution in court, they shall be retained beyond the stipulated retention period until such records are no longer needed.

In addition, the records kept must enable the reporting institution to establish the history, circumstances and reconstruction of each transaction. The documents should be retained in a form that is acceptable under section 3 of the Evidence Act 1950. It must be secure and retrievable upon request in a timely manner.

Obligation 3: Know Your Customer (KYC) or Customer Due Diligence (CDD)

The Guidelines (7.1) require the reporting institution to conduct ongoing customer due diligence (CDD). This is a continuation of the previous similar policy known as Know Your Customer policy.

7.1.2 An effective customer due diligence process would enable the reporting institution to detect related money laundering and financing of terrorism transactions at the point of customer contact (based on the front-line staff’s ad hoc report). Generally, most detection would be made through analyzing the transaction patters or activities of the customer.

A Regulation (PU(A)104/2007) has been issued which is to be read with S16 which emphasizes on Customer Due Diligence (CDD):

(1) A reporting institution shall conduct customer due diligence measures on its account holders, including when:-

(a) there is a suspicion of money laundering; or

(b) it has doubts about the veracity or adequacy of information on the identity of the account holder which it has obtained previously.

(2) The reporting institution shall verify, by reliable means or from any independent source of document, data or information:-

a)    that any person who is purporting to act on behalf of the account holder is so authorized and the identity of that person; and

b)   a beneficial owner on whose behalf an account is opened or a transaction is conducted and the identity of that person.

(3) The reporting institution shall conduct ongoing due diligence on all its business relationship with any account holder.

There appears to be no specific definition of CDD in AMLATFA or the Guidelines. It is presumed to be essentially the same as the previous ‘know your customer’ (KYC) policy. CDD basically knows all about the customer so that a potential money launderer is detected at the initial account opening stage, or if not then by an ongoing CDD process.

The issuance of this Regulation appears to have been done to ensure greater compatibility with the Bank Negara Guidelines.

The Standard Guidelines (S4) have introduced the concept of Customer Acceptance Policy (CAP), which basically cover what needs to be done when deciding whether to accept a prospective customer. Little information is given as this will be in the bank’s own internal procedures, which has to be done.

Section 4.1

Customer Acceptance Policy

4.1.1 Every reporting institution should develop customer acceptance policy and procedures to address the establishment of business relationship with the customer. For that purpose, the reporting institution should identify and assess risk of customers, i.e. risk profiling, especially in identifying the type of customers associated with high risk of money laundering and financing of terrorism.

4.1.2 Reflective of the risk profiling conducted, the reporting institution should have reasonable measures in its internal policies and procedures, including customer due diligence, to address the different risks posed by each type of customer.

The Guidelines (4.2.1) ask for ‘risk profiles’ of customers to be made, which means that the following has to be taken into account:

- the origin of the customer and location of business;

-background or profile of the customer;

-nature of the customer’s business;

-structure of ownership for a corporate customer; and

-any other information suggesting that the customer is of higher risk.

The Sectoral Guidelines require further that:

“In addition to the risk profiling requirements set out in the Standard Guidelines on AML/CFT, the reporting institution should review and update its customers. profiles regularly especially when there are changes in their employment or nature of business”.

A large part of the Standard Guidelines (S5) relate to CDD, and cover various aspects of this. The specifiedrequirements, which give more detail than the Act, are found in section 5.1

Customer Due Diligence

5.1.2 Every reporting institution must conduct customer due diligence, when:

-establishing business relationship with any customer;

-carrying out cash or occasional transaction that involves a sum in excess of the amount specified by BankNegara Malaysia under its sectoral guidelines or relevant circular;

-it has any suspicion of money laundering or financing of terrorism; or

-it has any doubt about the veracity or adequacy of previously obtained information.

5.1.3 The customer due diligence undertaken by the reporting institution should at least comprise the following:

-identify and verify the customer;

-identify and verify beneficial ownership and control of such transaction;

-obtain information on the purpose and intended nature of the business relationship/transaction; and

-conduct ongoing due diligence and scrutiny, to ensure the information provided is updated and relevant.

