By Xavier Kong
In this article, KINIBIZ looks at the crime trends in Malaysia, the part money laundering plays, as well as Malaysia’s record against money laundering.
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So how fares the ongoing battle between law and order against money launderers in Malaysia? KINIBIZ has it from the Royal Malaysian Police themselves that they are doing everything they can. But how, exactly, is Malaysia doing?
Where money launderers receive demand
If there is anything true about the world, it is that a demand will inevitably create a supply, as long as the demand is loud enough, or is willing to pay enough money for it. Such is the way money laundering came about, when there was a need to hoodwink the financial system into thinking that any money acquired through crime was actually legitimate and clean.
Unfortunately, for money laundering to thrive, there has to be a backdrop of other crimes that require the service of money launderers. deputy superintendent of police (DSP) Mohd Noor Firdaus Abdullah, the the Anti-Money Laundering Act (AMLA) senior investigating officer from the Commercial Crime Department of the Royal Malaysian Police, noted that there were a variety of crimes that required the services of money laundering, with the DSP naming tobacco smuggling, arms smuggling, and prostitution, among others.
“Any criminal activity that generates significant profit creates a need for money laundering,” said DSP Noor, adding that organised crime and financial crime together costs Malaysia between RM15 million and RM25 billion per annum.
DSP Noor also noted that the primary concern of the police force with money laundering is that the proceeds would be used to further crime, either through funding more criminal acts, or by enabling criminals to more easily launder money via legitimacy.
“The banking sector is attractive to money launderers, due to the large number of users and large financial capacity, which allows the money launderers to more easily conceal their laundering,” cautioned DSP Noor.
According to the DSP, the Royal Malaysian Police are already watching the finance and remittance sectors as well, and even cautioned against what is commonly known as “hawala”, a method of remittance that launders large amount of funds.
DSP Noor provided an example of “hawala”, by postulating the scenario of a stud farm in Australia purchasing a specimen from Malaysia for RM1 million. Rather than putting the consideration for the specimen through proper channels, the stud farm would instead pay a transaction company (a front for money launderers) in Australia, which then provides the organisation RM1 million of clean, legitimate money as working funds.
Over here in Malaysia, the counterpart of the money laundering operation in Australia (a partner or branch company) would pay the owner of the specimen RM1 million from the organisation’s own stockpile of funds acquired through illegitimate means, thus allowing the operation in Malaysia to inject a large amount of illegal funds into the financial system through a legitimate channel, thus laundering the said amount.
This may be one large organisation, or two separate organisations working together. However, the end result is that the money launderers have successfully laundered RM1 million of their total stockpile of illicit funds.
“This is also known as cuckoo-smurfing, after the bird that lays its eggs in the nests of other birds. This particular method leaves no paper trail, which in turn complicates investigations on money laundering,” said DSP Noor.
Victories claimed…
The Royal Malaysian Police has tasted victory against money launderers before. DSP Noor noted the very first case of money laundering prosecuted in Malaysia, which was the case of Dr Hamimah Idruss, of which he was the officer in charge of investigating the case.
Dr Hamimah was a former director of Syarikat Safire Pharmaceuticals (M) Sdn Bhd, and was charged under the Anti-Money Laundering Act of 2001 for receiving RM41.3 million in illegal gains between June 3 and 10, 2003. Hamimah was sentenced to 38 years in prison with a fine of RM6.39 million for eight counts of money laundering and ten counts of abetting.
DSP Noor also recounted that the Royal Malaysian Police was the first enforcement agency to prosecute two cases of terrorism financing, with the DSP stressing “financing”. However, the DSP did not reveal more details, as the cases are still ongoing.
…victories to come?
So, while Malaysia has indeed claimed several victories in the ongoing battle against money laundering and the financing of terrorism, is Malaysia truly ready to be in the fight?
DSP Noor found it prudent to bring up several issues still faced by law enforcement in the battle. The DSP noted that there needed to be a network, as well as more cooperation between law enforcement and banking authorities, by simple virtue of the fact that it would aid in efforts against money laundering.
Banking authorities would usually be the first to notice something wrong with a particular transaction or series of transactions. However, they do not hold the power to issue warrants or make arrests. Conversely, the police force does have the power to do both of those, but are often bogged down by red tape. A network or established protocol and system would greatly increase the efficiency of the police, as well as provide banking authorities with options, should there be a money laundering case.
DSP Noor also noted that there should also be a more stringent implementation policy, and called for those that are either lax in their maintenance of the communal system, or refuse to take part in that system altogether, to face tougher sanctions. This bears the idea that money laundering is a fight where each individual and corporation is necessary to eventually win, where any loophole would allow the crime itself to escape eradication and eventually flourish again.
Malaysia is already taking steps towards bettering herself against money laundering and terror financing, with one such step the national risk assessments Malaysia has undergone for the first time recently, under the guidelines of the Financial Action Task Force.
As it stands, while Malaysia may neither be at the very top, nor have the best image right now due to the currently messy political situation, steps are being taken towards the betterment of Malaysia. While it may be that these steps are being overshadowed by the enormity of the current situation, it should be noted that steps are definitely being taken.
As such, the conclusion would be no, Malaysia is not truly ready, as no institution or nation can ever be truly ready, due to the continuous advancements that are seen in terms of techniques and methods from the criminals. However, Malaysia is definitely working its way towards being ready to adapt and respond appropriately against money launderers and terrorism financers, which is about as much as can be asked of any nation.
Still, the devil remains in the details, in that it requires every individual to play their part. Compliance and law enforcement, as pointed out above, should work on a system that allows for a rapid response to suspicious transactions, as we now live in a world where a large sum of money can be spirited away by a few clicks, in a matter of moments.
Yesterday: Fighting money laundering and terrorism financing
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