Plugging the loopholes in money laundering

It is still nothing less than mind boggling that certain individuals are free to move funds without triggering any alarm bells

pic by TMR File

GEORGE Orwell in his novel Animal Farm wrote: “The distinguishing mark of man is the hand, the instrument with which he does all his mischief.”

Such truth that Orwell speaks is not of a particular regime but societies at large, irrespective of political affiliations, time and place.

Sin against society, destruction of basic humanity’s core, self-righteousness based on maligned beliefs or the ugly side of mankind’s endless greed and obsession. That is the hand of man.

The 1Malaysia Development Bhd (1MDB) saga is almost all that Orwell’s political fable depicts. A promise of almost heavenly rewards which for ignorant followers would be a gospel that will eclipse Prophet Moses holding out his staff and parting the Red Sea.

A head of a nation who bandied together with loyalists, lawyers, investment bankers, financiers and opportunists, setting up a grand scheme that makes The Wolf of Wall Street look like a petty thief stealing 20 sen worth of Hacks from a sundry shop.

It is the world’s largest larceny after all and continues to be the disdain of the ordinary Ali, Ahmad, Ah Kow and Ramasamy.

Last week, the Wall Street Journal (WSJ) reported that US investigators are zeroing on Deutsche Bank AG for possible breach of corruption or anti-money-laundering laws.

The German bank, who recently announced an 18,000 jobs cut, helped raise US$1.2 billion (RM4.93 billion) in 2014 for the now debt-serving fund.

The WSJ’s report said prosecutors are looking into the role of Tan Boon-Kee who was Deutsche Bank Asia Pacific head of banking for financial institutions.

Tan, who had been queried by Singapore’s authority, was a colleague of a former Goldman Sachs Group Inc executive, Tim Leissner. Tan has not been charged for any wrongdoing. Leissner has already pleaded guilty to assisting in money laundering and violating anti-bribery laws in the US.

The US Federal Reserve has barred the former Goldman Sachs golden boy from working in the banking industry. Similarly, Hong Kong followed suit, while Singapore has slapped a 10-year ban. The only financial transaction that Kimora Lee Simmons’ husband would do for a long time would be withdrawals from the ATM.

But the ills related to the whole 1MDB fiasco exceed beyond crooked bankers and twisted politicians. It also highlighted the frailty of the global financial system in combating the act of money laundering, financial siphoning and larceny. Clearly, there is a gaping hole larger than the one left by a meteor.

Recent court cases in Malaysia have been a revelation of the loopholes in the system. Millions, if not billions, of money transacted between accounts faster than a blink of an eye.

We heard about the billions that were transferred to former Prime Minister (PM) Datuk Seri Mohd Najib Razak’s account.

Others are no less brain cell damaging. Umno president Datuk Seri Dr Ahmad Zahid Hamidi has been charged for receiving kickbacks from the operator of the foreign visa system. The former deputy PM is accused of receiving payments of S$300,000 (RM909,019) (on March 28 and May 4 2017), two payments totalling S$1.04 million each (in September and November 2017) and three payments of S$520,000 (on Jan 10, Feb 12 and March 2 in 2018).

Ahmad Zahid has claimed trial to all these charges.

Another Umno stalwart Datuk Seri Tengku Adnan Tengku Mansor has also been charged for receiving a RM2 million bribe from a businessman.

Many of these transactions moved through the banking system with ease, like the cylinder head after a fresh bottle of engine oil.

It begs the question about how many more similar transactions have flowed through the system undetected or ignored. The new central bank governor has slapped a RM25,000 limit as the maximum daily cash transaction, from RM50,000 previously, to plug the loopholes in the system. Banks must report any amount above RM25,000 to the regulator.

But it is still nothing less than mind boggling that certain individuals are free to move funds without triggering any alarm bells. It also brings to mind about the monies deposited to the previously unregulated fund like Lembaga Tabung Haji or other pseudo-savings and unit trust offerings.

Basel Institute on Governance’s report released in October 2018 put money laundered worldwide at between US$500 billion and US$1 trillion. The Basel Anti-Money Laundering Index ranked Malaysia at number 57 from 203 countries among the worst in the crime.

But the fact remains that these bank accounts that received the money in the past are above supervision or detection. Or just maybe these accounts are given VIP treatment like the green lane at the airport.

And how many lenders have actually been reprimanded for their oversight?

Orwell is certainly right… “All animals are equal, but some animals are more equal than others.”

It speaks volume about life itself, criminals and accomplices.


Mohamad Azlan Jaafar is the editor-in-chief at The Malaysian Reserve.