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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

Implication on Reporting Institutions


Reputation
risk

Customer
Customerlose
loseconfidence,
confidence,
Adverse
AdversePublicity
Publicity

Operational
Risk

Direct
Direct/ /Indirect
Indirectlosses,
losses,

Concentration
Risk

Sudden
Suddenwithdrawal,
withdrawal,affecting
affectingliquidity
liquidity

Licensing
Risk

Licence
Licencesuspend/cancelled
suspend/cancelled

Legal
Risk

Fine/Imprisonment
Fine/Imprisonmentor
orBoth
Both

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

What does AMLA provide ?


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

Duty of Reporting Institutions (Banks)

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)

Customer Due Diligence (CDD)


Policy
is all about knowing
Customers 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 (CDD)


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 & noncash on customer and person conducting transaction.

CDD and Wire Transfer


Bank to obtain following originators 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.

Enhanced CDD for High Risk Customers


Individuals

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 ?

To complete the STR form & get signed-off


from the AML/CFT Compliance Officer

Where to submit ?

Submit to Money Laundering Reporting


Officer

Flow of Suspicious Transaction Report


Financial Intelligence Unit, BNM

Money Laundering Reporting Officer (MLRO)

Employees

Branch/Subsidiary Compliance Officer

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 dont 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

Dont create his suspicion


Be discreet
Dont panic
Use a phone that is out off suspects sight
Dont discuss with staff in suspects
presence

NO TIPPING
OFF

AMLA Penalties

AMLA Penalties Appendix 3


Any person who engages
Fine not exceeding
in or attempt to engage
RM5 million
in or abets** the
or
commission of money Imprisonment not
laundering
exceeding 5 years
or
** to help or encourage
BOTH
someone to do something
wrong or illegal

AMLA Penalties Appendix 3


Failure to retain records for
minimum 6 years from date
account closed or
transaction has
been completed/ terminated

or
Tipping off to any other
person of an investigation
that is likely to prejudice the
investigation

Fine not exceeding


RM1 million
or
Imprisonment not
exceeding 1 year
or
BOTH

BANKS PENALIZED UNDER AMLA

BANK 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

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%

Conclusion
1. 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

Q&A

Disclaim Notes
All photos Illustrated in this presentation are for Illustration purpose only.
Photos are obtained from varies sources from Internet and are for acedemic purpose only.