According to Online Cambridge Dictionary, money laundering is the crime of moving money that has been obtained illegally through banks and other businesses to make it seem as if the money has been obtained legally. Terrorism financing can be defined as acts of providing financial support to the terrorist activities. Unlawful activities on the hand are defined as serious offences and it includes all the predicate offences in Second Schedule of the Act. Money laundering essentially consists of three stages: Placement; Layering and Integration (refer to Figure 1). More often than not, the process is more complicated and sophisticated so that the dirty money cannot be traced by the authorities.
Figure 1: Infographic courtesy of Bank Negara Malaysia’s website
MONEY LAUNDERING OFFENCE
Section 4(1) of the Act states that a person commits a money laundering offence if:
- Engages in a transaction that involves proceeds of an unlawful activity;
- acquires, receives, possesses, disguises, transfers, converts, exchanges, carries, disposes of or uses proceeds of an unlawful activity;
- removes from or brings into Malaysia, proceeds of an unlawful activity;
- conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of an unlawful activity
If we refer to Section 4(2) of the Act, in determining whether the fall under Section 4(1) or not, the prosecution has to prove whether:
- the person has knowledge or reason to believe/reasonable suspicion; or
- the person has no reasonable excuse for failing to take reasonable steps to ascertain the proceeds are from unlawful activity or not.
This section is extremely extensive and prosecution only has to prove knowledge or reasonable suspicion or reasonable excuse for a person to fall under Section 4(1). The last two terms are, however, not defined in the Act or by the court of law at the moment. Bear in mind that “unlawful activity” covers all offences under Second Schedule which consists of 414 offences under 65 pieces of legislation as of 28 December 2017. In addition, section 4(3) states that it is not necessary for the prosecution to prove the proceed is from specific unlawful activity when proceed is derived from one or more unlawful activities.
Section 4A on the other hand criminalized any person who structures or direct, assist or participate in structuring to evade reporting requirement. The person will be fined 5 times the value of the transaction or imprisoned not exceeding 7 years if found liable. Hence, any multiple transactions below the report threshold involving an account for example may fall under this section.
Why this Act is so important and why it is regarded as an extremely powerful legislation by Prof Dato’ Salleh Buang in his article?
For the first question, our governor, Datuk Nor Shamsiah Mohd Yunus in her speech at 10th International Conference on Financial Crime and Terrorism Financing had stressed the pervasive and destructive effect of these crimes to the society. She mentioned that in estimate, an amount of USD2.6 trillion is stolen through corruption every year globally and these amounts are nearly the costs to meet all United Nations Sustainable Development Goals which aims to elevate the lives of billions. Yes, we are talking about billions of lives that could be saved with this huge amount of money. Not only that, time, money and other resources are exhausted to combat these organized crimes. In other words, we are spending more money to trace the lost money.
Hence, to encounter against these crimes, this Act is a vital instrument that spelled out the offences, the obligations of reporting institution, the powers of the enforcement agencies and the manner to prosecute the offenders. This Act is necessary not only to preserve the integrity of the financial institutions and prevent the offenders from using the system to achieve their goals. Various policies, preventive measures and regulations by Bank Negara Malaysia are introduced in order to inhibit and burn the bridges between the dirty funds and the criminals.
This Act has been gradually amended over the years to ensure all related offences are included and stricter penalties are imposed to the offenders. The amendment made to the Act are summarized as follows:
| Year of Amendment | Amending Act | Amendment | |
|---|---|---|---|
| 2007 | Act A1208
Anti-Money Laundering (Amendment) Act 2003 |
The title was expanded to cover the offence of terrorist financing and relevant sections were amended to include the offence – Anti-Money Laundering and Anti-Terrorism Financing Act 2001 Among others: – Property, terrorist property, terrorism financing offence are defined. – A new part, Part VIA was included where it laid down the power of Ministry and enforcement agencies regarding the terrorism financing |
|
| 2014 | Act A1467
Anti-Money Laundering and Anti-Terrorism Financing (Amendment) Act 2014 |
The title is further expanded to include the scope that deals with the proceeds of unlawful activities – Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 Among others: – Definition of unlawful activities, proceeds of unlawful activities, and financial institution are further specified, – Definition of money laundering offence is included – Substitution of Section 4 – The money laundering offence is broader – Insertion of Section 4A – offences of structuring transactions to evade reporting requirement is criminalized – Section 6(5) is amended by increasing the penalty for the offence of publishing or broadcasting any information including a report of any civil or criminal proceeding from RM50k to Rm1 Million and/or from 1 year to 3 years and fine from RM1k to RM3k (overall this amending act increase the penalty for offences under this Act) – Section 12(4) – Penalty against disclosure to the person other than the competent authorities is increased from 3 million to 5 million and imprisonment from 1 year to 3 years – Section 14 is substituted – to specify that reporting institution shall report promptly any transaction exceeding amount the authority may specify and to include any circumstances that give reason to suspect property involved or linked to terrorism – Section 14A is included – for prohibition against disclosure of reports and related information – Section 56A – Acquittal of a serious offence does not affect the power of court to order forfeiture order – Section 58(5) is added – to define “purchaser in good faith for valuable consideration” – Section 75A – To allow stay of proceeding to gather evidence – Section 86A – Attempt, abetment and criminal conspiracies – Part IVA was added to control the cross-border movement of cash |
Apart from the various amendments made, by observing the choice of words and definitions under this Act, it can be said that the Parliament intends the Act to tackle these offences by ensuring the offenders fall under the extensive definition.
