The term Money laundering refers to an illegal transfer of money. It can be classified into two types. First is traditional which deals with concealment of the origin of the money and making them appear legal. For example, when a drug dealer deposits cash in bank, and transfer them until the funds appear to originate from legal sources (Menezes 2017). Second deals with terrorism financing, where transfer of illicit funds takes place. Money laundering is crime that is economically significant and can cause social harm. It enables criminals to enjoy revenues. In recent years, countries are implementing laws to fight against the crime. In Malaysia, the anti money-laundering act (AMLA) was passed in 2001; the main purpose is to fight against terrorism financing (Rahman 2013). The AMLA was renamed as Anti Money Laundering and Anti Terrorism Financing (AMLATFA), it along with criminalizing money laundering, impose various obligations on reporting institutions. The financial institutions like the banks are the main reporting entities who have been suffering due these law amendments as the financial institutions have been concealing the illegal money by accepting the revenues from illegal sources, investing them and making them legal.
The money laundering is a phenomenon that has existed for centuries. The criminals disguise the true origin of the crime proceeds and get their illicit funds legitimate with the help of institutions (Takáts 2009). The term “money laundering” was first used in the year 1920s by the United States enforcement of laws agencies. It is the lifeblood of most of the criminal activities, an effective laundering enables the launderers to hide and invest the ill-gotten gains without fear of being caught with the help of enforcement agencies (Rahman 2010). Fight against money laundering consist of two legal devises, one is criminalizing of the money and confiscation of the proceeds of crime.
The initial stage of the money laundering is the placement stage, where cash that are derived illegal activities are disposed physically s into local or international financial intermediaries. The next step can be called as the Layering stage that consists of complex layer of financial transactions that help in separating the illicit proceeds from their origin (Rahman 2010). The complex web of transaction makes it difficult to find out the source and the launderer can easily disguise and destroy the audit trail. The next step is followed by the integration stage, which is the final stage where wealth is derived criminally and is converted into legitimate funds by integrating the money into the legitimate financial systems. This can be done by converting illegal fund into other kinds of assets; making it impossible to trace the source and the launderers are saved.
Even though there are various methods of money laundering, the launderers prefer to take the help of the various financial institutions like banks to conceal the illicit earnings. The procedure in this case is such that the launders invest and manage their money in different ways by depositing, transferring, exchanging and delivering the fund accounts under different names in different financial intermediaries in different countries (Takáts 2009). This allows the criminal to hide and cover up the source and nature of the illegally obtained money. With the increase in the worldwide financial system and barrier removals of free capital movement, the money laundering in this sector is significant. The financial institution may or may not have the knowledge of the concealment. The staff and other responsible personnel in the bank could easily conspire against the bank and help the launderer to take part in the crime. Moreover, taking advantage of the weakness in the anti money laundering laws, the launderers can easily fool the banks and conceal the source of the illegally obtained money the bank will have the east knowledge about it. the financial action task force (FATF) have provided several recommendations to prevent this practice by new trends of principles like, identifying the transactions, keeping a track on the records ,and systematic reporting of transactions that are suspicious.
Drug trafficking has been the main source of illegal proceeds in Malaysia, apart from that illegal gambling, breach of trust and robbery has been the source of money laundering in the country. There is a wide range of money laundering, techniques used by the criminals in Malaysia. Using family members to change the money, setting up front companies, purchasing insurance products, high value good purchase and other capital investments can be jotted down as some of the methods. The criminals also manipulate the cash transactions and conceal the money trails (Menezes 2017).
The national coordination committee: The government of Malaysia in April 2000, to coordinate with the national efforts to counter money laundering and terrorfinancing, created the committee. The NCC consists of 12 ministries and government agencies with Bank of Negara Malaysia (BNM). The agency works together to develop law reform proposals, regulations and guides to combat the crime.
AMLATFA: In Malaysia, the obligation for reporting the suspicious transactions is a fundamental element of anti money laundering. it refers to the informations that alerts the law enforcements. The system of anti money laundering was introduced first in Malaysia in 2002. Anti Money Laundering and Anti Terrorism Financing is the single unit tat taes care of the laundering in Australia. The section b of the AMLATFA deals with the financial institutions who have to report immediately in case of suspicious transactions. This is known as suspicious transaction reporting (STR), where the identification of the persons involved in the criminal transactions takes place. The section 3 of the AMLATFA defines the various activities that are directly and indirectly related with the offence (Mulligan 2015).
The amendments to the AMLATFA has made financial terrorism a criminal offence in 2007.The compliance with the obligations led down by the AMLATFA also means that the banks need to balance the consumer confidentiality on one hand and protect the laws on other. The duty of the bank is such that, at the same time the duty is to keep the customer information secret and duty to disclose the fraudulent information.
MACMA: the mutual assistance in criminal matters (MACMA) is an international cooperation engaged in combating the money laundering with the help of mutual legal assistance treaty (MLAT). It has been concluded for Malaysia and relevant jurisdiction for Combating financing terrorism (Helgesson and Mörth 2016). With the help of MACMA, the AMLATFA can be enforced. The government of Malaysia seeks and provides wide range of assistance in criminal matters to this body.
