Malaysia

Last Updated: 24/05/2011


CENTRAL AUTHORITY FOR REPORTING



ANTI-MONEY LAUNDERING REGULATOR(S)


  1. Ministry of Home Affairs(The Ministry of International Security has merged with the Ministry of Home Affairs and is now known as the Ministry of Home Affairs)
  2. Royal Malaysian Police
  3. Malaysia Anti-Corruption Commission (formerly known as the Anti-Corruption Agency)
  4. Securities Commission
  5. Royal Malaysian Customs
  6. Immigration Department
  7. Labuan Offshore Financial Services Authority
  8. Companies Commission of Malaysia
  9. Attorney General’s Chambers
  10. Ministry of Finance
  11. Ministry of Internal Security
  12. Ministry of Domestic Trade, Co-operatives and Consumerism

ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?


Section 14 of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (“AMLATF”) imposes on a reporting institution an obligation to “promptly report to the competent authority any transaction:

  1. exceeding such amount as the competent authority may specify; and
  2. where the identity of the persons involved, the transaction itself or any other circumstances concerning that transaction gives any officer or employee of the reporting institution reason to suspect that the transaction involves proceeds of an unlawful activity.”

With effect from 30 September 2004, advocates and solicitors are included as one of the ‘reporting institutions’ pursuant to Articles 15, 16 and 17, Part 1, First Schedule of the AMLATF. Lawyers thus have the same obligations to that of financial institutions to report to the competent authority any transaction which falls within section 14 of the AMLATF.

Further, subsection 47(1)of the AMLATF is a provision specific to advocates and solicitors which empowers a High Court judge to on an application being made to him in relation to an investigation into a money laundering offence or a terrorism financing offence, orderan advocate and solicitor to disclose information available to him in respect of any transaction or dealing relating to any property which is liable to seizure under the AMLATF


LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.


The AMLATF (formerly known as the Anti-Money Laundering Act 2001), which came into force on 15 January 2002, provides the offence of money laundering of proceeds from the predicate offences and the measures to be taken for its prevention. In general, the AMLATF provides for:

  1. suspicious transaction reporting(“STR”), (subsection 19(4) of the AMLATF)
  2. record-keeping (section 13 of the AMLATF);
  3. the functions of a financial intelligence unit that could co-operate with domestic as well as foreign enforcement agencies (Part III of the AMLATF);
  4. investigation into money laundering activities (Part V of the AMLATF);
  5. law enforcement agencies to freeze, seize and forfeit terrorist property and property involved in, or derived from, money laundering and terrorism financing   offences as well as prosecution of money launderers (Part VI and section 66B of the AMLATF); and
  6. prohibition of falsification, concealment and destruction of documents (section 89 of the AMLATF).
  • Mutual Assistance in Criminal Matters Act (MACMA) 2002 (Act 621)

The purpose of MACMA is to provide and obtain international assistance in criminal matters including:

  1. providing and obtaining evidence and other things;
  2. the preparation of arrangements for persons to give evidence, or to assist in criminal investigations;
  3. the recovery, forfeiture or confiscation of property in respect of a serious offence or a foreign serious offence;
  4. the restraining of dealings in property, or the freezing of property, that may be recovered in respect of a serious offence or a foreign serious offence;
  5. the execution of requests for search and seizure;
  6. the location and identification of witnesses and suspects;
  7. the service of process;
  8. the identification or tracing of proceeds of crime and property and instrumentalities derived from or used in the commission of a serious offence or a foreign serious offence;
  9. the recovery of pecuniary penalties in respect of a serious offence or a foreign serious offence; and
  10. the examination of evidence and premises.

The definition of ‘serious offence’ under the MACMA expressly refers to, amongst others, an offence as defined under the AMLATF.

  • Penal Code

Under Section 130(O) of the Penal Code, whoever, directly or indirectly, provides or makes available financial services or facilities(which term is defined to include services and facilities offered by lawyers and accountants acting as nominees or agents for their clients):

  1. intending that the services or facilities be used, knowing or having reasonable grounds to believe that the services or facilities will be used, in whole or in part, for the purpose of committing or facilitating the commission of a terrorist act, or for the purpose of benefiting any person who is committing or facilitating the commission of a terrorist act; or
  2. knowing or having reasonable grounds to believe that, in whole or in part, the services or facilities will be used by or will benefit any terrorist, terrorist entity or terrorist group, would be committing a criminal offence.
  • Criminal Procedure Code (“CPC”)

The CPC is a compilation of procedures according to which all offences under the Penal Code and any other law shall be inquired into and tried, subject, however, to any written law in force regulating the manner or place of inquiry into such offences.

