Central bank enhances laws on money laundering


BANK Negara Malaysia (BNM) has added sweeping changes to money laundering regulations and compliance, including requiring insurance, takaful and Lembaga Tabung Haji (TH) branches to have compliance officers to vet, report or even reject suspicious transactions.

In a comprehensive 188-page Policy Document on Anti-Money Laundering, Countering Financing of Terrorism (AML/CFT) and Targeted Financial Sanctions for Financial Institutions (TFS for FIs), the central bank requires all institutions under its regulatory framework to enhance their compliance monitoring across the board, including at branches.

The move is seen as the country financial regulator seeks to plug loopholes related to money laundering, which saw billions related to 1Malaysia Development Bhd looted and transferred easily across the banking system.

A few money laundering cases involved foundations and clubs.

Under the new regulatory framework, senior management is also accountable for the implementation and management of AML/CFT compliance programmes in accordance with policies and procedures established by the board, requirements of the law, regulations, guidelines and the industry’s standards and best practices.

“The senior management has the following roles and responsibilities; including to appoint a compliance officer at management level at the head office and designate a compliance officer at management level at each branch or subsidiary,” according to the enhanced regulations.

TH deposit-taking will fall under BNM monitoring starting this year. Previously, TH did not have to report their deposit-taking activities to the central bank. The move to instal a compliance officer at branches and to build a monitoring system, however, would add to the operational cost to all the firms under the central bank’s regulatory framework.

BNM said the compliance officer acts as the reference point for AML/ CFT matters within the reporting institution and must have sufficient stature, authority and seniority within the reporting institution to participate and be able to effectively influence decisions relating to AML and CFT.

The central bank added that the compliance officer has a duty to ensure compliance with the AML/ CFT requirements, proper implementation of AML/CFT policies, and effective implementation of appropriate AML/CFT procedures, including customer due diligence (CDD), record-keeping, ongoing due diligence, suspicious transaction report and combating the financing of terrorism, among others.

BNM said in cases where the reporting institution forms a suspicion of money laundering/ terrorism financing (ML/TF) and

reasonably believes that performing the CDD process would tipoff the customer, the reporting institution is permitted not to pursue the CDD process, document the basis for not completing the CDD and immediately file a suspicious transaction report.

Reporting institutions may conduct simplified CDD where ML/TF risks are assessed to be low, except where there are instances of higher risks or suspicion of ML/TF.

To implement simplified CDD, BNM said, reporting institutions shall obtain prior written approval from the central bank’s director of Money Services Business Regulation Department.

Remittance transactions performed by an individual (including an expatriate) had been capped to RM30,000 daily, while foreign workers’ total transaction is limited to RM5,000 monthly.

The central bank has also focused on politically exposed persons (PEPs).

“The requirements are applicable to all types of PEPs and family members, or close associates of those PEPs,” said the central bank.

“In identifying individuals who fall within the definition of a close associate of a PEP, reporting institutions must take reasonable measures to determine the extent to which these individuals are directly engaged or involved in the activity of the PEP,” said the central bank.

If the customer or beneficial owner is determined to be a domestic PEP or a person entrusted with a prominent function by an international organisation, reporting institutions are required to assess the level of ML/TF risks posed by the business relationship with the domestic PEP or the person entrusted with a prominent function by an international organisation.