Even a doctor. One was convicted in 2012.

Under the Act even a fishmonger may not be spared.

Do you remember ‘Nineteen Eighty-Four’  by George Orwell? He wrote it in 1949, possibly in a direct attack on Stalinist totalitarianism. In the story he examines the curtailment of freedom by politicians and public officials. [1]

Orwell had prophetic insight. He seems to have foreseen AMLA.

On September 11, 2001, 19 terrorists hijacked four aircraft and carried out suicide attacks on selected US targets. In its aftermath, it was discovered that the terrorists had established a world-wide financial network.

Before 9/11, governments everywhere had fought such financial crimes using available laws: [2]

It did not work.

You know why?  Governments were riddled with corruption.  Most politicians in power were corrupt. Terrorists slipped through the fingers of law enforcement.

So countries across the world enacted various anti-terrorist and anti-money laundering laws.

Malaysia enacted its own version in the  Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act  in 2001.[3]. Hence ‘AMLA’.

In 2013, Parliament widened the ambit of the Act.

The Bank Negara website states that: –

‘… there [are] 356 offences under 42 [Acts] listed under the Second Schedule of the AMLA’.

So AMLA is a Super Act.

It watches everything.

And it catches everything.

It is the cautionary tale of Orwellian proportions.

Under AMLA, ‘Big Brother is Watching You’. Always.

[1]-Why is snitching so important?

The Act expects you to snitch – on everyone.

A ‘snitch’ is an informer:  he or she gives incriminating information about others.  Quite the way the Orwellian hero in ‘1984,’ Winston Smith does, right at the end of the story.

The Act gives snitches a nice name: they – you – are called ‘Reporting institutions’: [4]

[2]- Here’s the lowdown on AMLA

In case you are in a hurry, here is a summary of what you need to know about AMLA – and what you need to do:-

(a).      Snitch on people you think are indulging in ‘suspicious transactions’.

(b).      ‘Suspicious transactions’ are 356 kinds of ‘unlawful activities’ which the Act specifies. Know them well.

(c).      The people you should snitch on are your clients and your opponents.

(d).      Snitch all the time, everywhere, and on everyone.

(e).      If you snitch, nothing will happen to you.  No one can sue you; or hold you criminally liable; or accuse you of misconduct. What you say will be held in secret.

(f).       If you don’t snitch, you’ll get slapped with multiple AMLA and non-AMLA crimes; you will be punished separately for each, and you will certainly go to prison  — and then you’ll have to pay to the Government five times more than the total value of the suspicious transactions that you did not snitch on.

(g).      It is not what you think is suspicious that matters -it is what the court thinks that does.

(h).      So, if in doubt, snitch.

(i).       In order to stay out of AMLA’s clutches, adopt, develop and implement ways to detect or avoid any AMLA offence; and ‘implement’ AMLA-compliant programmes.

(j).       Keep a record on your client’s activities for more than 6 years.

(k).      Conduct customer due diligence for a period of at least six years – in other words, become a Sherlock Holmes. Snoop around your client’s –or your opponent’s backyard – all the time.

[3]-Starting Point

AMLA is designed to punish people who hide, use, or transact with assets that are the fruit of illegal activities.  They are ‘dirty assets’.  If money is the fruit of such activity, it is ‘dirty money’.

AMLA also punishes other people who ‘help’ the former by being silent.

[4]-What is ‘money laundering’?

What do you do with dirty clothes?  You wash them in a laundry.

When a person takes a ‘dirty asset’ (or ‘dirty money’) and puts it through a process to make it look like it is a ‘clean asset’ – that’s ‘money laundering’.

[5]-Why was AMLA enacted?

Terrorists exploit vulnerable points in a nation.  They find that two groups of people can be exploited – the criminal underworld and corrupt people in power.

So AMLA – and versions of it all over the world— deliberately cast the net wide.  Otherwise it would be difficult to catch terrorists.

So AMLA criminalises the persons, the assets and the processes involved in money laundering.

[6]-What will be the effect of AMLA?

Used wisely and effectively, in time it will eradicate terrorism and corruption.

In the near future, if your conduct (or omission) fall under it, it can kill your practice or business, send you to jail, and make you a bankrupt — because you’d be forced to pay as much as 5 times the value of the asset, or RM5.0 million, whichever is higher. [5]

The Act can go after your family and friends.[6]

It will burn even a dentist.

Or an architect.

Or an Engineer.

Or a chicken farmer.

It is that wide.

[7]-First Line of Defence against Money Laundering are professionals — each professional is now a ‘Reporting Institution’

The First Source of illegal funds is crime.  It is difficult to trace such transactions.  But at some point the Dirty Money has to ‘come up for air’.

To launder money, Big Money requires the help of Big Boys and Girls. They are the first liners, such as:-

Bankers,

Accountants,

Auditors,

Finance advisors,

Investment advisors,

and Lawyers.

Or anyone who ‘receives, holds and transfers money on the instruction’ of their masters.

If you catch the First Liners, you catch the problem at the Second Source.

So AMLA catches first liners.