  • Malaysian Anti-Corruption Commission Act 2009 (“MACCA 2009”)

Money laundering under the AMLATF includes any form of dealing, whether direct or indirect, that involves proceeds relating to a serious offence or foreign serious offence.

        Sections 16 to 23, 26 and 28 of the MACCA 2009 are included in the list of serious offences under the Second Schedule of AMLATF.

Pursuant to subsection 46(1)of the MACCA 2009, a Judge of the High court may, on application being made to him in relation to an investigation into any offence under this Act, order an advocate and solicitor to disclose information available to him in respect of any transaction or dealing relating to any property which is liable to seizure under this Act.


ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?


Only lawyers, who are entitled to practice as advocates and solicitors under the laws in Malaysia, are subject to sections 14 and 47 of the AMLATF.

Pursuant to the MACMA, however, the Attorney General may make a request to a foreign state for assistance in a criminal matter. For example, the Attorney General may, under section 9 of the MACMA, request the appropriate authority of a foreign state to assist in arranging for the attendance in Malaysia of a person in the foreign state for the purpose of giving any evidence or assistance if he is satisfied that:

  1. there are reasonable grounds to believe that the person is capable of giving such evidence or assistance relevant to a criminal matter involving a serious offence; and  
  2. the person consents to travel to Malaysia for the purpose of giving such evidence or assistance, although that person will not be subjected to any penalty or liability or otherwise prejudiced in law by reason only of his refusal or failure to consent to attend as requested(section 10 of the MACMA).

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE


The Bank Negara Malaysia Guidelines (“BNM Standard Guidelines”) relevantly provide for:

  1. BNM/RH/GL 000-2Standard Guidelines on Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) (updated on 3 February 2009)which apply to all reporting institutions; and
  2. UPW/GP1[6]: Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Sectoral Guidelines 6 for Designated Non-Financial Businesses and Professions (DNFBPs) which supplement the Standard Guidelines in their application to DNFBPs, including lawyers.

Malaysian Bar Council Guidelines include:

  1. Bar Council Guidelines on Anti-Money Laundering & Anti-Terrorism Financing dated 6th May 2005;
  2. Anti-Money Laundering and Anti-Terrorism Financing Compliance Framework dated 6th May 2005;
  3. Anti-Money Laundering and Anti-Terrorism Financing: Overview of the Reporting Obligation Affecting Legal Practitioners dated 6th May 2005; and
  4. Anti-Money Laundering and Anti-Terrorism Financing Act 2001: Checklist for legal firms dated 27 December 2010.

[Please note that the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT)guidance issued by the Malaysian Bar Council are additional industry guidance applicable to the reporting institution in complying with AMLATF and related guidelines issued by the BNM.]


IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?


The Malaysian Bar Council has established the Anti-Money Laundering and Anti-Terrorism Task Force and the Ad Hoc Anti-Money Laundering Committee to ensure compliance of AML obligations within the profession. The Bar Council Guidelines set out above were all issued in furtherance of ensuring such compliance.

In April 2008 the Committee was merged with the Legal Profession Committee in order to establish a general supervisory committee over the legal practice.   


DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS


Subsections 5(1) and (2) of the Anti-Money Laundering and Anti-Terrorism Financing (Reporting Obligations) Regulations 2007 provide that:

  1. A reporting institution shall conduct customer due diligence measures on its account holders, including when: (i) there is a suspicion of money laundering; or (ii) it has doubts about the veracity or adequacy of information on the identity of the account holder which it has obtained previously.
  2. The reporting institution shall verify, by reliable means or from any independent source of document, data or information: (i) that any person who is purporting to act on behalf of the account holder is so authorized and the identity of that person; and (ii) a beneficial owner on whose behalf an account is opened or a transaction is conducted and the identity of that person.

