MALAYSIA ANTI-CORRUPTION COMMISSION: EFFECTIVEFINANCIAL INVESTIGATION AND ANTI-MONEY-LAUNDERINGMEASURES FOR CONFISCATION AND ASSET RECOVERY TO
COUNTER NEW AND EMERGING CORRUPTION THREATS
Shuhaimi Man*I. INTRODUCTION
Money-laundering is a growing crime this decade. According to a report from the Washingtonbased Global Financial Integrity Report, Malaysia is ranked fifth in the world with US $ 39.49
billion in illegal money-laundering. While there have been various steps taken by the authorities
to address this problem, the number of money-laundering cases has increased in tandem with theincrease in other crimes, and this trend is not only happening in Malaysia but also worldwide. To
further support this point, statistical data shows that money-laundering from developing countries
is increasing by an average of 9.4 per cent per year.
Serious attention to money-laundering activities began with the signing of the United Nations
Convention on Transnational Crime in Palermo Italy in December 2000 (UN 2004). All thecountries involved have sought to ensure that the essence of this convention is implemented intheir respective countries. This convention provides a framework for participating countries inpromoting greater cooperation to prevent and address cross-border crime more effectively.
II. SEGREGATION OF TASKS IN THE AML DIVISION OF THE MACCAML Division Chart

DirectorAsst. Director
1

AMLA Branch- Investigation*Asst. Director
2Planning &Coordination
BranchOTC Branch– Pre
Investigation

FOP Branch- Forfeiture

Anti-Money-Laundering Division, Malaysia Anti-Corruption Commission, Malaysia.

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According to the organizational chart of the AML Division of the MACC (AML Division),
there is a separation of duties at each branch within the AML division.
The AMLA branch of the AML Division (the AMLA branch) is responsible to investigate
corruption-related money-laundering offences under the AMLATFPUAA Act 2001.
The Asset Recovery Branch of the AML Division (the Asset Recovery branch) is responsible
to conduct forfeiture of property in relation to corruption and money-laundering, monitor theexpiry of seizure orders and progress of the forfeiture proceedings, and produce reports on thestatus of all properties under its purview.
The Planning & Coordinating Branch of the AML Division (the Planning & Coordinatingbranch) is responsible for providing statistics and producing reports required by the National
Coordination Committee in Combatting ML/TF for the purpose of a Follow Up Report andFollow-up Assessment on the implementation of the FATF Forty Recommendations, scheduled tobe held in 2020. It is also responsible to ensure that the MACC conducts the corruption risk
assessment for the country for the period from 2016 to 2018. With an additional scope of work inadministration and confidentiality, this section covers the management and coordination of records
applications with FIED (Cash Threshold Report (CTR), Suspicious Transaction Report (STR) andInternational Transfer Transactions).
Meanwhile the OTC Branch is conducting pre-investigation work. The primary focus of theOTC is scrutinization and examination of information obtained from various sources for profilingof the subject and associates, asset identification and tracing, and case risk assessment.
III. OBJECTIVES OF THE AML DIVISION OF THE MACC
The focus of the AML Division is to disrupt and dismantle corruption and related moneylaundering activities via two (2) main objectives, as follows:•To punish offenders/associates;•To recover and confiscate stolen assets.

A. To Punish Offenders/Associates
Punishment is a conventional device for the expression of attitudes of resentment andindignation, and of judgments of disapproval and reprobation, on the part either of the punishingauthority or of those “in whose name” the punishment is inflicted. Punishment, in short, has asymbolic significance largely missing from other kinds of penalties. We at the MACC want toemphasize that punishment serves to teach offenders a lesson so that in the process of being
punished and being made aware that a crime violated communal values, they will come to see what
is good and choose it in the future.
B. To Recover and Confiscate Assets
Stolen assets can be hidden either domestically or abroad. Such assets are often hidden in banks
located in the financial centres of developed countries, although financial havens have begun to- 61 -

