Crime threatens Malaysia’s economic recovery

FINANCIAL institutions have projected economic growth for Malaysia in the 2022-2023 period. The Organisation for Economic Cooperation and Development, International Monetary Fund, Bank Negara Malaysia and the Finance Ministry have announced that the country’s GDP will grow between 5.5% and 6.5%.

While key economic indicators are indeed looking at recovery to stable levels, we are disregarding the measure and extent of damage caused by financial crime, which has been aggravated during the Covid-19 pandemic over the last two years.

The recent release of the National Risk Assessment 2020 report by Bank Negara Malaysia, which takes into account results from observation and evaluations of the domestic risks of money laundering and terrorism financing done from 2017 to 2019, yields worrying trends in five key threat areas: fraud, corruption, smuggling, drug trafficking and organised crime.

However, we must be mindful that this is an assessment done before the pandemic began in 2020. Global findings, including the report on Covid-19-related money laundering and terrorism financing risks by the Financial Action Task Force in December 2020, show an upward trend in these threat areas, with perpetrators leveraging on digital platforms, designated payment instruments and cryptocurrencies.

Additionally, Malaysia’s battle against corruption has not seen a clear light at the end of the tunnel yet. This is obvious from the Corruption Perceptions Index 2021 report by Transparency Inter-national: Malaysia’s world ranking in the perception of public sector corruption slid from a rank of 57 in 2020 to 62 in 2021. With overdue institutional reforms and questionable enforcement actions, I do not see a drastic change to this ranking anytime in the near future.

Some of the key drivers of financial crime are cash-based businesses, money mules, professional facilitators and enablers (e.g. corrupt lawyers, accountants, company secretaries), and the involvement of organised crime groups. Such entities or groups act as gatekeepers in facilitating fraud, corruption and other serious offences and are used as conduits to obscure the source of illegal proceeds and the purposes for which they are to be used.

While the competent National Coordination Committee to Counter Money Laundering has required those designated as reporting institutions in Malaysia to have in place an AML/CFT (Anti-Money Laun-dering/Countering Financing of Terrorism) compliance framework to mitigate the risk of involvement in such conduct, other entities and the general public should also be aware of the current threats and red flags that signify such conduct, and how to report known and suspected wrongdoings to enforcement agencies.

Take, for instance, the rise in Macau scams which are being reported in the media almost daily. Scammers are now focusing on fear instead of hope and greed. In the past, most scams drew on the promise of fast financial gains or a “once in a lifetime opportunity to get rich”; now, however, scammers impersonate an authority figure to threaten people into giving up their Personally Identifiable Infor-mation, which can be easily monetised or used to transfer funds into accounts held by the scammers.

It’s important the public understands how the scheme is perpetrated and be mindful of red flags – and to realise the recovery of funds is close to impossible. This is because funds would usually be transferred to mule accounts held by knowing or unknowing individuals in trust for a short time before they are moved out to other accounts, leaving a confusing trail.

Without awareness of and education on these key aspects, we will continue to see the rise of scams. And without reform of corruption and abuse of power, we will continue to see smuggling, drug trafficking and organised crime syndicates operating. This will ultimately halt our journey to economic recovery and continuous growth.

The country has also shown vulnerability to environmental crimes, human trafficking/migrant smuggling, tax offences, sexual exploitation, forgery and extortion.

RAYMON RAM

Petaling Jaya

The letter writer is a certified fraud examiner and a certified anti-money laundering specialist.