Pursuant to paragraph 5.1.2 of the BNM Standard Guidelines on AML/CFT, every reporting institution must conduct customer diligence when:

  1. establishing a business relationship with any customer;
  2. carrying out cash or occasional transaction that involves a sum in excess of the amount specified by BNM under its sectoral guidelines or relevant circular;
  3. it has any suspicion of money laundering or financing of terrorism; or
  4. it has any doubt about the veracity or adequacy of previously obtained information.

Paragraph 5.1.3 of  the BNM Standard Guidelines on AML/CFT states that the customer due diligence undertaken by the reporting institution should at least, comprise the following:

  1. identify and verify the customer;
  2. identify and verify beneficial ownership and control of such transaction;
  3. obtain information on the purpose and intended nature of the business relationship/ transaction; and
  4. conduct on going due diligence and scrutiny, to ensure the information provided is updated and relevant.

Paragraph 5.1.5 of the BNM Standard Guidelines on AML/CFT further provides that the reporting institution should not commence business relation or perform any transaction, or in the case of existing business relation, it should terminate such business relation if the customer fails to comply with the customer due diligence requirements and consider lodging a suspicious transaction report with the FIU.

There is also requirement for retention of records for at least six years from the date that the transaction has been completed/terminated or after the business relations with the customer has ended (section 17 of the AMLATF and paragraph 6.1.1 of the BNM Standard Guidelines on AML/CFT).


DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?


Yes. According to paragraph 5.10.1 of the BNM Standard Guidelines on AML/CFT, reporting institutions shall conduct an enhanced customer due diligence process for higher risk customers.


ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?


Yes.

Paragraph 5.10 of the BNM Standard Guidelines on AML/CFT provides for enhanced due diligence measures for higher risk customers. As a minimum, the enhanced due diligence process  involves:

  • obtaining more detailed information from the customer through publicly available information, in particular,on the purpose of transaction and source of funds; and
  • obtaining approval from the senior management of the reporting institution before establishing the business relationship with the customers.

Examples of higher risk customers are:

  • high net worth individuals;
  • non-resident customers;
  • customers from locations known for their high rates of crime (e.g. drug producing, trafficking, smuggling);
  • customers from countries or jurisdictions with inadequate AML/CFT laws and regulations as highlighted by the Financial Action Task Force (“FATF”);
  • politically Exposed Persons (“PEPs”);
  • legal arrangements that are complex (e.g. trust, nominee);
  • cash-based businesses; and
  • businesses/activities identified by the FATF as of higher money laundering and financing of terrorism risk.

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?


Yes.

Pursuant to paragraph 5.3.5 of the BNM Standard Guidelines on AML/CFT, reporting institutions are not required to obtain a copy of the Memorandum and Articles of Association or Certificate of Incorporation nor to identify or verify the directors and shareholders of the corporate customers for the following categories:

(a) public listed companies/corporations (including foreign companies in exchanges recognised by Bursa Malaysia Securities Bhd) subject to regulatory disclosure;

(b) government linked companies in Malaysia(“Government linked company” is defined to mean “a corporate entity that may be private or public (listed on a stock exchange) where the government owns an effective controlling interest (>50%), or is owned by any corporate entity where the government is a shareholder”);

(c) state owned corporations and companies in Malaysia;

(d) financial institutions licensed under the Islamic Banking Act 1983, the Takaful Act 1984, the Banking and Financial Institutions Act 1989, the Insurance Act 1996, the Securities Commission or the Labuan Offshore Financial Services Authority; or

(e) prescribed institutions under the Development Financial Institutions Act 2002 and supervised by BNM.


ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE


Yes, lawyers are permitted to rely on third party due diligence.

It is set out in paragraph 5.7.1 of the BNM Standard Guidelines on AML/CFT that a reporting institution (which includeslawyers - seeFirst Schedule to the AMLATF) who uses the services of intermediaries to introduce business may rely on the customersdue diligence conducted by such intermediaries, although the ultimate responsibility of customersdue diligence will remain with the reporting institution.

Further, s. 24(2) of the AMLATF provides that:

“In proceedings against any person for an offence under this Part [reporting obligation], it shall be a defence for that person to show that he took all reasonable steps and exercised all due diligence to avoid committing the offence.”

