Integrated anti-money laundering initiatives in the Malaysian banking industry towards FATF full-compliant status
DOI:
https://doi.org/10.24200/jonus.vol8iss1pp117-139Abstract
This study aims to demonstrate the integrated anti-money laundering (AML) initiatives in the Malaysian banking industry, focusing on achieving the Financial Action Task Force (FATF) full-compliant status. It reviews and analyzes secondary data from relevant literature and documents about money laundering risk in the Malaysian banking industry. The review reveals that the integrated AML initiatives combine domestic and international efforts, which the Malaysian Central Bank and FATF anchor. Malaysia has proactively abided by the FATF requirements, and affirmative progression can be seen from the improved FATF-compliant status throughout the years. This study adds new knowledge to the literature by integrating domestic and international AML efforts. With the current integrated AML initiatives in place, Malaysia can achieve a full compliance status with the FATF, and this forms a strong pillar that could protect the Malaysian banking industry from money laundering risk.
Keywords: Money laundering, AML, risk, banking industry, Malaysia.
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Sathye, M., & Islam, J. (2011). Adopting a risk-based approach to AMLCTF compliance: The Australian case. Journal of Financial Crime, 18(2), 169–182.
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AMLA. (2001). Anti-money laundering, anti-terrorism financing and proceeds of Unlawful Activities Act 2001. Laws of Malaysia.
Asia/Pacific Group on Money Laundering (APG). (2001). Annual report 2000-2001. The Asia/Pacific Group.
Asia/Pacific Group on Money Laundering (APG). (2002). Annual report 2001-2002. The Asia/Pacific Group.
Asia/Pacific Group on Money Laundering (APG). (2007). APG mutual evaluation report on Malaysia. The Asia/Pacific Group.
Asia/Pacific Group on Money Laundering (APG). (2015). Mutual evaluation report on Malaysia anti-money laundering and counter-terrorist financing
measures. The Asia/Pacific Group.
Asia/Pacific Group on Money Laundering (APG). (2018). Malaysia - Enhanced follow-up report & technical compliance re-rating. The Asia/Pacific
Group.
Basel Committee on Banking Supervision. (2013). Basel committee on banking supervision consultative document sound management of risks
related to money laundering and financing. Basel Committee.
BNM. (2011). Financial sector blueprint 2011-2020. Bank Negara Malaysia.
BNM. (2014). The financial stability and payment systems report 2014. Bank Negara Malaysia.
BNM. (2015). Compliance. Bank Negara Malaysia.
BNM. (2018). The financial stability and payment systems report 2018. Bank Negara Malaysia.
BNM. (2020). Malaysia banking sector report 2020/2021. Bank Negara Malaysia.
BNM. (n.d.a). Anti-money laundering and counter financing of terrorism, (Sector 4). Bank Negara Malaysia.
BNM. (n.d.b). Anti-money laundering and counter financing of terrorism (AML/ CFT) - Banking and deposit-taking institutions (Sector 1). Bank Negara
Malaysia.
BNM. (n.d.c). Standard guidelines on anti-money laundering and counter financing of terrorism (AML/CFT) (BNM/RH/GL000-2). Bank Negara Malaysia.
Dhillon, G., Ahmad, R., Rahman, A., & Ng, Y. M. (2013). The viability of enforcement mechanisms under money laundering and anti-terrorism offences
in Malaysia. Journal of Money Laundering Control, 16(2), 171–192.
Duncan, P. (2021). A methodology for enterprise-wide risk assessment in small banks and credit union. Journal of Money Laundering Control, 24(2),
374-395.
Edirisuriya, P., Gunasekarage, A., & Perera, S. (2019). Product diversification and bank risk: Evidence from South Asian banking institutions. Applied
Economics, 51(5), 444-464.
Favarel-Garrigues, G., Godefroy, T., & Lascoumes, P. (2007). Sentinels in the banking industry: Private actors and the fight against money laundering in
France. British Journal of Criminology, 48(1), 1–19.
FATF. (2012). International standards on combating money laundering and the financing of terrorism & proliferation. The FATF Recommendations.
FATF. (n.d.). Financial Action Task Force (FATF). https://www.fatf-gafi.org/
Hinterseer, K. (1997). An economic analysis of money laundering. Journal of Money Laundering Control, 1(2), 154–164.
Hoque, M. N., & Said, J. (2021). Money laundering from Maqāsid Al-Sharī ‘Ah perspective with particular reference to preservation of wealth (Hifz Al-
Mal). https://ssrn.com/abstract=3209775
Idowu, A., & Obasan, K. (2012). Anti-money laundering policy and its effects on bank performance in Nigeria. Business Intelligence Journal, 5(2), 367–
373.
