Money Laundering

According to the 2013 Global Financial Integrity Report of Washington, Malaysia stands at No.5 in the world with an illicit funds outflow of USD 291 billion. Despite China being the leader in this list, Malaysia beats China and wins the top spot in money laundering per capita, recording RM 6,400 per person per year. In the world of money laundering, international reputation of Malaysia is degrading with time and has already fallen below that of Thailand or Indonesia. (Source: Global Financial Integrity Report)

What is Money Laundering

Money Laundering is the process by which money coming from Source X (illegal/Black Money) is made to look as it’s coming from Source Y (legal/clean Money). Bank Negara Malaysia (BNM) defined Money Laundering as: 

"A process of converting cash/property, which is derived from unlawful activities, to give it the appearance of having been obtained from a “legitimate source”.

Money Laundering Process

Involved 3 process described as diagram below:

Source:www.kcymap.com

Collection from the illegal money/Black Money will be placed at Financial Institution. Under layering activities, this money will be transfer between offshore/onshore Bank. Once completed the layering process, to ensure the money look like legitimate, the money will be used as and investment such buying the luxury assets, investment into legal commercial activities etc.

High Risk Customer 

In combating the Money laundering activities, BNM has identified the High Risk Customer which all Bank must more careful in dealing with them. 

1.    Political Exposed Person (PEP). Foreign individuals who are or have previously been assigned prominent public functions in a particular country (e.g. member of royal families, senior political figure, religious figure, key non executive individual)

2.    Member of Cabinet & Local Politician

3.    Money Changer

4.    Legal Firm

5.    Offshore Entities

6.    Individual/entities from high risk jurisdiction country listed by FAFF & UNSCR i.e.  Iran, Democratic People of Korea, Algeria, Ethiopia, Indonesia, Kenya, Myanmar, Pakistan, Syria, Tanzania, Turkey, Yemen & Ecuador.

7.    High Network Individual

How Bank Detect the Suspected Money Laundering Activities

Today, there are numbers of system available in the market designed specifically to detect the suspected Money Laundering Transaction. One of the system called Coral Intelligent Sensor For Money Laundering (Coral ISEM) designed by TESS International, one of the System provider in Banking Industry globally.

Function of the System

1. Monitor customer’s transaction and perform behavioral Analysis or pattern to detect any deviation

2. Screening of new customer

3. Dashboard reporting for Compliance Team & Management  

 How the System Work

Source: Functional Specification, Bank Islam Anti Money Laundering (AML)System

Data were extracted of data from source systems like Core Banking System (CBS) as an input to the Coral ISEM system. In addition the data were extracted from LexisNexis database as a for watchlist filtering. LexisNexis is the Risk Solution Company which provides the worldwide comprehensive database for people who are under high risk customer and Watchlist criteria. All the data extracted will be processed at the staging database and transformed into the AML system required data input templates and loaded into the respective tables for Watchlist and transaction filtering purpose.

Once the processing is done, the alerts and the relevant information from the staging database will then be transferred across to the production application database where the users can access the system 

Source:

•   Bank Negara Malaysia 2013, Revised Guidelines. Anti-Money Laundering and Anti-Terrorism Financing      Act Sep 2013
•   Functional Specification, Bank Islam Anti Money Laundering (AML)System, September 2014.