So if you, as a professional, get a whiff of what you think are ‘suspicious activities’, you must snitch on it: [7].

You must report it.

You have no choice.

If you omit to report suspicious activities, you may be charged with numerous crimes:[8].

What you have to report are ‘unlawful activities’.

[8]. What are ‘unlawful activities’? Some 356 offences are defined

AMLA catches 356 offences under 42 Acts.  These are listed under the Second Schedule of the AMLA. [10].

Here are some ridiculous examples:-

Being a kootu [tontine] participant or carrying on such business [11] – by now all the old Indian aunties should be in prison!

Fishing without licence, or fishing in Malaysian waters using a foreign vessel [12];

Producing or selling palm products without licence – farmers beware! [13];

Keeping smuggled immigrants in your premises (building contractors beware!);

Employing a person without a valid Pass;

An occupier of a building allowing an immigrant to enter into, or remain on the premises – housewives beware! [14]);

Wrongful communication [WhatsAppers beware][15];

Importing or exporting endangered animals [16];

Hunting protected wildlife [20];

Evading excise duties [17];

Smuggling migrants;

Unlicensed moneylending, harassment or intimidation[18];

Selling items with a false trade description [19];

Criminal breach of trust [21];

Cheating [22];

Robbery [23];

Theft [24];

Murder [25]; and

Being a pawnbroker without a licence. [26]

This should give you an idea of how wide and varied are AMLA offences.

[9].  Why is AMLA so dangerous?

There are many reasons.  I’ll give you one.

In any criminal case, the prosecution must ‘prove’ its case on a standard ‘beyond reasonable doubt’ – some people call it a ‘75% proof rate’ (but that is a dangerous assumption). AMLA preserves that law: [9].

Then, it does something unusual – and dangerous.  Suppose someone is arrested for money-laundering. Suppose the police say they found the monies in the booth of his car.  He and his maid say, ‘No, the booth was empty.’ So the court has to now decide if the money was in his car booth or not. Who is the judge to believe?  This is called ‘a question of fact’.

AMLA says the judge can believe the police if the  evidence (on the question of fact) meets the standard of a mere ‘balance of probabilities’ (some people say this is a ‘51% standard of evidence’, but again it is a dangerous assumption—but it illustrates the point).  That is the civil standard. [27].

Here comes the dagger.

Even if you are charged with ‘tax evasion’ e.g., and the police failed to prove that charge against you, you can still be convicted of ‘money laundering’. Section 4(2) sees to that.

It is a poisonous section.

So the MACC may start investigations somewhere else, and having failed there, end up using the AMLA offences as a ‘catch-all’ under the Second Schedule to AMLA.

[10].  Not only must you report – you must set up a whole array of policies and procedures

The Act requires professional firms to ‘adopt, develop and implement policies, procedures and controls to ‘guard against’ and ‘detect’ ‘any offence under AMLA, and to ‘implement compliance programmes.’ [28]

What happens if you don’t do all that?

You are guilty of a crime.

So here are some questions that might help you:-

What is your firm’s AMLA policy?

What methodology do you have in place?

What controls have you placed in your tiny – or massive – law firm?

Or architectural firm?

[11].  You are required to conduct a customer due diligence and keep a record on your client’s activities

You must keep a record on your client’s activities. You need to conduct ‘customer due diligence’ for ‘at least six years’.[29]

If you fail to file an STR in time, you may be charged. Omission is not an option.

Hence, ‘When in doubt, snitch!’

[12]. Investigate your client

Are you expected to behave like Sherlock Holmes?

Well, it is better to investigate and report, than not.

[13]. What kind of activities must you report? ‘Suspicious Transactions’

You have to report ‘suspicious transactions’. [30]

You have to file a ‘Suspicious Transaction Report’ (‘STR’). The Methodology for it can be found the Bank Negara website. You need to report it to the Financial Intelligence and Enforcement Division, BNM.

If you are involved in the sale and purchase of ‘properties’ you had better watch what you’re are doing.

Not just landed properties.

‘Property transactions’ include buying and selling houses, lands, shares, tenancy arrangements, general equipment, ships, and factory, or vehicles.

Not only that, but any activity that is ‘incidental’ to those ‘services’: the act of holding client’s monies in the firm’s clients’ account, RPGT deposits, or deposit of earnest monies.

That is the ‘straight’ part.

Then come the not-so obvious duties.

This is where you ‘manage clients’ monies or assets’.

Where you hold million of dollars ‘on trust’ for your client’ to ‘pay bills’ until the client returns from a trip to the wilderness of Siberia.

Or where money is ‘parked’ in a law firm pending the extraction of the Letters of Administration.

The Third Layer is where the client says it has many different accounts and wants ‘advise’ on how to ‘manage’ those accounts.

Which monies must be parked where?

How should tax avoidance be maximised? (Not tax evasion).

The Fourth Layer concerns professionals who receive funds for — or advise on — the creation of ‘investment funds’; and how these should be capitalised in a company or an investment arm.  This also involves what look like debt-restructuring activities — but are not.

[14]. What particulars should you report?

