Malaysia has an upper-middle-income economy and is subject to several money laundering threats. Situations such as the country's porous land and sea borders, strategic geographic location, and well-developed financial system increase its vulnerability to domestic and international criminal activities such as corruption, terrorism, terrorist financing, fraud, drug trafficking, smuggling, wildlife trade, tax crimes.
Besides, Malaysia has substantially up-to-date anti-money laundering (AML) legislation and institutional frameworks. Malaysia has made continued progress in improving its AML implementation by increasing money laundering investigations and prosecutions. Besides, one of the key areas for development in Malaysia is the prosecution of foreign-origin crimes.
Malaysia According to FATF
In 2010, Malaysia's government passed the AMLA (Amendment) Act, which bolstered the country's AML regulations. This amendment broadened the definition of money laundering and mandated that all financial institutions adhere to AML rules.
Subsequently, in 2014, the Financial Action Task Force (FATF) conducted an evaluation of Malaysia's AML framework. The assessment acknowledged Malaysia's significant progress in strengthening AML regulations but recommended further enhancements. The FATF suggested that Malaysia improve its customer due diligence procedures, increase prosecutions for money laundering, and enhance cooperation with other nations in combating money laundering.
In response to these recommendations, the Malaysian government introduced the Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act (AMLA) in 2014. This legislation established a legal framework for addressing money laundering, terrorism financing, and related financial crimes. In 2017, AMLA underwent further amendments, which expanded the definition of money laundering, strengthened AML regulations through various measures, introduced new offenses, raised penalties for non-compliance, and broadened the range of entities required to report suspicious activities.
What are AMLA’s measures?
The AMLA 2017 introduced a range of new measures aimed at combating money laundering. These measures include:
- Record-Keeping: Financial institutions must maintain records of customer transactions for a minimum of five years. This extended record-keeping period helps in tracking and auditing financial activities over an extended period.
- Customer Due Diligence: Financial institutions are now obligated to conduct enhanced customer due diligence, particularly for customers considered high-risk, such as politically exposed persons (PEPs). This involves conducting more thorough checks and assessments of these individuals or entities.
- Beneficial Ownership: Financial institutions are required to identify and verify the beneficial owners of their customers. This means understanding and confirming who ultimately owns or controls an account or entity, which helps in preventing anonymous transactions.
- Suspicious Transaction Reporting: Financial institutions have a mandate to promptly report any suspicious transactions to the relevant authorities. This reporting must occur within three working days to ensure timely investigation and action against potential money laundering activities.
Additionally, the AMLA 2017 established the National Coordinating Committee on Anti-Money Laundering and Counter Financing of Terrorism (NCC). This committee is tasked with coordinating anti-money laundering efforts across various government agencies, promoting collaboration, and ensuring a more cohesive approach to combating money laundering and the financing of terrorism.
The Essential Elements of the AMLA
The AMLA is a comprehensive piece of legislation that contains various provisions designed to combat money laundering effectively. Some of its key aspects include:
- Suspicious Activity Reports (SARs): The AMLA mandates the reporting of suspicious transactions. Any person who has reason to believe that a transaction may be linked to money laundering is obligated to report it to the Financial Intelligence Unit, ensuring that potential illicit activities are promptly identified and investigated.
- Offenses and Penalties: The Act clearly defines money laundering offenses and stipulates penalties for both individuals and corporations found guilty of such offenses. These penalties range from substantial fines to imprisonment, serving as a robust deterrent against money laundering activities.
- AML Compliance Program: Financial institutions are required by the AMLA to establish and implement internal procedures, policies, and controls aimed at preventing and detecting money laundering activities within their operations. This ensures that these institutions play an active role in the fight against money laundering and are equipped to comply with AML regulations.
- Freezing, Seizure, and Confiscation of Assets: The AMLA grants authorities the power to freeze, seize, and confiscate assets that are either directly involved in money laundering activities or derived from such activities. This empowers law enforcement to disrupt and dismantle money laundering operations effectively.
Anti-Money Laundering Solutions for Malaysia
Malaysia's approach to AML has changed significantly over the years, thanks to the government's adoption of thorough legislation and proactive actions to effectively combat money laundering. In addressing this issue, Sanction Scanner offers advanced AML solutions fueled by artificial intelligence. These solutions provide organizations with the tools to adeptly meet their AML obligations, presenting an innovative approach to fortifying financial integrity. To embark on a voyage into the future of AML compliance, customized for Malaysia's needs, we extend an invitation for you to reach out to us or request a demo, where we can offer an extensive presentation of our capabilities.