The Guidelines provided different requirement for different classes of customers; individual customers, corporate customers, clubs, societies and charities, trustees, and beneficial owners. These requirements need to be observed.

Documentary material to be provided in CDD is given in 5.2.1. For instance an individual customer needs to provide at least: full name; NRIC/passport number; permanent and mailing address; date of birth; and nationality.

Likewise, the Sectoral Guidelines are mainly devoted to CDD procedures. For example, in the case of individual customers, the following extra material is required for banks: occupation type/self employed; name of employer or nature of self-employment/nature of business; and contact number (home, office or mobile).

Obligation 4: Reporting suspicious activity

If an employee becomes suspicious regarding a particular transaction then the bank is clearly under an obligation to undertake a review to establish whether there are actually grounds for a true suspicion. The process adopted needs to be formally documented with the reason for reporting, or not reporting, the transactions clearly being set out. It may be necessary to provide protection to the bank in future potential legal actions against claims that they have failed to do what was required of them.

Below are some of the examples of possible suspicious transactions:

Identity-related matter

·      Situations in which it is difficult to confirm the identity of a person.

Weird transactions

·      If a customer’s place of business or residence is outside the financial institution’s normal service area then this is likely to raise concerns and require enhanced due diligence to be conducted.

·      Any unusual pattern of cash transactions will alert the bank to potential concerns. If the customer engages in unusual activity in cash purchases of traveller’s cheques, money orders or cashier’s cheques then this will likely be an area requiring investigation.

·      Businesses seeking investment management services when the source of funds is difficult to pinpoint or appears inconsistent with the customer’s means or expected behavior.

·      A customer opens a greater number of different accounts than would be expected for the type of business they are purportedly conducting and/or frequently transfers funds among those accounts.

·      Transactions that seem to be inconsistent with a customer’s known legitimate business or personal activities or means; unusual deviations from normal account and transaction patterns.

·      Purchases of goods and currency at prices significantly below or above market price.

·      Unconventionally large currency transactions, particularly in exchange for negotiable instruments or for the direct purchase of funds transfer services.

·      A customer’s corporate account(s) has deposits or withdrawals primarily in cash rather than cheques or other types of transfer

·      When a bank expects a customer to want cash given the nature of their activity and the customer fails to make such request then this will also cause concerns. For example, the owner of both a retail business and a cheque cashing service that does not ask for cash when depositing cheques, will possibly indicate the availability of another source of cash, which could be illegitimate. 

·      If the currency transaction patterns of a business experience a sudden and inconsistent change from normal activities it would be expected that this would be identified by the bank and reviews conducted.

Blurry transactions

·      Unauthorized or improperly recorded transactions; inadequate audit trails.

·      Uncharacteristically premature redemption of investment vehicles, particularly with requests to remit proceeds to apparently unrelated third parties.

·      Large unidentified lump-sum payments from abroad.

Apparently illegal transaction

·      Apparent structuring of currency transactions to avoid regulatory recordkeeping and reporting thresholds (such as transactions in amounts less than $10,000).

·      Insurance policies with values that appear to be inconsistent with the buyer’s insurance needs or apparent means.

Part IV of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 deals with the Reporting Obligations. (There are 15 sections under Part IV (section 13-28):

13. Record-keeping by reporting institutions

14. Report by reporting institutions

15. Centralization of information

16. Identification of account holder

17. Retention of records

18. Opening account in false name

19. Compliance programme

20. Secrecy obligations overridden

21. Obligations of supervisory or licensing authority

22. Powers to enforce compliance

23. Currency reporting at border

24. Protection of persons reporting

25. Examination of a reporting institution

26. Examination of person other than a reporting institution

27. Appearance before examiner

28. Destruction of examination records

According to S14 (Report by reporting institutions):

A reporting institution shall promptly report to the competent authority any transaction -

(a) exceeding such amount as the competent authority may specify; and

(b) where the identity of the persons involved, the transaction itself or any other circumstances concerning that transaction gives any officer or employee of the reporting institution reason to suspect that the transaction involves proceeds of an unlawful activity.

S14(a) is known as a Cash Transaction Report (CTR). Any transaction above the threshold must be notified.