Find out enough particulars about your client.  Knowing about their actual identity, personal and passport details, dates of birth, nationality, and purpose of transaction, details of business registration, nature of business, the details of directors and shareholders, etc —are all only the first step.

You need to excavate deeper. Ask yourself: –

What is the source of my client’s funds?

Then file the STR accordingly.

[15]. How wide is your duty to report?

The Act makes it rather wide. Very wide [31].

[16]. Secret agents

What AMLA does is to enlist your help as a secret agent.

[17]. If you snitch will you get into trouble?

The Act says, ‘No’.

Under the Act, no civil, criminal or disciplinary action can be taken against a snitch. AMLA sees to that.

It protects a snitch.

No one can sue you.

Snitching is not a breach of confidentiality.

It is not ‘professional misconduct’.

By extension, you should not lose your professional indemnity insurance.

[18]. What happens if your don’t report?

Two things: if found liable, you could be imprisoned up to five years.

But worse is to follow: if you are liable you have to pay back to the Government up to five times the sum over which you have breached the law.

[19].  Here a few reported examples

In 2012 a doctor, Dr Hamimah Idruss, was accused of falsifying certain financial documents. Some RM42 million was transferred into her account. She was convicted under AMLA and sentenced to 38 years in prison. She was fined RM6.39 million.

Two years ago MACC seized RM114 million from the homes of a Sabah Water Department director and his deputy. Money was also found packed into their cars. It was called the “Sabah Watergate” case. Investigators seized RM30 million worth of jewellery and 127 land titles. Naturally their bank accounts were frozen. We don’t know what happened to them.

In August 2017, Singapore police found that one Hasanah Abdullah, 44  had made 40 fraudulent wire transfers worth S$416,000. These monies were sent to her various bank accounts.  They ‘were from victims of various commercial crimes, including advanced fee fraud, email fraud, parcel scams, love scams, and charity scams’.  Her accomplice, Siti Zubaidah A. Johabar Ali, 30, was convicted on Aug 28 on a similar charge.

In April, in Singapore, an American, David Plate, was jailed for 4 years for conning a songwriter, Mary Lamar, out of USD 600,000.00.

[20]. What are reported Professional Lapses and Good practices?

A few months ago, the Bar Council sent out a notice advising lawyers on ‘good practices’. These were: [32]

(1)       Maintain a centralised customer database;

(2)       Systematically record how you have conducted customer due diligence; and

(3)       Store customer transaction records for at least 6 years.

Bank Negara had pointed out that professional firms suffered from certain lapses” –

(1)       Inadequate risk profiling of clients, especially high-risk clients;

(2)       Not monitoring client’s transactions;

(3)       Not having  “red flag” procedures to detect suspicious transactions;

(4)       Not having a database on sanctioned individuals and entities;

(5)       Not checking all clients against the list of sanctioned entities;

(6)       Not doing a ‘money laundering’ or ‘terrorism financing’ risk assessment on client’s business activities or geographical presence;

(7)       Not having written policies and procedures on key areas of AMLA requirements;

(8)       No ‘management oversight’ on AMLA requirements;

(9)       Not having a Compliance Officer to comply with AMLA; and

(10)     Not conducting AMLA training for employees.

[I am grateful to Dato V. Sithambaram, Advocate & Solicitor, from Penang. I heard him speaking at Santubong, Sarawak last week. I asked his permission to write on the subject – in my own way – with some of my own materials added.  All praise to him. All errors mine].

Endnotes:

[1].  Robert McCrum, 2009, The Observer, George Orwell?; ‘The Masterpiece that killed George Orwell’ (https://www.theguardian.com/books/2009/may/10/1984-george-orwell).

[2] e.g. the Penal Code, the Companies Act 1965, and the Dangerous Drugs (Forfeiture of Property) Act 1988 and the Anti Corruption Act 1997.

[3]  It came into force on Jan 15, 2002.

[4]. Section 4A, 14 etc AMLA

[5]. Section 4 AMLA

[6]. First Schedule, AMLA

[7]. Ibid

[8]. Sec 22, AMLA.

[9]. sec 70[2]

[10]. Sec. 4 AMLA

[11]. Kootu Funds [Prohibition] Act 1971

[12] Fisheries Act 1985

[13]. Malaysian Palm Oil Board [Licensing Regulations] 2005

[14]. Immigration Act

[15]. Computer Crimes Act 1997

[16]. International Trade in Endangered Species Act 2008

[17]. Excise Act

[18]. Moneylenders Act 1951

[19]. Trade Descriptions Act 2011

[20]. Wildlife Conservation Act 2010

[21]. Sec 405, Penal Code

[22]. Sec 415 Penal Code

[23]. sec 392 Penal Code

[24]. Sec 379 Penal Code

[25]. Sec 300 Penal Code

[26]. Pawnbrokers Act 1972

[27].  ]  sec. 70[1]

[28]. Sec 19 AMLA

[29] Sec 13(3), secs. 16, and 17 AMLA

[30]. Sec 14, AMLA.

[31]. Part IV].

[32] Bar Council Circular No. 119/2018 Dated 8 May 2018