appear in emerging market countries as well. Further, multinational corporations from developed
countries are often the source of bribes paid to public officials in developing countries. The crimesof bribery, corruption, and money-laundering (ML) are inextricably linked; indeed, ML,understood as hiding or obscuring the source, ownership, control, and movement of assets, could
be seen as the last link in a long chain of corrupt acts. ML seeks to lower the chances of detecting
stolen funds, as well as breaking the direct link between the kleptocrat or politically exposed person(PEP) and the stolen assets by disguising ownership.
The MACC is also aggressively collaborating with the Financial Intelligence Unit, other Law
Enforcement Agencies and international authorities to share expertise and information to expedite
investigations and produce quality investigative papers. In addition, the MACC has sought torecover movable or immovable property arising from illegal activities. By conducting
comprehensive investigations such as freezing assets and seizing criminals' property, the MACC
hopes to cripple these criminal activities as their financial resources are seized and frozen.
Integrated financial investigation is an essential element of any strategy for targeting proceedsfrom crime. The investigative process is the core activity, forming the basis for any asset recovery
effort, asset recovery (particularly at an international level) involving an overlapping of anticorruption, anti-money-laundering and broader law enforcement agendas. A jurisdiction wherefunds have been secreted will not confiscate or repatriate the assets to the country of origin unlessevidence is presented, linking them to an illegal activity. This evidence must, furthermore, beadmissible in court proceedings. As a preliminary activity to the recovery of stolen assets, theidentification and tracking of the proceeds of crime and securing the property for final confiscation
is an essential part of the process.
This is a demanding task which should be conducted in parallel with the investigation of thecriminal offence generating material benefit. It requires intense cooperation between law
enforcement agencies or those tasked with tracing assets, Financial Intelligence Units and, in mostinstances, the prosecutor. Where an investigation focuses, for example, on a public official’s
receipt of bribes or otherwise unlawful financial enrichment, this will require the involvement ofexperienced investigators in gathering and analysing financial evidence. In many instances, it will
also require the involvement of a forensic accountant, i.e. an expert, to assist in unravellingcomplex financial transactions, and an understanding of the role played by gatekeepers in assisting(sometimes unwittingly) criminals disposing of their criminal profits.
IV.

STRATEGIES TOWARD EFFECTIVE INVESTIGATION & CONFISCATION

A. Strong Collaboration with FIUs & Domestic LEAs through Exchange of Information
The MACC collaborates with FIUs, domestic and international law enforcement agencies andNGOs through exchange of information to foster understanding and share expertise in combatingcorruption and money-laundering. Among the key points for the collaboration are:•Sharing of expertise and information in the areas of operations, prevention and training;
and•Implementing capacity-building programmes to boost capability in combating corruption.

- 62 -Domesticcollaboration

Internationaltaskforce

Introduction of new& proposed newprovision

Integrity
Unit- Public Private
Partnership (MyFINet FIU, MACC &Reporting Institutions)- A member of theNational Coordination
Committee on ML/TF- A member of special
taskforce on 1MDB

- Grand corruption
involving multiple
jurisdictions
1. Effective platform forclarification of facts
2. Sharing of Information& documents prior toMLA
3. Overcoming legal
impediments- Malaysian AntiCorruption Act 2009
- New Section 17A –Corporate Liability- Proposed new sectionthat will criminalize
wrongful declaration ofbeneficiary ownership
information ingovernment
procurement– Requirement to set up
Integrity Unit within
Government Ministry,
Agencies &Government Link
Companies