(Currently RM50,000 which is equivalent to USD20,000).

S14(b) is known as a Suspicious Transaction Report (STR). A report must be made if there is a suspicion of money laundering.

A Regulation (PU(A) 104/2007.

Anti-money laundering and anti-terrorism financing (Reporting Obligations) Regulations 2007) has been issued to modify s14(b) to make it a requirement to make an STR if the transaction is only attempted and also to make it clear that the amount of any attempted or actual transaction is irrelevant:

“A reporting institution shall promptly report to the competent authority any attempted transaction or transactions where the identity of the persons involved, the transaction itself or any other circumstances concerning that transaction gives any officer or employee of the reporting institution reason to suspect that the transaction involves proceeds of an unlawful activity regardless of the amount of the transaction”.

The Standard Guidelines (S8) have information on the submission of an STR to the Financial Intelligence Unit of Bank Negara. This is standard for all reporting institutions. As the Sectoral Guidelines state:

6.1.” The reporting institution shall be subject to the requirement and mechanisms on reporting of suspicious transactions as set out in the Standard Guidelines on AML/CFT”.

The duty to report suspicious activities and to keep record often occur simultaneously.

Section 15

“A reporting institution shall provide for the centralisation of the information collected pursuant to this Part”.

At its most basic, this section means that the bank must have the material that is kept pursuant to s13 in such a way that an investigator can easily access it.

Section 16 is concerned with the identification of the account holder:

(1) A reporting institution-

(a) shall maintain accounts in the name of the account holder; and

(b) shall not open, operate or maintain any anonymous account or any account which is in a fictitious, false or incorrect name.

This subsection is self-explanatory. An account must be in the name of the actual holder.

(2) A reporting institution shall-

(a) verify, by reliable means, the identity, representative capacity, domicile, legal capacity, occupation or business purpose of any person, as well as other identifying information on that person, whether he be an occasional or usual client, through the use of documents such as identity card, passport, birth certificate, driver’s licence and constituent document, or any other official or private document, when establishing or conducting business relations, particularly when opening new accounts or passbooks, entering into any fiduciary transaction, renting of a safe deposit box, or performing any cash transaction exceeding such amount as the competent authority may specify; and

(b) include such details in a record. This subsection is advisory regarding the documentary material to be used to verify the identity of a customer. Specific guidance on what documents should be used are given in Bank Negara’s Guidance.

Subsection (3) deals with what is now known as ‘Customer Due Diligence’ (previously ‘Know Your Customer’). This is covered in detail in the Bank Negara Guidelines.

(3)” A reporting institution shall take reasonable measures to obtain and record information about the true identity of the person on whose behalf an account is opened or a transaction is conducted if there are any doubts that any person is not acting on his own behalf, particularly in the case of a person who is not conducting any commercial, financial, or industrial operations in the foreign State where it has its headquarters or domicile”.

The necessary reporting mechanism is mentioned in Section 8 of the Guidelines:

                                      

            8.2 Reporting Mechanism

8.2.1 The reporting institution should appoint one officer (or more) at the Senior Management level to be the compliance officer responsible for the submission of suspicious transaction reports to the Financial Intelligent Unit in Bank Negara Malaysia with regards to AML/CFT matters.

8.2.3 In addition, the reporting institution should appoint at each branch and subsidiary… a branch/subsidiary compliance officer.

8.2.6 The compliance officer should ensure that the suspicious transaction report is submitted within the next working day, from the date the compliance officer establishes the suspicion. In the course of submitting the suspicious transaction report, utmost care must be taken to ensure that such reports are treated with the highest level of confidentiality. Hence, the compliance officer must be given the independence to report suspicious transactions to the Financial Intelligence Unit in Bank Negara Malaysia without the need to go through any elaborate approval process.

Obligation 5: To have compliance programme

There must be compliance with AML/CFT regulations. In addition, suitable training and compliance programme must be introduced.

It is important that, in implementing an AML/CFT internal programme, the board of directors and senior management ensure that it is in compliance with the AMLATFA and the related regulatory guidelines, in particular, the three important aspects of an AML/CFT internal programme.