To fulfill the international obligations and to demonstrate the commitment to overcome money laundering, the Anti money-laundering act (AMLA) in 2001 was passed by Malaysia that was renamed as AMLATFA in 2003. This imposes specific obligations on the on banks to counter money laundering and terrorism financing activities (Shanmugam and Thanasegaran 2008). These obligations include obligation to indentify and verify the persons and report the suspicious transactions. They have implied this since 15 January 2002.
The regulation of money laundering in Australia has been taking place since 1988. It is the forefront of the international efforts to stop the money laundering. The Australian financial transaction act 1988(FTRA) has more than 40 recommendations to combat financial terrorism. It is the primary anti money laundering regime applicable to Australian financial institutions (Vaithilingam and Nair 2007). It also requires identification certain transactions and customers and reporting the same to the board.
In 2006, as the FTRA became outdated, the anti money laundering law and counter financial terrorism act was also implemented to ensure consistent and effective application of anti money laundering policies (AML/CTF). The anti money-laundering package in Australia also includes criminal code act 1995, mutual assistance in criminal matters act and proceeds of crimes legislation (Shanmugam, Nair and Suganthi 2003).
The Australian transaction report and analysis report eshtablished in 1989 under section of the FTRA is a stationary authority that with the help of the AML/CTF acts as the intelligence unitr that administers the various transactions and prevents the laundering.
There is various AML regime set out in UK. The money-laundering terrorist financing and transfer of funds regulation that was set up in 2017 and money laundering regulations in 2007 are the major laws that take care of the concealment of the illegal money and financial terrorism (Mulligan 2015). The regulations consist of various penalties for the criminals and the guidelines to identify the suspicious funds. The association keeps the obligation to report to the board suspected financial terrorism. The acts puts burden on the bans and its employees to detect the frauds. Penalties including death penalty can be applicable to the culprits if found guilty (Demetis 2018). The detection of terrorism in financial sector has become a new challenge in the banking sector. The counter measures are building substantially for effective results and minimize the problem. However, detection is difficulty as the funds in general originates from legal sourced such as private donations and contributions from charity (Helgesson and Mörth 2016).
Unlike the Australian and UK regime, the Malaysian anti money laundering regime is principally found in a single statue that is the AMLATFA. The act criminalizes money laundering and terrorism. It also imposes the AML/CTF obligations; it also introduces the mechanisms for investigation and provides measures for forfeiture of the illegal proceeds derived from criminal activities (Vaithilingam and Nair 2007). In Australia and UK, there is more than one unit that takes care of the anti money laundering.
Conclusion
The different countries have different techniques of money laundering. The last few years have witnessed various fundamental changes in the legal and regulatory environment relating to AML. The discussion vividly shows the laws adapted by the Malaysian banks and other financial intermediaries to combat the financial terrorism. There has been a increase in the regulations and guidelines in terms of AML. The Malaysian anti money laundering regime is principally found in a single statue that is the AMLATFA, whereas UK and Australia has more than one governing bodies taking care of money laundering.
References
Demetis, D.S., 2018. Fighting money laundering with technology: A case study of Bank X in the UK. Decision Support Systems, 105, pp.96-107.
Helgesson, K.S. and Mörth, U., 2016. Involuntary Public Policy?making by For?Profit Professionals: European Lawyers on Anti?Money Laundering and Terrorism Financing. JCMS: Journal of Common Market Studies, 54(5), pp.1216-1232.
Menezes, K.P., 2017. To what extent has money laundering affected Financial Institutions and how to mitigate the risks associated with it: A case study of EmiratesNBD (Doctoral dissertation, Cardiff Metropolitan University).
Mulligan, E.M., 2015. Evaluating the Social Control of Banking Crimes: An Examination of Anti-Money Laundering Deficiencies and Industry Success.
Rahman, A.A., 2010. An Analysis of the Malaysian Anti-money Laundering Laws and their Impact on Banking Institutions. VDM Publishing.
Rahman, A.A., 2013. The impact of reporting suspicious transactions regime on banks: Malaysian experience. Journal of Money Laundering Control, 16(2), pp.159-170.
Shanmugam, B. and Thanasegaran, H., 2008. Combating money laundering in Malaysia. Journal of Money Laundering Control, 11(4), pp.331-344.
Shanmugam, B., Nair, M. and Suganthi, R., 2003. Money laundering in Malaysia. Journal of Money Laundering Control, 6(4), pp.373-378.
Takáts, E., 2009. A theory of “Crying Wolf”: The economics of money laundering enforcement. The Journal of Law, Economics, & Organization, 27(1), pp.32-78.
Vaithilingam, S. and Nair, M., 2007. Factors affecting money laundering: lesson for developing countries. Journal of Money Laundering Control, 10(3), pp.352-366.
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