Malaysia

1. Does Malaysia have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes. The primary legislation is the Malaysian Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613) (“AMLA”) and the Malaysian Penal Code (Act 574) (“Penal Code”).

2. To whom does the legislation apply?

Both AMLA and Penal Code apply to all persons, which includes a body of persons, corporate or unincorporated.

3. What does the legislation prohibit?

AMLA prohibits money laundering activities. Under the AMLA, any person who:

• engages, directly or indirectly, in a transaction that involves proceeds of an unlawful activity or instrumentalities of an offence;
• acquires, receives, possesses, disguises, transfers, converts, exchanges, carries, disposes of or uses proceeds of an unlawful activity or instrumentalities of an offence;
• removes from or bringing into Malaysia proceeds of an unlawful activity or instrumentalities of an offence; or
• conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of an unlawful activity or instrumentalities of an offence,

commits a money laundering offence.

The phrase “proceeds of unlawful activity” is defined as “any property or any economic advantage or economic gain from such property, within or outside Malaysia, which is wholly or partly derived or obtained, directly or indirectly, by any person as a result of any unlawful activity”, whilst the term “unlawful activity” is defined as “any activity which constitutes or is of such a nature, or occurs in such circumstances, that it results in or leads to the commission of any serious offence or any foreign serious offence” as stipulated in the AMLA (a “predicate offence”).

The money laundering offence in Malaysia is wider than the idea of cleaning dirty money, which is commonly understood in respect of money laundering.

In relation to terrorism financing, the legislation generally prohibits the provision of or dealing, directly or indirectly, in any property intending to be used in whole or in part to commit a terrorist act or property owned or controlled directly or indirectly by an entity declared by the Government as a specific entity under AMLA (“specific entity”) including any fund deriving therefrom, as well as the provision of services or facilities (financial or otherwise) for the purpose of committing or facilitating or benefiting from a terrorist act or terrorist purpose.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

Any person who conducts any of the acts set out in Question 3 above commits a money laundering offence. Besides, the Central Bank of Malaysia (“CBM”) describes the term ‘money laundering’ as ‘a process of converting cash or property derived from criminal activities to give it a legitimate appearance. It is a process to clean ‘dirty’ money in order to disguise its criminal origin’.

AMLA provides that a person may be found guilty of a money laundering offence irrespective of whether there is a conviction or ongoing prosecution in respect of a predicate offence.

It should be noted that the Malaysian courts have held that, notwithstanding that the prosecution (let alone a conviction) of the predicate offences is not necessary, the prosecution is not relieved of its duty to still prove that the predicate offences have been committed; it is still necessary for a prosecution for a money laundering offence under AMLA for the prosecution to adduce evidence to prove that an unlawful activity – either the predicate offence or any activity which results in the commission of the predicate offence – has been committed.

5. What level of intent or knowledge is required to establish a violation?

The money laundering offence is aimed at any person who knowingly engages in the proceeds of an unlawful activity. A person commits an offence of money laundering if they, either directly or indirectly, are concerned in a transaction involving proceeds from any unlawful activity, where from an objective circumstance, it is possible to conclude that they know or have reason to believe that the proceeds that they are concerned with in the transaction are proceeds from an unlawful activity, or the person without reasonable excuse fails to take reasonable steps to ascertain whether or not the property is the proceeds of an unlawful activity or instrumentalities of offence.

Generally, establishment of the financing of a terrorist act offence requires proof on the part of the accused of the relevant knowledge (which could include the state of mind of a person who “turns a blind eye”) or intention or that the accused has reasonable grounds to believe that the property or services rendered may be used, in whole or in part, for the purpose of committing or facilitating or benefiting a terrorist act or terrorist purpose.

6. What are the potential penalties for infringing the legislation?

A conviction of a money laundering offence under AMLA may entail imprisonment for a term not exceeding 15 years as well as a fine of not less than five times the sum or value of the proceeds of an unlawful activity or offence at the time when the offence is committed or Ringgit Malaysia (RM) 5 million, whichever is higher.

A conviction of terrorism financing under AMLA may attract a fine not exceeding RM3 million or imprisonment for a term not exceeding five years or both; whilst a conviction of terrorism financing falling within the ambit of the Penal Code may attract the death penalty, if the act results in death, and in any other case, imprisonment for a term of not less than 7 years but not exceeding 30 years as well as liability for a fine.

Both AMLA and the Penal Code provide that, where an offence is committed by a body corporate or an association of persons, a person who is its director, controller, officer, partner or is concerned in the management of its affairs at the time of the commission of the office, is deemed to have also committed the relevant offence unless that person proves that the offence was committed without their consent or connivance and that they exercised all such due diligence to prevent the commission of the offence as they ought to have exercised, having regard to the nature of their function in that capacity and to the circumstances.

7. Does the legislation have extra-territorial reach?

Both AMLA and the Penal Code are extra-territorial legislation, as they apply to property outside Malaysia, as well as to Malaysian citizens and permanent residents outside the territory of Malaysia or any person who after the commission of the offence is present in Malaysia.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Yes. Any person, including branches and subsidiaries outside Malaysia of that person, who carries on any activity listed in the First Schedule of AMLA (“Reporting Institutions”) such as banks, insurance companies, accountants, lawyers, money changers and leasing and factoring businesses, are obliged to adhere to the reporting obligations as set out in Part IV of AMLA which include conducting customer due diligence, keeping proper records on customers and transactions as well as reporting suspicious transaction reports (STR) and cash threshold reports for cash transactions exceeding RM25,000 or whichever amounts specified involving physical currencies (domestic or foreign currency) and bearer negotiable instruments such as travellers’ cheques but excluding bank drafts, cheques, electronic transfers or fixed deposit rollovers or renewals (“Reporting Obligations”).

In this respect the CBM, Securities Commission Malaysia as well as the Labuan Financial Services Authority have issued various policy documents, guidelines, directives, circulars and any other documents to clarify the expected scope and performance of the Reporting Obligations by relevant Reporting Institutions.

9. What are the potential penalties for failing to comply with these obligations?

Generally, Reporting Institutions who fail to comply with the Reporting Obligations shall on conviction be liable to a fine not exceeding RM1 million. However, where Reporting Institutions fail to maintain any account, record, business correspondence and documentation relating to an account, business relationship, transaction or activity with a customer or any person as well as the results of any analysis undertaken for at least 6 years from the date the account is closed or the business relationship, transaction or activity is completed or terminated, such failure is an offence which may on conviction attract a fine not exceeding RM3 millions or imprisonment for a term not exceeding five years or to both.

10. Who are the relevant enforcement authorities in Malaysia and what are their contact details?

In Malaysia, there is no centralised enforcement system, agency or body in relation to money laundering offence and terrorism financing offences. Enforcement activities are generally undertaken by various agencies or bodies based on the predicate offences under their respective purview. Some of the relevant agencies are as follows: