Standard Guidelines Anti-Money Laundering and Counter Financing ...

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STANDARD GUIDELINES ON AML/CFTUPW/GP11. INTRODUCTION1.1. The Guidelines on Anti-Money Laundering and Combating the Financingof Terrorism (Guidelines) are issued pursuant to section 66E and section83 of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001(AMLA).1.2. The Guidelines are established and formulated to address therequirements that must be complied by the reporting institutions under theAMLA to effectively combat money laundering and financing of terrorismactivities.1.3. The Guidelines are drawn up in accordance with the AMLA and theFinancial Action Task Force on Money Laundering’s (FATF) FortyRecommendations on Money Laundering and Nine SpecialRecommendations on Terrorist Financing.2. APPLICABILITY2.1. The Guidelines are applicable to the reporting institutions includingbranches and subsidiaries outside Malaysia carrying on any activity listedin the First Schedule to the AMLA.2.2. Foreign branches and subsidiaries must comply with the Guidelines andwhere there is conflict between the Guidelines and the regulatoryrequirements of the host country, the more stringent requirement must beadopted to the extent that is permitted by the host country’s laws andregulations. In addition, reporting institution should pay special attention toforeign branches or subsidiaries operating in countries which haveinsufficiently implemented the internationally accepted AML/CFTmeasures.2.3. In the event, a reporting institution’s foreign branch or subsidiary is unableto observe the more stringent requirements, including the reporting ofsuspicious transaction to the Financial Intelligence Unit in Bank NegaraMalaysia due to the prohibition of the host country’s laws and regulations,it must issue an exception report to the reporting institution, which mustinform the Financial Intelligence Unit in Bank Negara Malaysia. In addition,the reporting institution should place additional AML/CFT controls on therespective foreign branch or subsidiary and should map out a timeline for itto comply with the requirements.3. DEFINITION3.1. Money laundering3.1.1. In general terms, money laundering is defined as the process ofconverting money/property, which is derived from illegal activitiesto give it a legitimate appearance. There are 3 stages in moneylaundering, which are:1
STANDARD GUIDELINES ON AML/CFTUPW/GP1Placement - The physical disposal of proceeds derived fromillegal activities;Layering – Separating the illicit proceeds from their sourcesthrough transactions that disguise the audit trail and provideanonymity;Integration – Integrating the laundered proceeds into theeconomy as normal funds.3.1.2. Section 3(1) of the AMLA, defines “money laundering” as the actof a person who: engages, directly or indirectly, in a transaction that involvesproceeds of any unlawful activity; acquires, receives, possesses, disguises, transfers, converts,exchanges, carries, disposes, uses, removes from or bringsinto Malaysia proceeds of any unlawful activity; or conceals, disguises or impedes the establishment of the truenature, origin, location, movement, disposition, title of, rightswith respect to, or ownership of, proceeds of any unlawfulactivity;where – as may be inferred from objective factual circumstances, theperson knows or has reason to believe, that the property isproceeds from any unlawful activity; or in respect of the conduct of a natural person, the personwithout reasonable excuse fails to take reasonable steps toascertain whether or not the property is proceeds from anyunlawful activity.3.2. Financing of terrorism3.2.1. Financing of terrorism generally refers to carrying out transactionsinvolving funds that may or may not be owned by terrorist, or thathave been, or are intended to be, used to assist the commission ofterrorism.3.2.2. Section 3(1) of the AMLA defines a “terrorism financing offence”as any offence under section 130N, 130O, 130P or 130Q of thePenal Code. Essentially, financing of terrorism includes: providing or collecting property for carrying out an act ofterrorism; providing services for terrorism purposes; arranging for retention or control of terrorist property; or dealing with terrorist property.3.2.3. In the financing of terrorism, the focus is on the determination oruse of funds, which may have been derived from legitimatesources.2
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