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Mutual Evaluation Report of Malaysia

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FATF/APG assessment report of the anti-money laundering and counter-terrorist financing (AML/CFT) measures in Malaysia

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Mutual Evaluation Report of Malaysia

  1. 1. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 1 Anti-money laundering and counter- terrorist financing (AML/CFT) measures in Malaysia Fourth Round Mutual Evaluation Key findings, ratings and priority actions September 2015 www.fatf-gafi.org/publications/mutualevaluations/documents/mer-malaysia-2015.html
  2. 2. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Key findings  Malaysia has a robust AML/CFT policy framework, reflecting strong political commitment, and well- functioning coordination structures and significant AML/CFT resources.  Malaysia has largely up-to-date AML/CFT statutory instruments, generally well-developed policies, institutional arrangements and implementation mechanisms.  Malaysia has a sound understanding of its risks and has integrated the outcomes of its two national risk assessments into its policies and priorities. However, it needs to improve its TF risk assessment, and strengthen the processes to disseminate risk findings. 2
  3. 3. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Key findings  The FIU produces high-quality intelligence to a range of law enforcement agencies, but it needs to improve the usage of this financial intelligence to target investigations for at least all of the high-risk crime types.  Malaysia’s frameworks for ML investigations and prosecutions are sound but have produced minimal outcomes. Malaysia is not effectively targeting high-risk offences or foreign sourced threats.  Malaysia has excellent results in confiscation to combat tax fraud and good smuggling, but low confiscation levels in other high-risk areas and in international matters. The cross-border declaration regime is producing minimal results, reducing effectiveness.17-Sep-15 3
  4. 4. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Key findings  To date, Malaysia has not prosecuted any TF cases, although it has undertaken TF investigations. Malaysia takes a security intelligence approach to terrorism prevention, rather than criminal justice action against the financiers.  Malaysia’s legal and institutional framework to implement targeted financial sanctions against terrorism is compliant and is being implemented with notable successes.  Malaysia has a targeted approach to educate and oversee non-profit organisations that are at risk to prevent their abuse for terrorist financing. 17-Sep-15 4
  5. 5. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Key findings  The legal framework for targeted financial sanctions against proliferation of weapons of mass destruction contains a significant legal gap in the delay of transposing UN designations into domestic law, which undermines effectiveness. Despite this, freezing results have occurred, supervision is taking place and vigilance measures are in place.  Malaysia’s legal framework for supervision is sound and regulators apply a risk-based approach to supervision. Supervisors have adequate resources, tools and well- trained staff. However, supervision of Malaysia’s large DNFBP population needs more resources. 17-Sep-15 5
  6. 6. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Key findings  The regulatory framework for preventative measures is highly compliant, however many sectors are taking longer to transition from a rules- based to risk-based approach.  Malaysia’s is still developing its controls on legal persons and arrangements to ensure that the ‘corporate veil’ cannot undermine AML/CFT preventative measures and investigations, but there are some notable strengths, such as the public availability of Malaysia’s legal persons ownership registers and the requirement for trustees to declare their trustee status to banks. 17-Sep-15 6
  7. 7. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Key findings  Malaysia’s has aligned its international cooperation to its risk profile to some extent, but needs to increase its focus on the risks it faces from transnational crime. Malaysia receives far more mutual legal assistance requests and law enforcement agency cooperation requests than it makes, which may be a product of Malaysia’s lack of focus on foreign threats. 17-Sep-15 7
  8. 8. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Ratings – Effectiveness (1/3) 8 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Malaysia has achieved this objective 1. ML and TF risks are understood and, where appropriate, actions co-ordinated domestically to combat ML and TF Substantial 2. International co-operation delivers appropriate information, financial intelligence, and evidence, and facilitates action against criminals and their assets Moderate 3. Supervisors appropriately supervise, monitor and regulate financial institutions and designated non-financial businesses and professions (DNFBPs) for compliance with AML/CFT requirements commensurate with their risks. Substantial 4. Financial institutions and DNFBPs adequately apply AML/CFT preventive measures commensurate with their risks, and report suspicious transactions. Moderate
  9. 9. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 9 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Malaysia has achieved this objective 5. Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments Moderate 6. Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations. Substantial 7. Money laundering offences and activities are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions Moderate 8. Proceeds and instrumentalities of crime are confiscated. Moderate Ratings – Effectiveness (2/3)
  10. 10. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 10 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Malaysia has achieved this objective 9. Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subject to effective, proportionate and dissuasive sanctions. Moderate 10. Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the non-profit sector. Substantial 11. Persons and entities involved in the proliferation of weapons of mass destruction are prevented from raising, moving and using funds, consistent with the relevant United Nations Security Council Resolutions. Moderate Ratings – Effectiveness (3/3)
