Anti-money laundering and counter-terrorist financing measures Malaysia Mutual Evaluation Report September 2015 The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CTF) standard. For more information about the FATF, please visit the website: www.fatf-gafi.org For more information about the APG, please visit the website: www.apgml.org This document and/or any map included herein are without prejudice to the status of or soverignty over any territory, to the delimitation of international frontiers and bounderies and to the name of any territory, city or area. Citing reference: FATF and APG (2015), Anti-money laundering and counter-terrorist financing measures - Malaysia, Fourth Round Mutual Evaluation Report, FATF, Paris and APG, Sydney www.fatf-gafi.org/publications/mutualevaluations/documents/mer-malaysia-2015.html © 2015 FATF and APG. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue André Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: [email protected]). Photocredits coverphoto: ©Thinkstock Contents EXECUTIVE SUMMARY ...................................................................................................................................................5 A Key ϐindings .....................................................................................................................................5 B Risk and General Situation ........................................................................................................8 C Overall level of compliance ........................................................................................................9 D Priority actions ........................................................................................................................... 12 Table 1. Effective Implementation of Immediate Outcomes .................................................. 14 Table 2. Compliance with FATF Recommendations ...................................................................19 MUTUAL EVALUATION REPORT OF MALAYSIA .................................................................................................25 Preface ....................................................................................................................................................... 25 1. ML/TF RISKS AND CONTEXT ...................................................................................................27 1.1 ML/TF Risks .............................................................................................................................................. 27 1.2 Materiality .................................................................................................................................................. 28 1.3 Structural Elements ............................................................................................................................... 28 1.4 Other Contextual Factors..................................................................................................................... 30 1.5 Scoping of Higher-Risk Issues ............................................................................................................ 30 2. NATIONAL AML/CTF POLICIES AND COORDINATION .....................................................33 2.1 Background and Context .....................................................................................................................34 2.2 Technical Compliance (R.1, R.2, R.33) ........................................................................................... 37 2.3 Effectiveness: Immediate Outcome 1 (Risk, Policy and Coordination) ..........................37 2.4 Recommendations on National AML/CTF Policies and Coordination .............................43 3. LEGAL SYSTEM AND OPERATIONAL ISSUES ...................................................................... 45 3.1 Background and Context ..................................................................................................................... 47 3.2 Technical Compliance (R.3, R.4, R.29-32) .................................................................................... 47 3.3 Effectiveness: Immediate Outcome 6 (Financial intelligence) ........................................... 47 3.4 Effectiveness: Immediate Outcome 7 (ML investigation and prosecution) ..................53 3.5 Effectiveness: Immediate Outcome 8 (Coniscation) .............................................................. 61 3.6 Recommendations on legal system and operational issues................................................. 71 4. TERRORIST FINANCING AND FINANCING OF PROLIFERATION .................................. 74 4.1 Background and Context ..................................................................................................................... 75 4.2 Technical Compliance (R.5-8)............................................................................................................ 75 4.3 Effectiveness: Immediate Outcome 9 (TF investigation and prosecution)................... 75 4.4 Effectiveness: Immediate Outcome 10 (TF preventive measures and inancial sanctions) ................................................................................................................................80 4.5 Effectiveness: Immediate Outcome 11 (PF inancial sanctions) ....................................... 86 4.6 Recommendations on Terrorist Financing and Financing of Proliferation ..................90 5. PREVENTIVE MEASURES .......................................................................................................... 92 5.1 Background and Context ..................................................................................................................... 93 5.2 Technical Compliance (R.9-23)..........................................................................................................94 5.3 Effectiveness: Immediate Outcome 4 (Preventive Measures) ............................................ 95 5.4 Recommendations on Preventive Measures .............................................................................103 Anti-money laundering and counter-terrorist inancing measures in Malaysia - 2015 © FATF and APG 2015 1 6. SUPERVISION ..............................................................................................................................105 6.1 Background and Context ...................................................................................................................106 6.2 Technical Compliance (R.26-28, R.34, R.35) .............................................................................106 6.3 Effectiveness: Immediate Outcome 3 (Supervision) .............................................................106 6.4 Recommendations on Supervision ................................................................................................117 7. LEGAL PERSONS AND ARRANGEMENTS ............................................................................119 7.1 Background and Context ...................................................................................................................120 7.2 Technical Compliance (R.24, R.25)................................................................................................120 7.3 Effectiveness: Immediate Outcome 5 (Legal Persons and Arrangements) ................121 7.4 Recommendations on Legal Persons and Arrangements ...................................................128 8. INTERNATIONAL COOPERATION .........................................................................................129 8.1 Background and Context ...................................................................................................................130 8.2 Technical Compliance (R.36-40) ....................................................................................................130 8.3 Effectiveness: Immediate Outcome 2 (International Cooperation) ...............................130 8.4 Recommendations on International Cooperation ..................................................................139 TECHNICAL COMPLIANCE ANNEX .........................................................................................................................141 1. INTRODUCTION ..........................................................................................................................141 2. NATIONAL AML/CTF POLICIES AND COORDINATION ...................................................143 Recommendation 1 – Assessing Risks and applying a Risk-Based Approach ............................143 Recommendation 2 – National Cooperation and Coordination ........................................................144 Recommendation 33 – Statistics ....................................................................................................................145 3. LEGAL SYSTEM AND OPERATIONAL ISSUES ....................................................................147 Recommendation 3 – Money