KUALA LUMPUR: Bank Negara Malaysia (BNM) has identified two major offenses frequently committed by financial institutions, contributing to the proliferation of money laundering and terrorism financing activities.
These offenses include the failure of financial institutions to conduct Customer Due Diligence (CDD) and sanctions screening upon client onboarding, both deemed mandatory by BNM for reporting institutions.
These measures were crucial for conducting risk evaluations, enabling effective Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) efforts targeting businesses or organisations.
"Such actions are important because it allows law enforcement agencies to promptly launch investigation, especially on people with interest," BNM told Berita Harian recently.
The central bank's statement aimed to address several BH reports that uncovered the strategies and tactics employed by criminals engaged in cross-border crime and online scams.
In an exposé last October, BH revealed that financial criminals were eluding authorities by employing various tactics, including donating to charity organisations and using proxies and political funding to conceal wealth.
These crimes often involved substantial sums of money, which were then reinvested to generate even larger profits.
Malaysian Anti Corruption Commission (MACC) chief commissioner Tan Sri Azam Baki had said that the criminals' modus operandi were getting more advanced due to latest developments around the world.
He said a mastermind in such a case would operate a syndicate and reap profits from money laundering activities using companies registered under the name of a proxy.
Federal Commercial Crime Investigation Department director Datuk Seri Ramli Mohamed Yoosuf said Bukit Aman have detected many criminal syndicates that were laundering money using the 'layering' system, or transaction layers.
This was done by registering a company through proper procedures, although the company was not involved in any form of trade.
He said a syndicate would set up a company under the ruse of conducting a legitimate business, but that was not what happened.
THREE TYPES OF MODUS OPERANDI
Earlier this year, BH reported that the Domestic Trade and Cost of Living Ministry had identifying the three main modus operandi used by businesses involved in money laundering.
The ministry's enforcement director-general Datuk Azman Adam had said that one of them involved depositing illegal funds into businesses and other individuals' accounts, which were mixed with legitimate business earnings.
These criminals would also deposit illegal funds into other business or other individuals' accounts, set up a shell company, buy assets and make investments, and pay for loans and insurance in a structured manner.
BNM said the process of conducting customer due diligence (CCD) allows one to certify a client's identify at a reporting institution. This helps because it requires one to be satisfied that a client is who they say they are.
This task involves identifying a client's identity, beneficial ownership identity or people behind a transaction; as well as the identity of people who made a transaction if it was done on behalf of another person; or if it were done by an appointed representative while also determining the purpose of the transaction.
Sanction screenings were applicable to all Malaysians and all corporate bodies in Malaysia.
"It must be done on any individual conducting statutory obligation transactions such as contributions for the Employees Provident Fund and Inland Revenue Board," it said.
BNM stressed the importance of a reporting institution to have employee screening procedures, training and awareness under an Anti-Money Laundering/ Countering the Financing of Terrorism (AML/CFT) programme.
"As a competent authority, BNM, under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 plays a role in preventing any involvement by reporting institutions in facilitating any criminal activity. This is done through scheduled enforcement, supervision and monitoring to ensure AML/CFT guidelines are followed."
BNM said any violation of these laws by these reporting institutions or by any entitity will lead to appropriate action being taken, including corrective measures and punitive action.
Since the implementation of enforcement framework and penalty in 2014, the central bank has taken 74 actions, including punitive measures and corrective measures for offences related to obligatory compliance or as preventive measure under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act.
Between January 2021 and October 2023, 15 financial institutions and related entities were fined a total of RM7 million for committing offences.
In 2021, two money services business operators were slapped with administrative penalties totalling RM147,000.
In 2022, four insurance companies and takaful operators were issued with more than RM1 million in administrative fines; while seven entities which were not supervised under BNM were issued compounds of RM5.2 million.
Last year, two e-money issuers issued with RM600,000 in administrative penalties.