  11. 11. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 17-Sep-15 11 Ratings – Effectiveness 0 4 7 0 High Substantial Moderate Low
  12. 12. 17-Sep-15 12 Ratings – technical compliance (1/5) AML/CFT POLICIES AND COORDINATION 1. Assessing risks & applying a risk-based approach Largely compliant 2. National cooperation and coordination Compliant MONEY LAUNDERING AND CONFISCATION 3. Money laundering offence Largely compliant 4. Confiscation and provisional measures Largely compliant TERRORIST FINANCING AND FINANCING OF PROLIFERATION 5. Terrorist financing offence Largely compliant 6. Targeted financial sanctions related to terrorism & terrorist financing Compliant 7. Targeted financial sanctions related to proliferation Partially compliant 8.Non-profit organisations Largely compliant
  13. 13. 17-Sep-15 13 Ratings – technical compliance (2/5) PREVENTIVE MEASURES 9. Financial institution secrecy laws Largely compliant Customer due diligence and record keeping 10. Customer due diligence Compliant 11. Record keeping Largely compliant Additional measures for specific customers and activities 12. Politically exposed persons Largely compliant 13. Correspondent banking Largely compliant 14. Money or value transfer services Compliant 15. New technologies Compliant 16. Wire transfers Compliant
  14. 14. 17-Sep-15 14 Ratings – technical compliance (3/5) PREVENTIVE MEASURES (continued) Reliance, Controls and Financial Groups 17. Reliance on third parties Largely compliant 18. Internal controls and foreign branches and subsidiaries Compliant 19. Higher-risk countries Compliant Reporting of suspicious transactions 20. Reporting of suspicious transactions Compliant 21. Tipping-off and confidentiality Compliant Designated non-financial Businesses and Professions (DNFBPs) 22. DNFBPs: Customer due diligence Largely compliant 23. DNFBPs: Other measures Largely compliant
  15. 15. 17-Sep-15 15 Ratings – technical compliance (4/5) TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS 24. Transparency and beneficial ownership of legal persons Partially compliant 25. Transparency and beneficial ownership of legal arrangements Partially compliant POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES Regulation and Supervision 26. Regulation and supervision of financial institutions Compliant 27. Powers of supervisors Compliant 28. Regulation and supervision of DNFBPs Largely compliant Operational and Law Enforcement 29. Financial intelligence units Compliant 30. Responsibilities of law enforcement and investigative authorities Compliant 31. Powers of law enforcement and investigative authorities Compliant 32. Cash couriers Largely compliant
  16. 16. 17-Sep-15 16 Ratings – technical compliance (5/5) TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS (continued) General Requirements 33. Statistics Compliant 34. Guidance and feedback Largely compliant Sanctions 35. Sanctions Largely compliant INTERNATIONAL COOPERATION 36. International instruments Largely compliant 37. Mutual legal assistance Largely compliant 38. Mutual legal assistance: freezing and confiscation Largely compliant 39. Extradition Largely compliant 40. Other forms of international cooperation Largely compliant
  17. 17. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 17-Sep-15 17 Ratings – technical compliance 16 21 3 0 Compliant Largely compliant Partially compliant Non-compliant
  18. 18. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Priority Actions for Malaysia to strengthen its AML/CFT System  Conduct further assessment of risk to include more detailed consideration of – foreign sourced threats – terrorist financing – institution vulnerabilities – interconnectedness of organised crime and other categories of crime.  Enhance the distribution of the risk assessment findings to raise reporting institutions’ awareness of ML/TF risks  Place greater focus on obtaining ML convictions and confiscation, in particular relating to high-risk offences and foreign sourced threats and profit taking levels of crime. 17-Sep-15 18
  19. 19. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Priority Actions for Malaysia to strengthen its AML/CFT System  Ensure the effective implementation of the cross-border cash reporting regime and use the outputs to support AML/CFT outcomes in relation to ML and TF investigations, asset tracing and international cooperation.  Strengthen and broaden law enforcement agencies’ use of financial intelligence, in particular in relation to TF, narcotics and other crime types beyond fraud. International cooperation will be an essential part of this.  Enhance criminal justice approaches to combat TF and seek to prosecute TF in parallel with terrorism offences and preventive actions. Further enhance outreach to the NPO sector to raise awareness of TF risks and mitigation strategies.17-Sep-15 19
  20. 20. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Priority Actions for Malaysia to strengthen its AML/CFT System  Deepen implementation of targeted financial sanctions against terrorism.  Amend the legal framework for targeted financial sanctions against weapons of mass destruction to ensure the UN designations apply without delay. Strengthen the implementation of the framework.  Target outreach and supervision by supervisors and self- regulatory organisations to expedite the transition to a comprehensive risk-based approach, with a particular emphasis on risk-based customer due diligence. Enhance the resources dedicated to the supervision of DNFBPs to ensure adequate risk-based coverage of the large DNFBP population. 17-Sep-15 20
  21. 21. Anti-money laundering and counter-terrorist financing measures in Malaysia – Mutual Evaluation Report – April 2015 Priority Actions for Malaysia to strengthen its AML/CFT System  Issue enhanced guidance on risk, including identification and mitigation of risks relevant to each sector and regulators expectations of reporting institutions’ practice with identified high-risk areas and TF.  Reflecting policy decisions taken by Malaysia, follow through with the planned amendments to the legal framework to require legal persons to keep and register beneficial ownership information and extend similar obligations to trustees.  Strengthen international cooperation to more closely align with Malaysia’s risk profile, focusing in particular on requesting formal legal cooperation to address the risks from transnational crime. 17-Sep-15 21

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