PETALING JAYA: In tightening the loopholes for money laundering and corruption, Bank Negara has slashed the maximum amount of cash that can be transacted through financial institutions by 50%.
Effective Jan 1, banks must report any cash transaction exceeding RM25,000 compared to RM50,000 currently.
This effectively means that for cash transactions and other forms of money such as traveller’s cheques above RM25,000, customers will need to furnish the bank with information on the source of funds and purpose of transaction.
Even cash exceeding RM25,000 deposited into accounts through cash deposit machines would raise a red flag and attract the attention of financial institutions.
“At the moment, people can bank in any amount less than RM50,000 without any questions asked.
“It allows for money that cannot be accounted for to be deposited into the banking system.
“By lowering the limit, it becomes more difficult to deposit money that cannot be accounted for into the banking system,” said a banker commenting on the impact of Bank Negara’s latest effort to counter money laundering and corruption.
Announcing the measure yesterday, Bank Negara governor Datuk Nor Shamsiah Yunus had said that from Jan 1, banks must report any cash transaction exceeding RM25,000 in their daily cash threshold report (CTR).
She said the move was part of an initiative by the central bank to strengthen controls in order to mitigate financial crime in Malaysia.
One banking analyst said the change in the CTR limit would likely discourage the usage of cash in daily transactions and encourage the use of electronic transactions or e-payments.
In proposing to impose the lower daily limit of the CTR, Bank Negara noted that despite the headway the country had made in advancing e-payments, the persistency of cash among the public and small and medium-sized businesses remained high.
Nor Shamsiah said this opened the economy up to risk as cash was still being used by criminals to launder illegal proceeds, as seen in some high-profile cases over the past year.
“Similarly, this is the preferred mode to finance terrorist activities, which will involve transacting in cash,” she said in her keynote speech at the 10th International Conference on Financial Crime and Terrorism Financing yesterday.
Welcoming the move, analysts cited this as a positive step towards addressing the growing risk of financial crimes such as money laundering in Malaysia.
Most importantly, according to prominent economist Lee Heng Guie, the move is not a form of capital control and would unlikely affect genuine business transactions.
“The lowering of the daily CTR is aimed at strengthening the monitoring and vigilance of money laundering, financing for terrorists, graft and tax fraud.
“It is not targeted at hindering genuine business activities,” said Lee, who is the Socio-Economic Research Centre executive director.
“It is not a disguised form of capital control as feared. It is the responsibility of financial institutions to make the CTR report and there will be no extra documentation and official approval procedures for businesses and individuals.
“It is business as usual for businesses and individuals,” he added.
An analyst with a local bank said the latest move would not have an impact on the banking industry.
“The positive thing is that it will encourage the public and businesses to move towards the use of electronic transactions and lower the use of cash.
“Essentially, it is all about minimising illegal financial activities because the lower limit will make it more inconvenient for perpetrators to do their daily transactions.
“It will give the authorities better control in monitoring any peculiarities in banking transactions,” he added.
Lee noted that some major central banks and monetary authorities had already adopted similar rules and were subjected to even stricter rules, if necessary.
For instance, cash transactions worth US$10,000 or more are subjected to reporting in the United States, Canada and Australia.
“The biggest challenge is to curb ‘structuring’, which is a money laundering technique involving the deliberate splitting of transactions into smaller amounts in order to avoid CTR requirements,” Lee explained.
Nor Shamsiah said it was timely for Malaysia to look at ways to strengthen the controls to mitigate financial crime, namely the CTR requirement.
“When we compare Malaysia with other countries, our current threshold is too high and disconnected from the size of our economy, especially relative to our purchasing power.
“Hence, it needs to be updated,” she added.
The governor said the change would bring the CTR in Malaysia up to par with other countries.
“We do not anticipate any impact in terms of economic activity, but we do expect increased effectiveness in taming the black economy, which is still heavily reliant on cash transactions,” she said.
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