REPORTING INSTITUTION
Section 14 requires reporting institution to promptly report any transaction exceeds the amount specified by authority or they have reason to suspect that the proceeds are from unlawful activity. Apart from bankers, lawyers, accountants as well as company secretaries are fall under reporting institution (refer to First Schedule of the Act). Failure to report may attract the liability under Section 4 of the Act.
POWER OF INVESTIGATING OFFICER
Section 31 mentions that investigating officer may, without search warrant, inspect and search any documents or information, break open and search container or article found on premises, detain and take possession any document or property found on premises, and search any person if he has reason to suspect any person committed an offence under this Act.
Section 32 also lays down the power of investigating officer to attend before him or produce before him any property, document or information if he believes a person is acquainted. The investigating officer has the power to administer an oath or affirmation to the person examined. Plain reading of this section would suggest that this is a hearsay evidence. Nonetheless, in PP v Awaluddin [2018] 1 CLJ 305, Federal Court stated that the lower court has erred by stating evidence of such is purely hearsay and further mentioned that it is admissible by virtue of Section 40 of the Act. This section overrides any written law or any rule of law to the contrary.
FREEZING, SEIZURE AND FORFEITURE
The enforcement agency has the power to freeze and seizure the property of any person if investigation has commenced against that person or they have reasonable grounds to suspect that an offence under of Section 4(1) is being or about to be committed or it is the proceeds from unlawful activity. Forfeiture may be ordered by the if the offence is proved. Even if the offence is not proved, the court may order forfeiture against the property if the court satisfied the accused is not the lawful owner of the property or no other person is entitled to the property as bona fide purchaser for valuable consideration. However, the prosecution still can apply for forfeiture order even if there is no prosecution by proving the application on the balance of probabilities only.
BONA FIDE THIRD PARTIES
Nonetheless, if forfeiture is made, the court shall publish notice in the Gazette calling the third parties who have interest in the property to attend before the court and show cause why the property shall not be forfeited.
Figure 2- Example of Notice to Third Parties in the Gazette
Therefore, this is extremely powerful legislation to fight against money laundering locally and internationally. The enforcement agency and prosecution have wide power and it is not wrong to say that the Act is sided with the prosecution. The accused then may have a difficult time to defend himself. Nonetheless, the Act is needed considering the public interest such as impacts of money laundering to economic growth and how it threats the national security (i.e terrorism financing). This is more alarming when, on 30th January 2019, The Star Online reported that International Monetary Fund (IMF) placed Malaysia among top 30 countries with high illicit outflows and their statistics shows that the total trade with advanced countries valued at RM871.30 million with illicit outflows amounted to RM138.61 million.
REFERENCE
- Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613)
- Anti-Money Laundering (Amendment) Act 2003 (Act A1208)
- Anti- Money Laundering And Anti-Terrorism Financing (Amendment) Act 2014 (Act A1467)
- PP v Awaluddin [2018] 1 CLJ 305
- Bank Negara Malaysia’s website – http://amlcft.bnm.gov.my/AMLCFT01.html
- Governor’s Keynote Address at the 10thInternational Conference on Financial Crime and Terrorism Financing – “Reshaping Malaysia’s Future – Setting the goal for greater governance and transparency” by Datuk Nor Shamsiah Mohd Yunus on 30.08.2018 at Shari-La Hotel, KL
- Talk : ‘Advocacy & Malaysian Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATEPUA 2001)’ by Mr Steven Perian, organized by Selangor Bar Committee on 12.01.2019
- Hamin, Zaiton & Omar, Normah & Rosalili, Wan & Kamaruddin, Saslina. (2015). Reporting Obligation of Lawyers under the AML/ATF Law in Malaysia. Procedia – Social and Behavioral Sciences. 170. 409-414. 10.1016/j.sbspro.2015.01.001
- New Straits Times Online – https://www.nst.com.my/opinion/columnists/2018/07/394517/amla-extremely-powerful-legislation
- The Star Online – https://www.thestar.com.my/news/nation/2019/01/30/msia-among-top-30-for-illicit-financial-outflows/
