Dato’ Sri Akhbar Satar

Anti-Corruption Advisory Board (ACAB)

Director of Institute Of Crime and Criminology, HELP University

Former President of Transparency International Malaysia

It was Al-Capone, the Chicago notorious mafia in 1920’s and father of modern illegal proceeds, who coined the term money laundering.

Al-Capone made money illegally by buying laundromats in cash since they were a cash-only business.  He used them as a front in hiding the money to provide an explanation for his income and asset which actually obtained from drug smuggling, gambling prostitution and tax evasion.

He was sentenced for 11 years in prison for tax evasion and fined $80,000. The story how forensic accounting succeeded finding evidence and brought down his illegal operations.

The modus operandi of setting up front companies (no or less business activities) is to funnel illegal money is still being used in Malaysia.

Interestingly, the first prosecution for money laundering in Malaysia involved a woman.

Dr Hamimah Idruss — a former director of Syarikat Safire Pharmaceuticals Sdn Bhd — was charged in 2005 with laundering a total of RM41.337 million and abetting in forgery in the issuance of promissory notes to secure funding from Siemens Financial Services Ltd for her company.

After 15 years of the trial, including appeals, Hamimah (now 72) was sentenced to 38 years in prison and fined RM6.39 million.

After 15 years of trial including appeal, Hamimah (now around 72 years old) was sentenced to 38 years in prison with a fine of RM6.39 million for eight counts of money laundering and ten counts of abetting.

The modus operandi — setting up front companies (with zero or little business) to funnel illegal money — is still being used here.

In Malaysia, prosecution for criminal acts is not time-barred. What more in the corruption and money laundering cases involve documentary evidence and the movement of money usually can be traced.

Politically-exposed people present a higher risk of involvement in money laundering due to their status and authority. They have been investigated and charged under Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLATFPUAA). The political elites steal large sums of public funds or otherwise abuse power for personal or political advantage and are parked in off shore banking and overseas.

There are several ways to recover assets using the (AMLATFPUAA), including criminal prosecution, civil forfeiture, compound fines, return of assets to bona fide owners and asset recovery from absconded persons.

The Malaysian Anti-Corruption Commission's Anti-Money Laundering Division director, Datuk Mohamad Zamri Zainul Abidin, stated that if the authorities were to charge offender under penal code such as CBT, it would take years to prove his guilt beyond reasonable doubt. The offender may also get off due to technicalities and the lengthy appeal process.

He may also be jailed for just a few years, and be able to access and enjoy the laundered money via proxies when he gets out, Zamri said.

In the case of issuing a compound, the act takes the preponderance of evidence rather than having to prove beyond reasonable doubt to offer the accused a choice to pay the compound fine. In that way, the primary goal of asset recovery is achieved. And monies will be returned to public through the Federal Consolidated Fund.

A compound is a punitive action, and paying the compound is an admission of guilt.

One way of making dirty money legitimate is money laundering. The money is cleansed in the following ways.

Placement: Dirty cash transfers that enter the financial system i.e. change of currency, denominations and cash deposits and transactions performs with shell companies to obfuscate origin;

Layering: The process where the money is separated and moved around to disguise from the original illegal source, loan sharks schemes to cash heavy food business fronting as an investor, i.e. withdraws in cash, cash deposit in other banks (by wire transfers and transfers of funds offshore);

Integration: Finally, money re-enters the financial system and integrated in the economy through legal and clean investment (purchase luxury assets and financial and industry investments) and laundered.

It is also a known fact that criminals are getting smarter in the use of digital age to launder money.

Moreover, the recovery of laundered money has also become increasingly more challenging due to using digital currencies the criminals operating in syndicates, laundering ill-gotten gains through registered companies to hide their wealth which assisted them stay under the radar and two step ahead of the law enforcement agencies.

Oftentimes, the ill-gotten gains are used for legal or illegal purposes to generate more income.

In Malaysia, it is an offence under Section 4(1) of AMLATFPUAA. If convicted, the person may face imprisonment not exceeding 15 years and a fine of not less than five times the value of the proceeds, or RM5 million, whichever is higher.

With current economic uncertainty and situation, it is important for all tax payers’ monies to remain within Malaysia and not funnelled out to tax havens, in order to help rebuild Malaysians.