Concerns Around Money Laundering and Terrorism Financation

Today’s modern society, together with high achievements in all fields of human life, is more seriously threatened by crime that is constantly on the upswing. Special emphasis shall be placed on the organized crime that is socially negative phenomenon, possible to infiltrate in the socio-economic and political conditions in the country. Money laundering and financing terrorism can be considered as one of the “new forms” of organized crime, although the term of this crime is derived ling ago. The international nature of trade, payment systems, the advent of new technologies enable successful, in some cases, concealment and transfer of large flows of dirty money through the mixing with the proceeds of legitimate business.

Money laundering is seen as posing an international global threat, particularly amongst policy makers, facilitating serious and organised crime and undermining the integrity of financial system. This criminal phenomenon strikes a heavy blow to any economy, directly interfering with the monetary system and adversely affecting the economic development. Besides, it negatively affects the confidence in the political and economic system, directly impoverishing the population.

The literature on the concept of money laundering is rather extensive and abounding from various commentators. For instance, the United Nations Convention against Transnational Organized Crime 2000 defines money laundering as the process of converting or transferring criminal proceeds with the intention of disguising their illicit origin (article 3(1)(a) of the United Nations Convention against Transnational Organized Crime). Similarly, the FATF defines money laundering as the processing of a large number of criminal acts to generate profits for an individual or a group that carries out the act with the intention to disguise their illegal origin, in order to legitimise the ill-gotten gains of crime (FATF 2001; Hamin et al, 2013). The International Criminal Police Organization (‘INTERPOL’) being the world’s largest international police organisation defines money laundering as any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources.

Terrorism financing is a matter of great global concern after the September 11 attacks in the United States of America (‘United States’) (Ratner 2002; Andreas 2003). The International Convention for the Suppression of the Financing of Terrorism 1999 defines terrorism financing as a crime if ‘any person by any means, directly or indirectly, unlawfully and wilfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out terrorism’. The World Bank states that terrorist financing is the financial support, in any form, of terrorism or of those who encourage, plan or engage in it (World Bank 2006; Schott 2006). The September 11 attacks in the United States have brought out a critical need for cooperation among countries to combat the networks of financing terrorism (Thony, 2002).

The consequences of such terrorist attacks have led to the creation of special recommendations to counter the financing of terrorism (‘CFT’) by the FATF, which is now known as FATF Nine Special Recommendations (Vlcek, 2011). Such recommendations by the FATF were related to criminalising and confiscating terrorist financing. Different manners of terrorist financing have been examined. For instance, Durrieu (2013) identifies four various forms in which terrorist groups finance their activities; firstly, by using criminal assets, secondly, by using legal assets, thirdly, through money laundering and fourthly, through money dirtying. Terrorism financing has renewed interests in money-laundering that was due to the constant reporting by the Western media of terrorists committing money-laundering to support the causes of their movements. Furthermore, the special features of the terrorist fund laundering is that it explicitly aims to examine the proceeds of legitimate-source activity actually used or intended to be used for, rather than deriving from criminal purpose.

The Malaysian government has taken measures in countering money laundering and has criminalised money laundering by introducing the Anti-Money Laundering Act (‘AMLA’) in July 2001. AMLA has empowered certain agencies with the authority to trace, seize and ultimately confiscate criminally derived wealth and thus enabling the inter-government exchange of information with counterparts in other countries. Subsequently, on 30 September 2004, the AMLA 2001 was amended to be in line with the newly issued FATF 2003 recommendations (The Anti-Money Laundering Forum IBA, 2013).

The effect of the amendments has led to three pertinent changes involving firstly, the change of the name of the act from AMLA to AMLATFA 2001. Secondly, the criminalisation of terrorist financing and finally, the DNFBPs which include legal practitioners to be given the same obligations as the financial institutions to report to the competent authority of any suspicious transaction. In the recent amendment in 2013, the AML/ATF law was amended to tighten the regulation and measures in countering money laundering and terrorism financing. The amendments of the said law have led to a change in the name of the Act to the Anti-Money Laundering, Anti-Terrorism

Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA 2001) (Hamin, Othman & Kamaruddin, 2014; Hamin et al 2015). Apart from the above-mentioned changes, the new legislation provided many other significant changes including increased investigative powers and enhanced penalties for various offences under the said legislation and the inclusion of new predicate offences including tax avoidance.