The first aspect, i.e., customer due diligence or CDD, is the foundation to effectively prevent criminals from accessing the financial system. In today's internet environment and technologically savvy society, cross border transactions can be executed within seconds. It is for this speed in which transactions can be carried out that the bank need to be vigilant to ensure that the provisions of such excellent systems are not abused for illegitimate purposes.

The second important element of the AML/CFT programme, is the submission of suspicious transactions reports or STRs and Cash Threshold Reports or CTRs to the Financial Intelligence Unit of Bank Negara Malaysia. Such reports do not in any way implicate the customers of any unlawful activity or that investigation will commence as soon as the STRs or CTRs are lodged.

Thirdly, it is equally important to establish a range of red flags to enable detection of suspicious transactions. One important area is to be alert on high risk jurisdictions. Bank Negara Malaysia has, from time to time, provided information on this area such as circulars on countries that are deficient in their AML/CFT regime as identified by the FATF. Nowadays, it is compulsory for banks to adopt, develop and implement internal anti-money laundering programmes. This is in accordance with Section 19.

Part 10 of the Standard Guidelines gives more detail on compliance, ie:

10.1. Policies, Procedures and Controls

10.2. Staff Integrity

10.3. Compliance Officer

10.4. Staff Training and Awareness Programmes

10.5. Independent Audit

Obligation 6: To ensure independent audits to check effectiveness of AML/CFT measures

Internal audit is not sufficient. There must be independent audits as well. Internal Audit is a critical function of any organisation; providing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, and governance processes.  The role of internal audit as a cornerstone of corporate governance whether in the private or public sector cannot be overemphasized.  The International Standards for the Professional Practice of Internal Auditing (Standards) acknowledge the close link between corporate governance and the practice of internal auditing, suggesting the work related to corporate governance is fundamental to the basic practice and performance of the internal auditing function. An effective committee is an indication of best practice and reinforces the independence and objectivity of the internal audit units. Internal auditors must ensure the effectiveness of the audit committee which is an integral part of an effective audit function.

Section (7) of the Sectoral Guidelines has some specific requirements for banks regarding the independent audits, i.e.:

-ensure that independent audits are conducted to check and test the effectiveness of the policies, procedures and controls for AML/CFT measures;

-ensure the effectiveness of internal audit function in assessing and evaluating the AML/CFT controls;

-ensure the AML/CFT measures are in compliance with the AMLATFA, its regulations and the relevant Guidelines; and

-assess whether current AML/CFT measures which have been put in place are in line with the latest developments and changes of the relevant AML/CFT requirements.

S20 (Secrecy obligations overridden), states:

“The provisions of this Part shall have effect notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed by any written law or otherwise”.

As far as banks are concerned, S97 of the Banking and Financial Institutions Act (BAFIA) does not apply regarding any matter relating to AMLATFA. However, banking secrecy does not apply in a criminal investigation in any case under BAFIA.

Matters of compliance with AMLATFA and the Guidelines are conducted by Bank Negara in its role as the supervisory authority for banks and as the competent authority under AMLATFA.

Section 10 of the Guidelines deals with independent audit.

Obligation 7: To comply with and assist the investigation of relevant supervisory authority (Bank Negara)

S21 is indirectly relevant to banks as it lays out the role of Bank Negara as the ‘relevant supervisory authority’ of banks in regard to money laundering:

Section 21

(1) The relevant supervisory authority of a reporting institution or such other person as the relevant supervisory authority may deem fit may-

(a) adopt the necessary measures to prevent or avoid having any person who is unsuitable from controlling, or participating, directly or indirectly, in the directorship, management or operation of the reporting institution;

(b) examine and supervise reporting institutions, and regulate and verify, through regular examinations, that a reporting institution adopts and implements the compliance programmes in section 19;

(c) issue guidelines to assist reporting institutions in detecting suspicious patterns of behaviour in their clients and these guidelines shall be developed taking into account modern and secure techniques of money management and will serve as an educational tool for reporting institutions’ personnel; and

(d) co–operate with other enforcement agencies and lend technical assistance in any investigation, prosecution or proceedings relating to any unlawful activity or offence under this Act.

