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 20th 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.
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