5. A Malaysian Banking Perspective: The Regulation and the Regulator's Guidelines
Regulation
In the country of Malaysia, the relevant legislation / regulation for AML/CFT is called the Anti-Money Laundering Anti Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) .
Some key areas in the legislation that are worth noting, from my personal point of view (and my paraphrase), for banks generally are:
Section 4: Definition of Money Laundering offence by a person or employee in their course of work;
Section 12: Premitted disclosure and what happens when there is unauthorised release of information;
Section 14: Obligation to submit Suspicious Transaction Reports (STR)
Section 16: Requirements to conduct Customer Due Diligence (CDD) when onboarding new customers or performing transactions for customers
Section 17: Requirements to retain records and it penalties for non-compliance
Section 19: Requirement to set up a Compliance Program
Section 35: Tipping off offence
First Schedule: Definition of Reporting Institution
Second Schedule: Definition of Serious Offence
Click here for the full copy of the AMLATFPUAA (http://www.bnm.gov.my/index.php?ch=en_legislation&pg=en_legislation_act&ac=225&full=1&lang=en)
Guidelines
While there are many types of reporting institutions that have to abide by the legislation, the regulator, Bank Negara Malaysia (BNM) has provided additional guidelines to assist the reporting institutions in meeting the requirements. We will now take a quick look at the guidelines provided by BNM for Banking and Deposit Taking Institutions (Sector 1). I will highlight some of the salient features of these guidelines for your information.
Section 12: Looks at Risk Management, Risk Assessment, Control and Mitigation. Risk profiling to be done on customers, considering the following factors:
a. customer risk;
b. location / country of origin;
c. product, service or delivery channel;
d. any other relevant information
Section 13: focuses on Customer Due Diligence (CDD)
a. detailing WHEN CDD is required to be conducted on the customer;
b. what is required to be done when performing CDD
c. the timing of performing verification of the info obtained
d. specific CDD measures for different types of customers (individuals/beneficial owners, legal persons, many more)
e. when to conduct enhanced CDD and what must be done
f. what to do when performing ongoing CDD on existing customers
Section 14: Politically Exposed Persons (PEPs)
Provides definitions of local and foreign PEPs as well as some guidelines on their risk profiling and CDD to be done.
Section 15: New Products and Business Practices
In this current time, there are many new inovations as new ideas and technologies lead to new products and new ways of doing business. With these changes, the Reporting Institution has to assess the AML/CFT risks accordingly and take reasonable steps to address and manage those risks.
Section 18: Wire Transfers
This section details the requirements for banks processing wire transfers, whether domestic or cross border. Requirements include originator and beneficiary information.
Other key areas:
Section 21: Reliance on 3rd parties
Section 22: Non face to face business relationships
Section 23: High risk countries
Section 27: Record keeping
Section 28: AML/CFT Compliance program
Section 29: Suspicious Transaction Reporting
Section 31: Combating the financing of terrorism
Appendix 1: Examples of transactions/behaviours/ red flags / indicators of suspicious nature
Click here for the full copy of BNM's Guidelines for Sector 1 (http://www.bnm.gov.my/index.php?ch=57&pg=137&ac=29&bb=file')
