Unflagged transactions raise concerns over money laundering

The public deserves to know whether banks had promptly reported those transactions to BNM


Unflagged transactions involving billions of ringgit, which were exposed in several high-profile court cases recently, have raised concerns over gaps and adherence to suspicious money transfer laws.

Banks, including foreign branches operating in Malaysia, are required to flag and report suspicious transactions to the central bank’s Financial Intelligence and Enforcement Department.

This guideline, which covers all reporting financial institutions, is part of the Malaysian financial system’s commitment to combat money laundering and terrorism financing.

The law requires every reporting institution to perform due diligence on any customer’s transactions that involves a sum exceeding the amount specified by Bank Negara Malaysia (BNM).

Banks are also required to investigate any transaction in the event it was suspicious of the information, including the ownership of the money and the purpose and nature of the transaction.

Lenders can terminate the transaction if the customer fails to comply with the due diligence requirements.

Lawyer Lim Wei Jiet said the failure to flag the transactions raises questions on the effectiveness of the country’s financial system in combating money laundering.

“The public deserve to know whether banks had promptly reported those transactions to BNM,” Lim told The Malaysian Reserve (TMR).

Bank officials are required to promptly report to BNM cash transactions exceeding RM50,000 or dealings linked to suspicious activities, according to anti-money laundering regulations.

BNM had, in the past, fined lenders millions over governance and money laundering infringements.

Lim said the public also need to know what steps had been taken by the central bank to prevent such transactions meant for illicit purposes.

Recently, ex-first lady Datin Seri Rosmah Mansor was slapped with 17 money laundering offences amounting to RM7.1 million. She pleaded not guilty to all the charges and asked to be trialled.

The charge sheet showed 235 transactions involving the 66-year-old’s personal account at a local bank between December 2013 and June 2017. The transactions involved various amounts up to a high of RM300,000.

Rosmah’s husband, former Prime Minister Datuk Seri Mohd Najib Razak, is also facing various money laundering charges. He is also challenging those allegations.

A few corruption and money laundering cases had also revealed transactions to non-banking institutions as a mean to channel illegal proceeds.

Lim said Section 14 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) states that banks must promptly report to BNM any transaction exceeding RM50,000 or where any circumstance of the transaction gives reason to suspect the involvement of proceeds from an unlawful activity.

Section 22(1) of the act compels an officer of a bank to take all reasonable steps to ensure the bank’s compliance with prompt reporting. If an officer fails to comply, Section 22(4) of AMLA states that the offence carries the punishment of a fine not exceeding RM1 million or up to three years imprisonment, or both.

Section 4A of AMLA also states that any person who structures, directs, assists or participates in structuring any transaction to avoid the disclosure of the cash threshold report commits an offence and shall on conviction be liable to a fine of not more than five times the aggregate sum or value of the transaction at the time the offence was committed or up to seven years imprisonment, or both.