In view of paragraph 5.7.1 and section 24(2), the extent of lawyers’ reliance on third party due diligence will depend on the factual circumstances occurring. For example, it might be reasonable for lawyers to rely on due diligence conducted by a reputable commercial bank but it will not be reasonable for lawyers to rely on third party due diligence when it is obvious that the transaction involves proceeds of an unlawful activity.

According to paragraph 5.7.3 of the BNM Standard Guidelines on AML/CFT, the reporting institution must be satisfied at the minimum that the intermediary:

  1. has an adequate customersdue diligence process;
  2. has a reliable mechanism to verify customer identity;
  3. can provide the customersdue diligence information and make copies of the relevant documentation available immediately upon request; and
  4. is properly regulated and supervised by the respective authorities.

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?


Pursuant to section 14 of the AMLATF, a reporting institution (which, as mentioned above, includes lawyer) must promptly report to the FIU, any transaction:

  1. that exceeds the threshold as specified by the regulator; and
  2. where the identity of the persons involved, the transaction itself or any other circumstances concerning the transaction gives any officer or employee of the reporting institution reason to suspect that the transaction involves proceeds of an unlawful activity.

Failure to report a suspicious transaction can lead to an offence with a maximum fine of RM250, 000 (section 86 of the AMLATF).

Paragraph 8.1 of the BNM Standard Guidelines on AML/CFT further explains that:

  1. the reporting institution is required to promptly submit a suspicious transaction report to the FIU when any of its employees suspect or have reason to suspect that the transaction or attempted transaction involves proceeds from an unlawful activity or the customer is involved in money laundering or financing of terrorism;
  2. the reporting institution should provide the necessary information surrounding the suspicious transaction as required in the suspicious transaction report form; and

the reporting institution must establish a reporting system for the submission of suspicious transaction reports to the FIU.


DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?


The legal professional privilege between the Advocate & Solicitor and his/her client is overridden by section 20 of the AMLATF for the purposes of the reporting obligation and will not excuse the Advocate or Solicitor from any failure to report a suspicious transaction.


DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION? 


Under section 24 of the AMLATF, there is protection from civil, criminal or disciplinary proceedings for reporting individuals who disclose or supply information to the regulator provided the information was not disclosed or supplied in bad faith.


ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?


Pursuant to paragraph 48 of the Anti-Money Laundering and Anti-Terrorism Financing Compliance Framework issued by the Malaysian Bar Council, a lawyer who has made an STR: (i) should refrain as far as possible from carrying through with the transaction; (ii) should not do or omit anything which may have the effect of tipping off the parties to the transaction;and (iii) may be contacted by BNM and must comply with any directions given.


IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE


There is a tipping-off prohibition under subsection 35(1) of the AMLATF. A person is generally not allowed to disclose any information they have obtained from the regulators or reveal any possible investigation procedures.

Persons convicted of a tipping-off offence under subsection 35(1) shall be liable to a maximum fine of 1 million ringgit or to imprisonment for a term not exceeding 1 year or both.

However, an exception is made under subsection 35(2) for an advocate and solicitor or his employee to disclose any information or other matter:

  1. to his client or the client’s representative in connection with the giving of advice to the client in the course and for the purpose of the professional employment of the advocate and solicitor; or
  2. to any person in contemplation of, or in connection with and for the purpose of, any legal proceedings,

but not where the information or other matter is disclosed with a view to furthering any illegal purpose (subsection 35(3) AMLATF).


DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT


In accordance with paragraph 4 of the BNM Standard Guidelines on AML/CFT, a reporting institution should identify and assess the risk of the new customer i.e. risk profiling. In creating the risk profile, paragraph 4.2.1 of the BNM Standard Guidelines on AML/CFT states that the reporting institution should take into account at least the following factors:

  1. the origin of the customer and location of business;
  2. background or profile of the customer;
  3. nature of the customer’s business;
  4. structure of ownership for a corporate customer; and
  5. any other information suggesting that the customer is of higher risk.

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE


Yes.

