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CONCEPT OF MONEY LAUNDERING

• Money laundering is 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.
LEGAL DEFINITION OF MONEY LAUNDERING
• Section 3(1) of the AMLA as the act of a person who-
(a)engages, directly or indirectly, in a transaction that involves proceeds of any
unlawful activity;
(b)acquires, receives, possesses, disguises, transfers, converts, exchanges, carries,
disposes, uses, removes from or brings into Malaysia proceeds of any unlawful activity; or
(c)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 any unlawful activity;
where-
(aa)as may be inferred from objective factual circumstance, the person knows or
has reason to believe, that the property is proceeds from any unlawful activity; or
(bb) in respect of the conduct of a natural person, the person without reasonable
excuse fails to take reasonable steps to ascertain whether or not the property is proceeds
from any unlawful activity.
PROCESS OF MONEY LAUNDERING IN MALAYSIA
LAW AND RULES THAT GOVERNS MONEY LAUNDERING

• The Malaysian substantive law relating to money laundering is


contained in the AMLA.

• The AMLA was gazetted on 5 July 2001 and came into force on 15
January 2002.

• The purpose of the AMLA are seeks to establish and implement the
FATF Forty Recommendations in Malaysia
• The AMLA covers :
• offence of money laundering,
• creates mechanisms for investigating and recovering proceeds of unlawful
activities,
• introduces the power for the freezing, seizure and forfeiture of the
proceeds of unlawful activities.

The AMLA also consolidates the requirements on reporting institutions (as


defined therein) to report knowledge or suspicion of, money laundering
activities.
The AML/ACT Act and AML/ACFT Policies Issued by Bank Negara Malaysia.

• THE ACT
1. Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of
Unlawful Activities Act 2001 (AMLA)
2. Anti-Money Laundering Act 2001
• AML/CFT Policies Issued by Bank Negara Malaysia
Reporting obligations of the reporting institutions and common red flags for
each sector are provided in the following policies:
1. Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) –
Banking and Deposit-Taking Institutions (Sector 1)
2. Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) –
Insurance and Takaful (Sector 2)
3. Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) –
Money Services Business (Sector 3)
4. Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) –
Electronic Money and Non-Bank Affiliated Charge & Credit Card (Sector 4)
5. Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) –
Designated Non-Financial Businesses and Professions (DNFBPs) & Other
Non-Financial Sectors (Sector 5)
METHODS OF MONEY LAUNDERING PROCESSES TO HIDE THE
ILLEGAL PROCESS

• The first method is placement. Placement is one of the ways where


illicit funds are separated from their illegal source and are placed into
the financial system. Some of the common methods include:
i. depositing the ill gotten gains into financial institutions;
ii. structuring (smurfing) which the funds are of high value are broken
into many small value transactions;
iii. use of financing facilities at a financial institution and making
accelerated repayment before its tenure; and
iv. cashing unused chips at casinos for casino cheques, making them
appear as “winning cheques”.
• Layering is the second stage of the money laundering process where it
involves the process of creating multiple layers of transactions to
further distance the illegal funds from their illegal sources. The purpose
of layering is to obscure or to make it difficult to trace the origin of the
funds. Examples of layering are:
• i. multiple transfers and re-transfer of funds into the same or various
accounts;
• ii. repeat invoicing for the same transaction; and
• iii. re-sale of assets originally purchased in cash by using the illicit
funds.
• Integration is the final stage that completes the money laundering process
where laundered proceeds are successfully integrated into the economy as
legitimate funds.
• Transactions normally involve buying property or high value items or
engaging in legal businesses by using funds that have been successfully
placed or layered in the financial system. At this stage, it will be quite difficult
to detect the illegal funds as the funds would appear legitimate. Integration
normally involves the following activities:
i. trading activities that include invoice manipulation to remit money abroad;
ii. engaging in legal business by providing capital or loans; and
iii. buying property or high value items.

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