It’s a nice pleasure and honour to welcome all of you this morning to the AML/CFT Compliance Convention 2021. This convention kinds a part of Financial institution Negara Malaysia’s initiatives to raise the understanding and stage of AML/CFT compliance amongst all reporting establishments. Whereas we’re unable to fulfill in individual, I’m glad that we are able to join nearly amidst the challenges introduced on by the Covid-19 pandemic.
The pandemic has accelerated the tempo of change, particularly in the direction of better digitalisation adoption in all spheres of life, to the good thing about not solely the personal and public sectors, but in addition criminals, who’re all the time looking out for loopholes in rules, operations and compliance. Embedded within the convention theme at present is the necessity for us to stay vigilant of the heightened cash laundering (ML) and terrorism financing (TF) dangers.
There isn’t any doubt that ML/TF actions significantly have an effect on the integrity of the monetary system. Equally essential, ML/TF actions pose critical dangers to a rustic’s social and financial stability. Whereas many guesstimates have been made, the unlawful nature of cash laundering makes it tough to find out the exact quantity of funds which can be laundered. The legitimisation of unlawful proceeds from numerous prison actions, comparable to drug trafficking, fraud or scams, corruption will finally result in lack of public confidence within the monetary system. Left unchecked, ML actions will enable criminals to proceed to learn from their proceeds of crime and thus, enable crimes to thrive. Subsequently, we should recognise that efficient detection, prevention and enforcement towards ML actions are essential elements of total efforts to fight crimes.
How does your function match into this? I want to emphasise that stopping and combating monetary crimes is a shared accountability of all stakeholders, from each the personal and public sectors. As the primary line of defence, the reporting establishments from the monetary sector, non-bank monetary establishments and the designated non-financial companies and professions sectors play a crucial function. Basically, by making certain compliance with the legal guidelines, rules and necessities of AML/CFT, you’ll assist shield not solely your establishment, however finally forestall the proceeds of illegal actions and funding of terrorism from penetrating into our monetary system. Equally essential, your function will considerably restrict the power of criminals to learn from their ill-gotten positive factors. As well as, the data that you just collect can also be crucial in facilitating the investigation and prosecution of those crimes.
On that be aware, I want to contact on three core pillars of a sturdy AML/CFT compliance system:
- Understanding threat exposures at institutional and nationwide ranges;
- Leveraging on know-how as a key enabler within the combat towards ML/TF; and
- Efficient collaboration with all stakeholders.
Please enable me to elaborate.
a) Understanding threat exposures at institutional and nationwide ranges
First, an efficient AML/CFT compliance programme requires understanding of threat exposures at each institutional and nationwide ranges. On this regard, I want to take this chance to tell that the Nationwide Coordination Committee to Counter Cash Laundering or NCC has just lately concluded the Nationwide Threat Evaluation 2020 (NRA 2020). At the moment, I’ll share three key findings of the NRA 2020 whereas extra particulars will probably be mentioned all through the convention. A written report of NRA 2020 will probably be shared with all reporting establishments early subsequent 12 months.
Nationwide threat evaluation or NRA is globally acknowledged as an integral part and a dependable device to facilitate understanding of ML/TF threat exposures inside a rustic. The NRA 2020 is the fourth iteration of our threat evaluation, which Malaysia has dedicated to the Monetary Motion Job Drive (FATF) to conduct each three years.
Financial institution Negara Malaysia, because the secretariat to the NCC, led the preparation of the NRA 2020, with the help of the related legislation enforcement businesses, together with Royal Malaysia Police, Malaysian Anti-Corruption Fee, Nationwide Anti-Monetary Crime Centre and Inland Income Board. The preparation of the NRA 2020 concerned quantitative and qualitative information sources incorporating statistics from numerous businesses, inside and exterior reviews in addition to surveys carried out amongst legislation enforcement businesses, reporting establishments and worldwide stakeholders. I want to thanks for the help given to allow Financial institution Negara Malaysia to undertake a complete, reflective and significant NRA train.
The NRA 2020 has recognized high 5 crimes posing excessive ML menace to the nation and these are:
- fraud, which incorporates dishonest and unlawful funding scheme;
- illicit medicine trafficking;
- corruption and bribery;
- smuggling offences, together with evasion of customs and excise duties; and
- organised crimes.
We’ve got additionally noticed elevated threat for the next two crimes:
- environmental crimes because of growing threat emanating from unlawful wildlife trafficking, unlawful mining in addition to unlawful importation of plastic waste; and
- extortion because of growing threat emanating from cyber-enabled assault together with ransomware assault and under-reporting of extortion.
As well as, the NRA 2020 has additionally recognized firm secretaries, authorized companies in addition to sellers in treasured metals and stones as among the many sectors which can be weak to cash laundering actions. On this regard, the compliance officers from these sectors ought to be additional vigilant to the chance that their companies might be used for cash laundering actions.
