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AML/CTF compliance in Malaysia

WHAT ARE THE

Money laundering and terrorism financing laws in Malaysia?

In Malaysia, money laundering and terrorism financing are strictly regulated under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA). This act makes provisions for the offense of money laundering, the measures to be taken for the prevention of money laundering and terrorism financing, and the forfeiture of property involved in or derived from money laundering and terrorism financing.

WHAT ARE THE

Key obligations reporting entities have under Malaysian laws?

Under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA), reporting entities in Malaysia have several key obligations.

 

  • Customer Due Diligence: Reporting entities must carry out customer due diligence when establishing business relationships or conducting transactions.
  • Record Keeping: Maintain comprehensive records of all transactions for a period of at least six years.
  • Suspicious Transaction Report (STR): Reporting entities are required to submit an STR to the Financial Intelligence and Enforcement Department if they suspect any money laundering or terrorism financing activities.
  • Risk Assessment: Conduct risk assessments to understand the risk of money laundering and terrorism financing in their business.
  • Training: Reporting entities must provide regular training to their employees to ensure they understand their obligations under the AMLA.
  • Compliance Officer: Appoint a compliance officer who is responsible for ensuring the entity’s compliance with the AMLA.
  • Screening: Conduct screening procedures to ensure that none of their employees or customers are on any international sanctions lists.

WHO ARE THE

ML/TF regulators in Malaysia and what functions do they perform?

The competent authorities designated under section 7 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 in Malaysia include the Central Bank of Malaysia (Bank Negara Malaysia), the Securities Commission of Malaysia, the Labuan Financial Services Authority, and the relevant industry supervisors.

WHAT ARE THE

Industry sectors subject to ML/TF regulations?

The regulated sectors include:

Legal professions

Lawyers and law firms.

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Accountancy Profession

Accountants and accounting firms.

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Company Secretaries

Those providing company secretarial services.

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Capital Market Intermediaries

Entities involved in securities and derivatives markets, including brokers and investment advisors.

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Trust Companies

Firms offering services related to the creation and management of trusts.

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Financial Intermediaries

Entities that act as a middleman in the financial sector.

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Banking & Deposit-Taking Institutions

Commercial banks, investment banks, and other institutions accepting deposits.

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Insurance & Takaful Operators

Companies offering insurance and Islamic insurance (takaful) services.

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Entities registered and operating within the Labuan International Business and Financial Centre.

Entities registered and operating within the Labuan International Business and Financial Centre.

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Registered Estate Agents

Real estate agencies and agents.

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Money service businesses

Money changers, remittance service providers, and currency wholesalers.

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Non-Bank Financial Institutions

Financial institutions that are not regulated as a bank.

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Leasing & Factoring Companies

Firms involved in leasing and factoring services.

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Dealers in Precious Metals/Precious Stones

Businesses dealing in the trade of precious metals and stones.

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Non-Bank Issuers of Designated Payment Instruments

Entities issuing payment instruments, such as prepaid cards, that are not banks.

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Casino & Gaming Business

Casinos and other businesses involved in gaming and gambling.

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WHAT ARE THE

Penalties for non-compliance with AML/CTF laws?

In Malaysia, failure to comply with anti-money laundering and counter-terrorism financing (AML/CTF) laws, as outlined in the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001, may lead to the following sanctions:

  1. For contraventions under Section 14A (Prohibition against disclosure of reports and related information), Section 17 (Retention of records), and Section 18 (Opening of account or conducting business relationship, transaction or activity in fictitious, false or incorrect name), penalties can include fines up to RM3 million, imprisonment for a term not exceeding five years, or both.

  2. For contraventions under Section 22 (Powers to enforce compliance), penalties can include fines up to RM1 million, imprisonment for a term not exceeding three years, or both. In the case of a continuing offence, an additional fine not exceeding RM3,000 for each day or part thereof during which the offence continues to be committed may be charged.

  3. For contraventions under Section 26 (Examination of a person other than a reporting institution) and Section 27 (Appearance before examiner), penalties can include a fine not exceeding RM3 million, imprisonment for a term not exceeding five years, or both. In the case of a continuing offence, an additional fine not exceeding RM3,000 for each day or part thereof during which the offence continues to be committed may be charged.

  4. For general offences under Section 86, and specific offences under Section 14 (Report by reporting institution), Section 16 (Customer due diligence), and Section 19 (Compliance program), penalties can include a fine not exceeding RM1 million.

WHAT ARE THE

Largest fines for non-compliance with AML/CTF laws?

  • The largest fines for non-compliance with AML/CTF laws in Malaysia are as follows:
  • 1MDB Scandal Cases (Malaysia, 2022-2023) - The Kuala Lumpur High Court issued significant penalties in relation to the 1Malaysia Development Berhad (1MDB) scandal. On February 28, 2023, Abu Dhabi's International Petroleum Investment Co (IPIC) was fined MYR 806,401,800 to resolve a legal dispute related to the scandal.
    • Earlier, on August 23, 2022, former Malaysian Prime Minister Najib Razak was fined MYR 210,000,000 and sentenced to 12 years imprisonment for money laundering, criminal breach of trust, and abuse of power. This marked the first time a former Malaysian leader was incarcerated for corruption.
    • The 1MDB scandal involved approximately USD 4.5 billion being misappropriated from a fund established by Najib Razak. The repercussions of this case demonstrate the judicial system's commitment to combating corruption and financial crimes.
  • Five Elements Services Case (Malaysia, 2022) - On February 28, two individuals were penalized for money laundering by the Shah Alam Sessions Court. One was affiliated with Five Elements Services and was fined MYR 1,140,000 with a 60-month imprisonment for concealing and transferring illicit funds. The other, a relative of the victim, was fined MYR 30,000 and sentenced to 60-month imprisonment for fraudulent activities related to a fictitious fixed deposit promotion.
  • Company Director Case (Malaysia, 2022) - On July 14, the Kuala Lumpur Sessions Court penalized a company director for money laundering offenses. The director was fined MYR 2,258,000 and sentenced to one-day imprisonment for failing to cooperate with the Securities Commission Malaysia's investigation. The actions violated the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001. The offenses, committed over a span of nearly three years, highlight the judicial system's commitment to enforcing financial crime laws.
  • 1MDB State Fund Case (Malaysia, 2022) - On August 23, the Kuala Lumpur High Court imposed severe penalties on a former Malaysian leader for multiple charges, including money laundering, criminal breach of trust, and abuse of power. The individual was fined MYR 210,000,000 and sentenced to 12-year imprisonment in relation to the embezzlement of funds from the 1Malaysia Development Berhad (1MDB) state fund. The case marks the first time a former Malaysian leader has been incarcerated, highlighting the severity of financial crimes and the judicial system's commitment to upholding accountability.
  • Rosmah Mansor Case (Malaysia, 2022) - On September 1, the Kuala Lumpur High Court levied significant penalties on Malaysia's former first lady, Rosmah Mansor. Mansor was fined MYR 970,000,000 and sentenced to 10 years imprisonment for bribery. Despite not holding any official position, Mansor was found guilty of soliciting and accepting bribes in exchange for influencing government contracts. This case, separate from the 1MDB scandal involving her husband, underlines the judicial system's commitment to combat corruption at all levels.
  • Health Food Products Company Case (Malaysia, 2021) - On October 4, a health food products company faced significant penalties for money laundering in the Kuala Lumpur Sessions Court. The court imposed a total fine of MYR 5,150,000, which included a penalty for engaging in a direct selling business without a valid license and accepting funds from illegal activities. This case underscores the judicial system's commitment to enforcing the anti-money laundering laws and ensuring proper business licensing.
  • Immigration Officer Case (Malaysia, 2021) - On February 26, a Malaysian immigration officer faced serious penalties for money laundering and corruption. The officer was found guilty of abusing his position for illegal activities, including unlawfully acquiring sums of money related to his official duties. The Kuala Lumpur Sessions Court imposed a fine of MYR 40,000 and a 1-month imprisonment sentence. In addition, the Malaysian Anti-Corruption Commission ordered the forfeiture of assets valued at over MYR 1.2 million. This case emphasizes the judicial system's dedication to combating corruption and financial crimes.
  • AMMB Holdings Berhad Case (Malaysia, 2021) - On February 26, AmBank faced significant penalties due to accusations of breaching anti-money laundering laws. The bank had been investigated for its role in the alleged misappropriation of MYR 4.5 billion from 1Malaysia Development Berhad (1MDB). Bank Negara Malaysia imposed a fine of MYR 2.83 billion on the bank and ordered it to establish robust systems and processes to enhance its due diligence framework. The case highlights the financial sector's accountability in preventing financial crimes.
  • Red Granite Pictures Case (Malaysia, 2020) - An individual was penalized for involvement in money laundering totaling around RM250 million. The Putrajaya Sessions Court imposed a fine of RM500,000, along with the forfeiture of seized properties and funds, highlighting the severe consequences of such financial crimes.
  • Genneva Malaysia Sdn Bhd Case (Malaysia, 2020) - On August 4, a landmark verdict led to heavy penalties for Genneva Malaysia Sdn Bhd and its associates. The company, charged in 2013, was found guilty of unlawfully collecting RM7 billion in deposits and laundering RM4.5 billion. The Kuala Lumpur Sessions Court imposed a fine of RM 450 million on the company. The case underscores the judicial system's commitment to combating financial crime.
  • Asia Media Group Berhad Case (Malaysia, 2020) - On December 10, the Securities Commission Malaysia convicted a former group accountant of Asia Media Group Berhad for failing to assist in a money laundering investigation. The accountant was found guilty of three offences under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001. The individual received a fine of RM25,000 and a one-day jail sentence for each charge. Further, due to continuous non-compliance, a daily fine of RM1,500 was imposed, resulting in a total fine of RM1,009,500. This marks the first prosecution by the SC for non-compliance with a notice issued under the AMLATFPUAA.
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