Amendment to act necessary to combat Hawala activities, says Deputy Finance Minister

KUALA LUMPUR: Despite enforcement and surveillance, Bank Negara Malaysia (BNM) continues to receive a high volume of tip-offs from the public on Hawala or illegal remittance activities, says Lim Hui Ying.

The Deputy Finance Minister said the central bank has been receiving an average of 187 cases per annum over the past five years.

“These unlicensed activities are not only exposing the industry to the risk of money laundering or terrorism financing, but they also bring about other negative effects,” she said during her speech when the Money Services Bussiness (Amendment) Bill was tabled for the second reading in the Dewan Rakyat on Tuesday (March 26).

She said the measures to curb Hawala activities are necessary to ensure that they will not affect the country’s rating, as Malaysia will undergo the Mutual Evaluation assessment by the Financial Action Taskforce in 2025.

Therefore, the amendment to the Act was necessary, she said.

“Although enforcement efforts are continuously being made, BNM still faces challenges regarding the legal process under the existing legal framework.

“Obtaining proof can be difficult given that Hawala's modus operandi does not necessarily involve a clear intention and corresponding movement of funds among those involved in a cross-border transaction,” she said.

Citing BNM statistics, Lim said the penalties imposed on such cases have been extremely small, at only 0.02% of the estimated value of the Hawala trade.

“This is because almost half or 45% of (offences related to) unlicensed money services are imposed a fine of RM50,000 or less. At the same time, the prison term for offenders is only between one to three days,” she said.

She said the existing penalty was inadequate for effectively preventing such cases, especially those involving large transactions or syndicates.

In addition, Lim noted that before the proposed amendment, courts were not empowered to forfeit any exhibits brought about during court proceedings. This would prevent the offender from capitalising on the ill-gotten gains from the unlicensed activity and would also not deter them from repeating the offence.

“It is also difficult for BNM to act on any entities which are in cahoots with unlicensed money service providers as the definition of being in cahoots is not clearly spelt out in the (existing Act),” she said.

The amendment was tabled for the second and third readings and passed in the Dewan Rakyat on Tuesday.

It was tabled for the first reading on Feb 28.

The proposed amendment entails the admissibility of evidence in trial proceedings for offences related to unlicensed money service businesses.

It also empowers the court to make an order of forfeiture for any property seized under Act 731.

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