Malaysia and money laundering


IT seems like only yesterday our country was hit by the massive money laundering scandal known as 1MDB and had become the talk of the whole world. Hence it is not shocking that Malaysia was listed as a “high-risk jurisdiction” for money laundering recently.  This is based on an investigation into 88 countries and more than 2,000 suspicious activity reports (SARs). 
 

The banks mentioned were Maybank, CIMB, UOB, OCBC, HSBC, Alliance, Public, Ambank, and Standard Chartered. Although an SAR does not necessarily mean wrongdoing, it shows the high risk nature of transactions the bank chooses to approve.
 
In Malaysia, Bank Negara Malaysia is the authority designed to regulate money laundering under the Anti-Money Laundering, Anti-Terrorism Financing and Act and Proceeds of Unlawful Activities Act. The law imposes obligations on institutions to monitor and report on suspicious transactions to BNM. 
 
The findings by FinCen should not be shocking because not too long ago, the Panama papers released a list of the big names keeping their funds offshore. Among famous individuals named were David Cameron, Aisyhwararai, Lionel Messi, Najib Razak’s son and Dr Mahathir’ Mohamad’s son. 

Keeping money in offshore accounts is how rich people manage their finances and resources, and it is not illegal for someone to keep their money offshore. 
 
However, this raises questions such as, why is it keep there? What are the sources of the enormous sum? Are the rules only for the ordinary people who cannot afford to stash their money far away from home? 
 
As part of the banking policy, banks have to be aware of the sources of their customer’s funds. Hence the number of forms that we have to fill in when we make money transactions, especially those involving a considerable sum. Know Your Customer (KYC) is the term the banks are guided by in identifying and verifying their customer. Banks will have to report the transaction to BNM if the transaction is deemed suspicious. 
 
Early this year, BNM tightened the rules to prevent money laundering. Banks are now required to report cash transactions exceeding RM25,000; the previous threshold was RM50,000. 

What is the point of spending so much resources in combating money laundering if the results are not there? Year after year they are many events and discussion on these issues but the results show otherwise. Is all of that just for show? Are we doing enough?
 
A LexisNexis risk solution study shows Malaysian financial services firm spent an estimated RM3.68 billion on money laundering compliance. Imagine how many billions the banking industries spend in total to combat money laundering through their system and resources? 

During the hearing on Ahmad Zahid Hamidi’s money laundering case, it was revealed that RM99 million did go through Maybank. However, it did not raise a red flag. How is this even possible? During Najib’s trial over 1MDB, it was shown that millions of ringgit were able to pass through CIMB. Such a vast amount of funds and nobody bothers to validate the source or the nature of the transaction? What is the point of having procedures and policies if they are ignored? Is this due to our culture of giving free passes to VIPs? Where is the banks’ accountability? 
 
If these allegations are true, the banks should be held accountable and and made to pay the penalty for negligence.

Australia’s Westpac bank has been fined 23 million times for wholesale breaches of money-laundering and counter-terrorism regulations, involving more than AUS$7 billion.

Will the regulators in Malaysia uphold the same standards and penalise the banks mentioned in the FinCen findings if they are proven guilty?

Is the government going to take this seriously and repair our image which has been tainted? 

We have to stop kidding ourselves that we have done enough to prevent money laundering by criminals.

It is no longer effective or strategic to leave it to the banks to assess which are suspicious transactions. Banks are always looking to make more profits and secure customers, especially high net worth customers. If they don’t secure that customer, another bank will. It’s just how competitive the banking industry is.
 
The critical question moving forward is, if we know what has gone wrong, are we going to do what we can to fix it? Or is it enough to accept the banks’ claim that they will do better? – September 25, 2020.

* Sophie Shakur reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight.



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