What Is Money Laundering?

“It is the process of converting cash or property derived from illegal or criminal activities, to

give it the appearance of having been obtained from a

legitimate source”

Reputation risk

Customer lose confidence, Adverse Publicity

Operational Risk

Direct / Indirect losses,

ConcentrationRisk

Sudden withdrawal, affecting liquidity

Legal Risk

Fine/Imprisonment or Both

Licensing Risk

Licence suspend/cancelled

Implication on Reporting Institutions

Legislative Framework

Anti-Money Laundering and Anti-Terrorism Financing Act 2001(AMLATFA 2001)

Reporting Requirement Section 14(a)Section 14(b)

BNM Guidelines

BNM UPW/GP1: Standard Guidelines on Anti-Money

Laundering and Counter Financing of Terrorism (AML/CFT) (15 November 2006)

&Sectorial Guideline 1 for Banking &

Financial Institution

Types of money laundering offences

Protection for informers

Function of BNM as competent authority

Record keeping by reporting institution (RI)

Reporting of suspicious transaction by RI

Investigation by Competent Authority and Enforcement Agencies

Freezing, seizure and forfeiture of property

What does AMLA provide ?

Obligations to fight money laundering/terrorist financing

Obtain sufficient customer identification (CDD, Enhanced CDD, AMLATFA Watchlist check)

Identify suspicious transactions

Monitor suspicious `Report suspicious transaction (STR form)

Record Keeping of documents (Not less than 6 years –Sec 11)

Duty of Reporting Institutions (Banks)

Customer Due Diligence (CDD) Policy

is all about knowing Customer’s background His nature of business Source of funds

CDD is the gathering of information on individuals and companies (Profiling) and on the expected trend of account activities.

Customer due diligence must be conducted when: Establishing business relationship with any customer. Carrying out cash or occasional transaction in excess

of BNM specification. It has any suspicion of money laundering or terrorism. It has doubts of the correctness of previously obtained

information.

CUSTOMER DUE DILIGENCE (CDD)

CUSTOMER DUE DILIGENCE (CDD) should comprise of the following: Identify and verify the customer. Identify and verify beneficial ownership and control of transaction. Obtain information on purpose and intended nature of the business

relationship/transaction. Conduct on-going due diligence to ensure information provided is

updated. Should not commence business/transaction if customer fails to

comply with due diligence.

CUSTOMER DUE DILIGENCE (CDD)

CUSTOMER DUE DILIGENCE (CDD) to be done for the

following transactions:

BDC Equivalent to RM20,000.00 for customers.

Over the counter (Branches- Customer) For cash transactions (Deposit/Withdrawal) , amount equivalent to

RM50,000.00 and above on customer and person conducting transaction.

Walk-in Customers For amount equivalent to RM50,000.00 and above for both cash & non-

cash on customer and person conducting transaction.

CUSTOMER DUE DILIGENCE (CDD)

Bank to obtain following originator’s information for CDD before effecting transfer:

Name/Nationality/NRIC No./Passport no. Account no./ address

These details to be included in the message.

For wire transfer – amount equivalent to RM3,000.00 and above.

CDD and Wire Transfer

Enhanced CDD for High Risk CustomersIndividuals

Politically Exposed Persons Brokers & Dealers

Cash Intensive Businesses Jewellers & Precious Metal

dealers Mobile Phone dealers Money Changers – Owners Pawnshops – Owners Travel Agencies – Owners Used Car Dealer/ parts

manufacturers

Enhanced CDD for High Risk Customers – sec 6.1.6 Personal or business background

(Occupation, Profession, Nature of business)

Purpose & Usage of account

Source of funds (Ask Questions)

Details of operations in foreign countries

Expected pattern of activity

Details of other banking relationships

Suspicious Transaction Report (STR)

When to submit ?As and when detect & after conducting

Enhanced customer due diligence with a possible link to the predicate/serious

offences in Appendix 2

How to submit ?

Where to submit ?

To complete the STR form & get signed-off from the AML/CFT Compliance Officer

Submit to Money Laundering Reporting Officer

Financial Intelligence Unit, BNM

Branch/Subsidiary Compliance OfficerBranch/Subsidiary Compliance Officer

Money Laundering Reporting Officer (MLRO)Money Laundering Reporting Officer (MLRO)

Flow of Suspicious Transaction Report

Employees

Suspicious Transaction Report (STR)

1. Details of account holder

2. Details of person conducting transaction (Walk-In customer)

3. Transaction details, description of suspicious transaction

Inadequate information given in the STR

Enhanced CDD not properly done.

STR raise based on single transaction instead of previous/behavior pattern (at least 3 – 6 moths)

Source of fund not determine

BNM STR Form

Failure to report STR – What if you don’t report?

Section: 86 (AMLA 2001)Failure to report STR is an offence punishable

upon conviction.

Penalty: Fine not exceeding RM250k

Failure to report can also be tantamount to abetting the commission of money laundering

which is an offence punishable upon conviction with the penalty as specified in Section: 4 AMLA

2001

HOW TO HANDLE SUSPICIOUS CUSTOMERS

• Don’t create his suspicion

• Be discreet

• Don’t panic

• Use a phone that is out off suspect’s sight

• Don’t discuss with staff in suspect’s presence

“ NO TIPPING OFF ”

AMLA Penalties

Any person who engages in or attempt to engage

in or abets** the commission of money

laundering

** to help or encourage someone to do something

wrong or illegal

Fine not exceeding RM5 million

or Imprisonment not exceeding 5 years

or BOTH

AMLA Penalties – Appendix 3

Failure to retain records for minimum 6 years from date

account closed or transaction has

been completed/ terminatedor

Tipping off to any otherperson of an investigation

that is likely to prejudice theinvestigation

Fine not exceeding RM1 million

or Imprisonment not exceeding 1 year

or BOTH

AMLA Penalties – Appendix 3

BANKS PENALIZED UNDER AMLA

Banks Penalized under AMLA :

Financial Services Authority UK fine •Royal Bank of Scotland GBP 5.6 million – did not perform sufficient control and not consistently monitored PEP client

*PEP- Political Exposed Person

• Turkish Bank fined GBP294k by- fail to keep proper record

BANK PENALIZED UNDER AMLA

FINDINGS FROM SURVEY

Aware about AMLA - 100% Attended training AMLA -100% Raised STR - 5%

Never come across suspicious transaction - 75% Not sure what is suspicious transaction - 10% Not enough time to check in detail -15%

Conclusion1. Money Laundering has major impact on

banks

2. Non compliance to AMLA requirement leads to heavy penalty

3. Banks must establish good monitoring system and guidelines to meet reporting requirement

4. Gap between requirement and implementation

5. Conflict between business obligation and compliance obligation

Recomendations

1. Establish comprehensive written guidelines and SOP

2. Systems to monitor and alert suspicious transaction

3. Continuous training and awareness programme for all staff especially frontliners

4. Regular and comprehensive audit by BNM

5. Internal check and audit

Disclaim NotesAll photos Illustrated in this presentation are for Illustration purpose only.

Photos are obtained from varies sources from Internet and are for acedemic purpose only.

Q & A