Idris, A. N. (2022, January 25). Malaysia drops five spots to 62 in TI-M's corruption index rankings. The Edge Markets.
https://www.theedgemarkets.com/article/malaysia-drops-five-spots-62-tims-corruption-index-rankings
Killick, M., & Parody, D. (2007). Implementing AML/CFT measures that address the risks and not tick boxes. Journal of Financial Regulation and
Compliance, 15(2), 210–216.
KPMG. (2013). Malaysia fraud, bribery and corruption survey 2013. KPMG Management & Risk Consulting Sdn Bhd.
Latif, A. M. A., & Abdul-Rahman, A. (2018). Combating money laundering in Malaysia: Current Practice, Challenges and Suggestions. Asian Journal of
Accounting and Governance, 10(1), 123-134.
Levi, M., & Reuter, P. (2006). Money laundering: Crime and justice. The University of Chicago Press, 34(1), 289–375.
Mat Isa, Y., Sanusi, Z. M., Haniff, M. N., & Barnes, P. A. (2015). Money laundering risk: From the bankers’ and regulators perspectives. Procedia
Economics and Finance, 28(1), 7-13.
Mat Isa, Y., Mohd-Sanusi, Z., Sabri, S. S., & Barnes, P. A. (2021). Money laundering risk judgement and decision-making: Influences of customer due
diligence process and bank employees' expertise. International Journal of Economics and Business Research, 22(1), 1-20.
McDowell, J., & Novis, G. (2001). The consequences of money laundering and financial crime. Economic Perspectives, 6(2), 1–4.
McLaughlin, J. S., & Pavelka, D. (2013). The use of customer due diligence to combat money laundering. Accountancy Business and Public Interest,
1(2013), 57–84.
Naheem, M. A. (2015). HSBC Swiss bank accounts - AML compliance and money laundering implications. Journal of Financial Regulation and
Compliance, 23(3), 285–297.
Nance, M. T., & Tsingou, E. (2020). Who’s driving the ship? De-risking and governance of the AML regime. Journal of European Public Policy, 12(5), 841-
859.
Nazri, S. N. F. S. M., Zolkaflil, S., & Omar, N. (2019). Mitigating financial leakages through effective money laundering investigation. Managerial
Auditing Journal, 34(2), 89-207.
Pamungkas, D. (2020). How police overcomes money laundering? Study analysis of role of central Java regional police department on money
laundering case. Journal of Law and Legal Reform, 1(1), 25-34.
Podder, S. (2022). Leveraging the provisions of open banking to fight financial crimes. In D. Goldbarsht & L. de Koker (Eds.), Financial technology and
the law: Combating financial crime (pp. 19-46). Springer.
Pramod, V., Li, J., & Gao, P. (2012). A framework for preventing money laundering in banks. Information Management & Computer Security, 20(3),
170–183.
PricewaterhouseCoopers (PwC). (2020). PwC’s global economic crime and fraud survey. Malaysia Report.
Protess, B., & Silver-Greenberg, J. (2012, December 11). HSBC to pay $1.92 billion to settle charges of money laundering. The New York Times.
https://archive.nytimes.com/dealbook.nytimes.com/2012/12/11/hsbc-to-pay-record-fine-to-settle-money-laundering-charges/?
action=click&module=RelatedCoverage&pgtype=Article®ion=Footer
Raj, A. P. (2015, November 27). AmBank Group: Bank Negara fine was due to weaknesses in reporting systems. The Edge Markets.
https://www.theedgemarkets.com/article/ambank-group-bank-negara-fine-was-due-weaknesses-reporting-systems
Ruce, P. J. (2011). Anti-money laundering: The challenges of know your customer legislation for private bankers and the hidden benefits for
relationship management (“The bright side of knowing your customer”). Banking Law Journal, 128(6), 548–564.
Sarigul, H. (2013). Money laundering and abuse of the financial system. International Journal of Business and Management Studies, 2(1), 287–301.
Sathye, M., & Islam, J. (2011). Adopting a risk-based approach to AMLCTF compliance: The Australian case. Journal of Financial Crime, 18(2), 169–182.
Simser, J. (2013). Money laundering: Emerging threats and trends. Journal of Money Laundering Control, 16(1), 41–54.
Simwayi, M., & Guohua, W. (2011). The role of commercial banks in combating money laundering. Journal of Money Laundering Control, 14(4), 324–
333.
Teichmann, F. M. J. (2017). Twelve methods of money laundering. Journal of Money Laundering Control, 20(2), 130-137.
The World Bank. (2017). The world bank annual report 2017. World Bank Group.
United Nations Office on Drugs and Crime. (2019). World drug report 2019. United Nations.
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2023-01-31
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Integrated anti-money laundering initiatives in the Malaysian banking industry towards FATF full-compliant status. (2023). Journal of Nusantara Studies (JONUS), 8(1), 117-139. https://doi.org/10.24200/jonus.vol8iss1pp117-139
