AML in Malaysia

Malaysia, an upper-middle-income economy, faces numerous money laundering threats. Factors such as porous land and sea borders, strategic geographic location, and a well-developed financial system contribute to the country’s susceptibility to both domestic and international criminal activities, including corruption, terrorism, terrorist financing, fraud, drug trafficking, smuggling, wildlife trade, and tax crimes.

Furthermore, Malaysia has established robust AML legislation and institutional frameworks, which are regularly updated. The country has demonstrated ongoing progress in enhancing its implementation of AML measures, particularly through intensified money laundering investigations and prosecutions. Additionally, Malaysia recognizes the importance of addressing crimes originating from foreign sources as a significant area for further development.

There are multiple regulatory agencies in Malaysia responsible for combating money laundering crimes. The primary agency is The Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001 (AMLATFA). AMLATFA is a federal law that applies across all states and federal territories in Malaysia. Additionally, several other regulatory agencies play a role in addressing money laundering, including:

  • Royal Malaysian Police
  • Ministry of Home Affairs
  • Securities Commission
  • Malaysia Anti-Corruption Commission
  • Immigration Department
  • Royal Malaysian Customs
  • Ministry of Finance
  • Attorney General’s Chambers
  • Companies Commission of Malaysia
  • Labuan Offshore Financial Services Authority
  • Ministry of Internal Security
  • Ministry of Domestic Trade

These agencies collectively work towards combating money laundering and ensuring compliance with relevant laws and regulations in Malaysia.

As per Section 4 of the AMLATFA, the following activities are considered money laundering:

  1. Engaging, directly or indirectly, in a transaction involving proceeds of unlawful activity or instrumentalities of an offense.
  2. Acquiring, receiving, possessing, disguising, transferring, converting, exchanging, carrying, disposing of, or using proceeds of unlawful activity or instrumentalities of an offense.
  3. Removing from or bringing into Malaysia proceeds of unlawful activity or instrumentalities of an offense.
  4. Concealing, disguising, or impeding the establishment of the true nature, origin, location, movement, disposition, title of, rights concerning, or ownership of proceeds of unlawful activity or instrumentalities of an offense.

In general, any income or gains derived from illegal activities or related transactions are considered criminal acts. The term “illegal activity” refers to serious crimes, regardless of whether they occur entirely or partially within or outside Malaysia. Authorities in Malaysia take punitive measures against these crimes.

Penalties for AML offenses vary depending on the specific offense under the AMLATFA. For a money laundering offense under Section 4, the maximum penalty is 15 years of imprisonment and a fine of not less than five times the value of the offense. In addition to penalties for money laundering, non-compliance with AML regulations can also result in consequences. In cases of minor non-compliance, the relevant supervisory authority may issue a warning letter to the reporting agency involved.

While banks and financial institutions in Malaysia are obligated to adhere to AML regulations, there are certain institutions that must also comply with these regulations due to their inherent money laundering risks. The following are examples of such institutions:

  • Legal professionals such as lawyers
  • Accounting firms and company secretaries
  • Licensed casinos
  • Licensed gaming outlets
  • Registered estate agents
  • Trust companies
  • Moneylenders
  • Pawnbrokers