The section also gives the power to revoke or suspend a licence if the reporting institution is convicted of an offence under AMLATFA.

S21(1) states:

“An officer of a reporting institution shall take all reasonable steps to ensure the reporting institution’s compliance with its obligations under this Part”.

This subsection has the effect of placing a legal obligation on the money laundering compliance officer. Subsection (4) states that anyone contravening (1) commits an offence.

Subsection (2) allows Bank Negara as the competent authority to apply to the High Court for an Order against individuals at a reporting institution to force compliance with AMLATFA. Bank Negara can also have an agreement, under (3), with a reporting institution for it to become compliant. Failure to comply with a subsection (3) directive is an offence, as also stated in (4).

Oddly, Bank Negara does not appear to be able to simply impose a fine for non-compliance, as under (4), a conviction is required. S24 essentially gives legal immunity to anyone who makes a report under Part 4, presumably a s14(b) STR:

(1) No civil, criminal or disciplinary proceedings shall be brought against a person who

(a) discloses or supplies any information in any report made under this Part; or

(b) supplies any information in connection with such a report, whether at the time the report is made or afterwards; in respect of-

(aa) the disclosure or supply, or the manner of the disclosure or supply, by that person, of theinformation referred to in paragraph (a) or (b); or

(bb) any consequences that follow from the disclosure or supply of that information, unless the information was disclosed or supplied in bad faith.

It should be noted that an STR is strictly confidential and there ought not to be any circumstances where such information becomes public.

To avoid legal proceedings for contravention of Part 4, if it can be shown that all required procedures were followed, which would include the Guidelines, this would be a defence. To some extent, the long-standing tests of what is a ‘reasonable banker’ could apply as well.

(2)” In proceedings against any person for an offence under this Part, it shall be a defence for that person to show that he took all reasonable steps and exercised all due diligence to avoid committing the offence”.

Section 25 allows Bank Negara as the competent authority to appoint a person – known as an Examiner to inspect all aspects of a reporting institution’s compliance with anti-money laundering. In practice, for banks, the examiner will usually be from Bank Negara’s Special Investigation Unit (SIU) as they already inspect Bank’s compliance with other Guidelines and BAFIA. This investigation is a purely regulatory one.

Section 25

(1) For the purposes of monitoring a reporting institution’s compliance with this Part, the competent authority may authorise an examiner to examine-

(a) any of the reporting institution’s records or reports that relate to its obligations under this Part, which are

kept at, or accessible from, the reporting institution’s premises; and

(b) any system used by the reporting institution at its premises for keeping those records or reports.

(2) In carrying out the examination under subsection (1), the examiner may-

(a) ask any question relating to any record, system or report of a reporting institution; and

(b) make any note or take any copy of the whole or part of any business transaction of the reporting institution.

Section 26 allows the examiner to examine persons who are connected with a reporting institution. This could include a customer, but this seems unlikely in the context of a bank’s anti-money laundering procedures.

Section 26

(1) An examiner authorised under section 25 may examine-

(a) a person who is, or was at any time, a director or an officer of a reporting institution or of its agent;

(b) a person who is, or was at any time, a client, or otherwise having dealings with a reporting institution; or

(c) a person whom he believes to be acquainted with the facts and circumstances of the case, including an auditor or an advocate and solicitor of a reporting institution, and that person shall give such document or information as the examiner may require within such time as the examiner may specify. Section 27 gives the examiner the power to request a person to attend for an interview about compliance with anti-money laundering.

(1)” A director or an officer of a reporting institution examined under subsection 25(1), or a person examined under subsection 26(1), shall appear before the examiner at his office upon being called to do so by the examiner at such time as the examiner may specify”.

Section 28 is not relevant to reporting institutions: The competent authority may destroy any document or copy of such document made or taken pursuant to an examination under sections 25 and 26 within six years of the examination except where a copy of the document has been sent to an enforcement agency (Norhashimah, 2002).