Pursuant to subsection 5(3) of the Anti-Money Laundering and Anti-Terrorism Financing (Reporting Obligations) Regulations 2007, reporting institutions are required to conduct ongoing due diligence on all their business relationships with any account holder. Paragraph 4.2.2 of the BNM Standard Guidelines on AML/CFT requires the reporting institution to continuously monitoring each customer’s transaction activity patterns to ensure it is in line with the customer’s profile and to reassess the risk if there are any unreasonable differences.  Paragraph 5.1.3 expands on this by requiring an institution to conduct on-going due diligence and scrutiny to ensure the information provided is updated and relevant.

In particular, the reporting institution shall conduct on-going customer diligence to examine and clarify the economic background and purpose of any unusual transaction or business relationship that appears unusual, does not have any apparent economic purpose or the legality of such transaction is not clear (especially with regards to complex and large transactions or higher risk customers).Guidelines for ongoing monitoring of customers are provided for in paragraph 7 of the BNM Standard Guidelines on AML/CFT.


DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION


Note section 47 AMLATF:

  1. Notwithstanding any other law, a Judge of the High Court may, on application made to him in relation to an investigation into any [money laundering offence], or a terrorism financing offence, order an advocate and solicitor to disclose information available to him in respect of any transaction or dealing relating to any property which is liable to seizure under this Act.
  2. Nothing in subsection (1) shall require an advocate and solicitor to comply with any order under that subsection to the extent that such compliance would disclose any privileged information or communication which came to his knowledge for the purpose of any pending proceedings

Additionally, under Section 130Oof the Penal Code, lawyers would be committing an offence if they directly or indirectly, provide or make available financial services or facilities (which term is defined to include the services and facilities offered by lawyers and accountants acting as nominees or agents for their clients) intending that or knowing or having reasonable grounds to believe that the whole or part of the services or facilities will be used for the purpose of committing or facilitating the commission of a terrorist act, or for the purpose of benefiting any person who is committing or facilitating the commission of a terrorist act or knowing or having reasonable grounds to believe that the whole or part of the services or facilities will be used or will benefit any terrorist, terrorist entity or terrorist group.

Further, section 46 of the MACCA 2009 states that:

  1. Notwithstanding any other written law, a Judge of the High court may, on application being made to him in relation to an investigation into any offence under this Act, order an advocate and solicitor to disclose information available to him in respect of any transaction or dealing relating to any property which is liable to seizure under this Act.
  2. Nothing in subsection (1) shall require an advocate and solicitor to comply with any order under that subsection to the extent that such compliance would disclose any privileged information or communication which came to his knowledge for the purpose of any pending proceedings.

Sections 16 to 23, 26 and 28 of the MACCA 2009 are included in the list of serious offences under the Second Schedule of AMLATF.


HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?


There are no reported cases to date.


HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?


The APG on Money Laundering published a report on 25 July 2007 in relation to the FATF 40 + 9 Recommendations. The report states that customer due diligence regime in Malaysia shows a high degree of technical compliance with FATF standards. However, certain issues have been highlighted, such as the lack of clarity in the level of implementations of requirements to identify and verify beneficial ownership of corporate customer and the lack of specific obligations imposed when dealing with politically exposed persons(Paragraph 29).

The APG has noted that, due to the requirements of AML obligations being only recently imposed on the legal and other non-financial professions, there is very little evidence as yet of their effective implementation. Nonetheless, this is a welcomed step on both a national and international scale.  

On a side note, to improve the level of compliance with AMLATF amongst lawyers, the Malaysian Bar Council has, via circular No. 293/2010 dated 27 December 2010, issued a checklist for legal firms, advised Members of the Malaysian Bar to ask certain questions on the proposed transactions that their legal firms have been instructed to act upon prior to opening a client’s file and required Members of the Malaysia Bar to go through the items listed in the checklist to ensure that all necessary information has been obtained. This checklist has to be kept with the client’s file and shown to BNM during on-site examination.


INFORMATION SUPPLIED BY:

 

Mr Swee-Kee Ng

Shearn Delamore & Co.

Kuala Lumpur Office

7th Floor, Wisma Hamzah-Kwong Hing

No 1 Leboh Ampang

50100 Kuala Lumpur

Malaysia

 

General Email: info@shearndelamore.com

Official Website: http://www.shearndelamore.com