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By Mr. Low Kok Fei (Audit Principal of Chengco PLT)

As a business owner, it is important to be aware of anti-money laundering regulations for compliance purposes.

The anti-money laundering and counter financing of terrorism (AML/CFT) regime in Malaysia is rooted in the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA), which has been incrementally invoked in various sectors.

 

Money Laundering (ML), Terrorism Financing (TF) & Proceeds of Unlawful Activities Defined

“A process of converting cash or property derived from criminal activities to give it a legitimate appearance. It is the process of cleaning and disguising the criminal origin of ‘dirty’ money”

Process of financing terrorist activity either through legitimate or illegitimate sources.”

Any property derived or obtained, directly or indirectly, by any person as a result of any unlawful activity.

Money Laundering Offences

Section 4 AMLA is an extremely powerful provision.

Any person who commits a money laundering offence, upon conviction, will be punished with:

  • Imprisonment for a term not exceeding 15 years
  • Fine of not less than five times the sum or value of the proceeds of unlawful activityOr
  • RM5 million or whichever is higher

What do you need to do? The following is the process flow of preventive measures under the AML/CFT Guide issued by Bank Negara Malaysia

  1. Know your clients
  2. Screening
  3. Risk profiling
  4. Enhanced Due diligence
  5. Submit Suspicious Transaction Report (STR)
  6. Record keeping
  7. Repeat process

 

Who are the Reporting Institutions under the AMLA?

Source: http://amlcft.bnm.gov.my/

Reporting institutions (RIs) are the first line of defence

Business owners must be mindful when entering into arrangements or when conducting their business activities.

 

What are the Reporting Obligations Under The AMLA?

  1. Implement AML/CFT risk management that commensurate with the level of money laundering and terrorism financing risks;
  2. Conduct customer due diligence;
  3. Keep proper record on customers and transactions;
  4. Implement the AML/CFT compliance programme;
  5. Report suspicious transaction report (STR); and
  6. Report cash threshold report (CTR) for cash transaction exceeding RM25,000 (effective from 1st January 2019) or whichever amount specified. (Applicable to banking Institutions and the licensed casinos only).

 

How does Bank Negara Malaysia supervise the reporting Institutions’ in compliance with the AMLA?

Beginning in 2020, Bank Negara Malaysia will consider taking appropriate enforcement action under AMLA for any identified non-compliance.

 

The role of:

Audit Function

 

Tax Function

There is always close relationship between money laundering, tax evasion and tax havens.

It is often difficult to assess with certainty and distinguish between illegal “tax evasion” from legal “tax mitigation or avoidance” due to the complexity of tax schemes. Tax compliance and tax planning activities can assist business owners to identify their substance of arrangement, analysis of a financial situation and plan from a tax perspective in accordance with tax regulation to safeguard their business and potentially avoid any AMLA offence in tax related areas.

 

Company Secretaries’ Function

Directors of a company have the duty to act in the best interests of the company and also have the duty of reasonable care, skill and diligence. Accordingly, a company secretary has the duty to ensure that the board and its directors are apprised of the relevant AML laws with proper training and understanding of such laws. KYC or know your customer is the process that must be taken in order to verify customer identities, including a background check and customer due diligence, compliance and extended check report to protect financial transparency against anti-money laundering and anti-bribery activities.

 

Conclusion

Compliance with AML/CFT requirements is important for business owners and reporting institutions to protect their businesses from being abused and to safeguard their business ownership. With the introduction of the new anti-bribery legislation of section 17A of Malaysia Anti-Corruption Commission Act 2009 (MACC) (Amended 2018) effective June 2020, business owners could be exposed to risks of conviction for AMLA and MACC offences if no preventive measure and control procedures are taken in relation to money laundering and bribery activities.

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