It should be noted that as well as the various sanctions applied by Bank Negara, failure to carry out the antimony laundering requirements can result in the dismissal of staff by a bank. This can be seen in the Industrial

Court case of Southern Bank Berhad v. Yahya Talib (Award No. 1692 of 2006 [Case No: 4/4-626/05] 25 September 2006). The claimant was held to have broken the bank’s procedures established under the then BNM/GP9 (whichwas replaced by UPW/GP1(1)) by failing to know his customer as he had acted as the introducer for a prospective customer despite not knowing anything about him.

Bank officers must give full assistance and cooperation to the investigator or examiner appointed by the relevant supervisory authority. Part V of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 deals with Investigation.  There are 14 sections in Part V(section 29-43).

Obligation 8: Not to tip-off

Tipping-off the suspect is strictly prohibited. Tipping-off will defeat the whole purpose of having anti-money laundering legislation, as it will give a head start to the money launderer. The fine is heavy as it can go as high as RM1 million. The relevant section is section 35.

Section 35

(1) Any person who—

(a) knows or has reason to suspect that an investigating officer is acting, or is proposing to act, in connection with an investigation which is being, or is about to be, conducted under or for the purposes of this Act or any subsidiary legislation made under it and discloses to any other person information or any other matter which is likely to prejudice that investigation or proposed investigation; or

(b) knows or has reason to suspect that a disclosure has been made to an investigating officer under this Act and discloses to any other person information or any other matter which is likely to prejudice any investigation which might be conducted following the disclosure, commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding one year or to both.

---

[1] Alison S. Bachus, ‘From Drugs to Terrorism: The Focus Shifts in the international fight against money laundering after September 11, 2001’ (2004) 842

[2] Alison S. Bachus, ‘From Drugs to Terrorism: The Focus Shifts in the international fight against money laundering after September 11, 2001’ (2004) 844

[3] Alison S. Bachus, ‘From Drugs to Terrorism: The Focus Shifts in the international fight against money laundering after September 11, 2001’ (2004) 844

[4] Nicole Schulte-Kulkmann, ‘The Architecture of Anti-Money Laundering Regulation in the People’s Republic of China – Shortfalls and Requirements for Reform’ (2006)  410

[5] Nicole Schulte-Kulkmann, ‘The Architecture of Anti-Money Laundering Regulation in the People’s Republic of China – Shortfalls and Requirements for Reform’ (2006) 411

[6] Alison S. Bachus, ‘From Drugs to Terrorism: The Focus Shifts in the international fight against money laundering after September 11, 2001’ (2004) 849

[7] Alison S. Bachus, ‘From Drugs to Terrorism: The Focus Shifts in the international fight against money laundering after September 11, 2001’ (2004) 852

[8] Alison S. Bachus, ‘From Drugs to Terrorism: The Focus Shifts in the international fight against money laundering after September 11, 2001’ (2004) 838

[9] Alison S. Bachus, ‘From Drugs to Terrorism: The Focus Shifts in the international fight against money laundering after September 11, 2001’ (2004) 861

[10] Herbert V Morais, ‘The War against money laundering, terrorism, and the financing of terrorism’ (2002) LAWASIA Journal, Vol.1, 1

[11] ‘Almost 100 money laundering cases bring prosecuted’ The Malaysian Insider (Kuala Lumpur: 19 July 2010)

[12] The first Malaysian conviction for money laundering took place in December 2005, when Abd Khalid Hamid pleaded guilty to 5 accounts of money laundering under s 4(1) and was sentenced to 3 years by the Kuala Lumpur Session Court. The offences related to payments made for two cars and a house. He had already been found guilty of the predicate offence of theft in January 2005 by the Shah Alam Sessions court, and was already serving a 9 year sentence.

[13]Norhashimah Mohd Yasin, ‘The Malaysian Mutual Assistance in Criminal Matters Act 2002 (MACMA) and its application to money laundering’ (2009) 6 MLJA 83

[14]Norhashimah Mohd Yasin, ‘The Malaysian Mutual Assistance in Criminal Matters Act 2002 (MACMA) and its application to money laundering’ (2009) 6 MLJA 83

[15]Smurfing, also known as structuring, is the practice of executing financial transactions (such as the making of bank deposits) in a specific pattern calculated to avoid the creation of certain records and reports required by law.