Over the last few days, hundreds of global financial and surveillance experts had converged on Kuala Lumpur to share ideas on how to combat the menace of money laundering (ML) and terrorist financing (TF).
Criminals are often a few steps ahead of regulators and policymakers in their ways of laundering money and funding terrorist activities, and in the digital space, they are open to using all sorts of new ways to legitimise their dirty money.
A lot more countries have realised that their existing laws, rules and regulations are limited, and many are reviewing them in view of new complexities as the digital threat is real.
Even the European Union is grappling with it, given the spate of ML activities that has left many banks wounded in Europe.
While experts at this week’s International Conference on Financial Crime and Terrorism Financing were busy sharing what they know best, reports were emerging from smallish Cyprus.
Yes, the small island in the Eastern Mediterranean was under the spotlight for having granted 1MDB fugitive Low Taek Jho, or Jho Low, a passport.
Its own people were questioning the basis for it to have granted so many passports to so many foreigners. The latest is that Cyprus will withdraw his passport and cited “inadequate risk assessment in the system’’ for Low to be given a passport.
Another ML case that made headlines at the same time was that of lawyer Mark Scott. He is being accused of using a network of “shell companies, offshore bank accounts and phony investment funds to hide the origin of US$400mil in illegal proceeds.” All this is about ML for a multi-billion-dollar international pyramid scheme based on fake cryptocurrency OneCoin.
With all that money, Scott has a collection of a 57-foot yacht, multi-million-dollar homes in Cape Cod, Massachusetts, and luxury cars that include three Porsches.
Doesn’t that sound all too familiar as it is also happening here?
It is greed and the lure of easy money that drive people to engage in corrupt practices, and with all that dirty money, they then find ways to legitimise it by buying super yachts, property, jewellery, cars and living a lavish lifestyle.
ML and TF are big business, with millions of dollars passing through legitimate banking networks across borders. In most cases, it is such a convoluted web that makes tracking these crimes highly challenging. In the absence of a whistle blower or targeted surveillance, ML can go undetected for years. Even if it is detected, it can take several years before criminals are brought to book.
The United Nations Office of Drugs and Crime estimates that money laundered globally is about 2%-5% of the global gross domestic product, or US$800bil to US$2 trillion a year.
In recent times, several global banks have had to pay hefty fines for not upping their compliance and surveillance checks. But in other cases, there are corrupt bankers globally condoning such transactions.
With several high-profile cases in the spotlight, financial institutions are spending a lot more to train their people to be more compliance-ready and are also upgrading their software.
The first line of detection of any suspicious transaction is really at the financial institution level and that reporting is really essential to nip it at that level.
However, that is just one part of the equation. Trust, integrity and ethical behaviour play a vital role too, as do the rules on MT and FT.
This is what Asian Institute of Chartered Bankers chairman Tan Sri Azman Hashim said in his speech at the conference this week. He said it was “vital for bankers to have a code of ethics that promotes honesty, accountability and ethical conduct to maintain the highest levels of integrity in their professional practice.’’
Building trust and transparency by way of collaboration is also crucial since ML and TF are mostly cross-border transactions. Regulators and governments need to work together as no country can fight this war single-handedly, especially with dirty money transactions on the rise.
Talking about cooperation, Malaysia is facing a dilemma as a particular country is not really willing to cooperate even though Malaysia is doing all it can to bring Low back to face charges here.
There are allegations that Low has siphoned about US$4.5bil from 1MDB in a scandal that involves several countries, but he has denied any wrongdoing.
The name of the country and the reason it is unwilling to cooperate are not clear, but this points to some serious international coordination problems.
That aside, the more crucial thing for now is to ensure that there is no repeat of the 1MDB scandal.
There should be no avenue for another Low to be created. It is something the regulators and financial institutions have to make sure of because criminals are not about to stop their activities. So, the move by Bank Negara to impose a cash transaction limit of RM25,000 for any banking transaction beginning next year is yet another way to monitor any suspicious transaction in its anti-ML initiative.
The views expressed are solely the writer’s own.
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