On the outlook shifting ahead, it’s envisaged that the highest 5 excessive threat crimes will stay unchanged within the subsequent three years. However, one factor to be conscious of is the chance of the growing use of know-how and the shift of prison actions to on-line platforms. Associated to this, we count on to see a continued rise within the adoption of digital belongings amongst criminals and terrorists to launder their proceeds or finance their illicit actions, predominantly because of problem in tracing the related funds and figuring out beneficiaries. Digital belongings, together with cryptocurrencies, are noticed to be gaining extra traction and exploited by sellers of the darkish net, suppliers of kid sexual abuse supplies, ransomware creators and terrorist organisations.
So, what does it imply for reporting establishments?
It can be crucial for a reporting establishment to establish, assess, and perceive the extent of ML/TF dangers to your small business or organisation. In assessing the dangers, issues ought to be given to the findings of the NRA, notably in case your sector has been recognized as weak in facilitating the excessive threat crimes. Understanding these dangers will decide the required controls you should put in place and translate this into your AML/CFT compliance programme to mitigate and handle these dangers, via proportionate allocation of sources. This can be a crucial step to make sure that, whereas mitigating the dangers of ML/TF, you don’t apply a very cautious strategy which will inadvertently exclude authentic enterprise and customers from the monetary system.
b) Leveraging on know-how as key enabler within the combat towards ML/TF
Primarily based on the NRA 2020, we’ve got seen a rise in know-how being exploited to facilitate fraud, extortion, in addition to forgery of private and non-private sector documentations. We will count on this to proceed to rise within the coming years. To successfully forestall and fight this, we too, should embrace know-how. Undoubtedly, know-how is a robust enabler in our combat towards ML/TF.
It’s encouraging to notice that reporting establishments are starting to make use of know-how in conducting buyer due diligence, synthetic intelligence in detecting suspicious exercise, and the adoption of machine studying and robotic course of automation in every day processes and controls. I belief better adoption of know-how by reporting establishments to facilitate compliance of AML/CFT necessities will proceed.
In Financial institution Negara Malaysia, our AML/CFT supervisors and monetary intelligence analysts, proceed to enhance the effectiveness of risk-based supervision and intelligence evaluation via digitalisation and infusion of knowledge science strategies. Since 2020, our AML/CFT supervisors have efficiently carried out digital examinations and adopted extra complete off-site surveillance. Our information scientists have been utilising know-how to strengthen the standard of study, resulting in well timed and impactful disclosures. For instance, machine studying fashions are getting used for identification of upper precedence suspicious reviews and centralised databases consisting of graph analytics functionality.
c) Efficient collaboration amongst all stakeholders
Third, as I’ve emphasised earlier, stopping and combating monetary crimes is a shared accountability. Efficient collaboration amongst regulators, supervisors, legislation enforcement businesses, and trade gamers is the cornerstone of efforts to keep up the integrity of the monetary system.
To this impact, the institution of a public-private partnership (PPP) platform, the Malaysian Monetary Intelligence Community (MyFINet) in 2019, which entails collaboration between monetary establishments and legislation enforcement businesses such because the Royal Malaysia Police and Malaysian Anti-Corruption Fee, is a vital milestone. Thus far, a minimum of 44 circumstances associated to terrorism financing, proliferation financing, corruption, and securities offences have been shared via the MyFINet platform.
Transferring ahead, built-in efforts are additionally being explored to teach the general public and enhance coordination to detect, disrupt and dismantle fraud and rip-off operations on the earliest alternative. A key initiative is the event of an info sharing platform between collaborating monetary establishments and legislation enforcement businesses to minimise the dissipation of scammed funds, along with exploring name blocking applied sciences to cut back proliferation of rip-off incidences.
Past home collaboration, Malaysia has constantly been on the forefront in selling worldwide collaborations throughout the area, and maintained a robust and shut relationship with overseas counterparts and companions. A notable recognition is the appointment of Malaysia as Co-Chair of the Asia-Pacific Group on Cash Laundering (APG) from 2020 – 2022.
And naturally, our partnership with the trade is paramount within the prevention of ML/TF actions. Financial institution Negara Malaysia values the present shut partnership with all reporting establishments. Transferring ahead, we want to see better collaborative efforts by trade gamers to instil sturdy compliance tradition, particularly via self-regulatory our bodies, trade associations and compliance officers networking teams. I want to applaud the banking, insurance coverage in addition to the cash companies companies compliance officers networking teams which have paved the way in which in enhancing the professionalism and constructing the capability of compliance officers inside these sectors.
On this regard, I welcome the latest institution of compliance officers networking teams for e-money and belief corporations. I’m joyful to see extra sectors acknowledging the good thing about establishing a networking group to reinforce the compliance tradition of the sector, via amongst others, issuance of sector particular steering, finest practices, or info sharing.
As a ultimate thought, I imagine the change and challenges introduced forth by the pandemic additional strengthen our AML/CFT regime. I’ve little question that reporting establishments will proceed to stay vigilant and guarantee commensurate mitigations are in place to face the evolving setting and dangers.
Earlier than I finish, I want to specific my appreciation to all audio system at this convention, from the Royal Malaysia Police, Malaysian Anti-Corruption Fee, Royal Malaysian Customs Division and Financial institution Negara Malaysia, for his or her willingness to share their information and expertise. With that, I want you a productive two days of sharing and dialogue.