B. International Taskforce
MACC participates in a wide range of formal and informal task forces, including multi-agency
task forces. Multi-agency task forces involve a broad range of partners working together to disrupt
criminal enterprises through intelligence-led responses. Internationally, the MACC is working
closely with the Department of Justice (DOJ), FBI, ICAC Hong Kong; Egmont Group; AntiCorruption Bureau (BMR), Brunei Darussalam; Corrupt Practice Investigation Bureau (CPIB),Singapore; Commission on Corruption Eradication (KPK), Indonesia; Government Inspectorateof Viet Nam (GIV); National Anti-Corruption Commission (NACC), Thailand; International
Criminal Police Organization (INTERPOL) and others aim to share information, Joint Legal Aid(MLA) and share ideas or opinions in conducting investigations.
C. Introduction of New and Proposed Provisions
New provisions recommended by MACC:
1. Section 17A of the MACC Act 2009–Corporate Liability Offence for Corruption
The amendment to the Malaysian Anti-Corruption Act 2009 to include this new provision wastabled in and passed by the Malaysian Parliament on 4 April 2018 with the Royal assent granted
on 27 April 2018. The Bill introduces a new strict liability offence on corporations for failing toprevent bribery and shifts the burden of proof to the corporation to establish that it has adequate
measures in place to prevent corruption. The corporation commits an offence if a “personassociated with the commercial organisation” corruptly gives, agrees to give, promises or offers toany person gratification with the intent to secure business or an advantage for the commercialorganization. The penalties could be in the form of a fine of not less than ten times the value of thegratification (if capable of being valued), or RM 1 million, whichever is higher, or imprisonment
for a term not exceeding 20 years, or both.
2. Declaration of Beneficial Owner
The MACC is proposing a new provision under section 17B of the MACC Act 2009 whichmakes it an offence for failure to declare the ultimate beneficial owner by any person who enters- 63 -into the government procurement process: “Any person who fails to declare the ultimate
beneficiary owner in the government procurement process, has committed an offence under theAct.” Declaration of a false beneficial owner under any other acts enforceable in Malaysia is to be
designated as a prescribed offence under the act.
D. Setting-up Integrity Units
The best public sector governance system and quality work culture are important foundations
in raising people's perception of and confidence in their integrity. The Malaysian government is
implementing policies to prevent corruption and increase integrity among civil servants. One ofthem is the establishment of a unit of integrity in the public sector. In this regard, the Government
will continue to take steps to strengthen its integrity by ensuring civil servants uphold the principles
of integrity and accountability towards better public service.
The establishment of the Integrity Unit was an internal control effort by the agency for
managing integrity within the organization. This unit is responsible for the implementation of thefollowing six (6) core functions:
1. Governance
Ensures best governance is implemented;
2. Strengthening Integrity
Ensuring culture, institutionalization and implementation of integrity organization;
3. Detection and Verification(a) Detects and confirms complaints of criminal misconduct as well violations of the conductand ethics of the organization and ensures appropriate action is taken; and(b) Reporting crime to the responsible law enforcement agency;
4Complaint ManagementReceive and take action on all complaints / information on criminal mischief as well as moral
and ethical violations by the organization;

5Compliance
Ensures compliance with laws and regulations in force; and6Discipline
Performs the disciplinary functions of the Disciplinary Board.

Existing functions performed by various parts / branches / units in the agency must betransferred to this Integrity Unit based on the Integrity Unit model designated. The MACC is
responsible for implementing agency risk rating to determine the appropriate Integrity Unit model.
Risk levels are classified into high, medium or low, and risk rating is required to be performed
every three (3) years.

- 64 -V. TREND AND TYPOLOGIES: CURRENT AND EMERGINGOffshore
Company

Merger &Acquisition

Shell & Shelf

Beneficial
Ownership
Enabler(Lawyer,Accountant,
Valuer etc
2 DollarsCompany

Land swap

Non-Profit
Organization

Cross Border

Politically
Exposed
PersonTrend &Typologies
Current &Emerging

Transfer ofShare

VI. NEW AND EMERGING INVESTIGATION AT THE MACC
In the MACC, there is a branch within the AML Division, called the Operations Target Centre(OTC) that carries out pre-investigation work. The establishment of the OTC serves as thebackbone of the Investigation Division at the MACC, especially in cases involving high-profile
individuals and of public interest. The focus of pre-investigation work at the OTC is when theinformation obtained will be examined by analysing information from various angles including
risk analysis and subsequently performing profiling to determine whether further investigations
are needed before being recommended for further investigation. Pre-investigations carried out byOTC officials require strategic and detailed planning where the actions taken are based oncollaborative data obtained from private agencies, overseas enforcement agencies andgovernments, as well as good analytical measures to determine the effectiveness of effective
investigations and meet the targets. The OTC conducted preliminary investigations based on
profiling and analysis. OTC officers called Case Analysts (CA) will handle cases with detailed
financial and data analysis. The CA may conduct investigations in accordance with the powers ofthe Malaysian Anti-Corruption Commission Act 2009 (ASPRM 2009), AMLATFPUAA 2001 andthe Criminal Procedure Code (KTJ).
A. Profiling and Analysis
Profiling is a fundamental step in every case investigation where identifying both the target
and his associates is crucial and key to the next phase. Proper profiling is very useful in determining
the pattern of investigation to be applied. The analysis ensures that the investigation is carried out- 65 -

efficiently and effectively to obtain the required evidence and testimony and to meet the substanceof the crime. At this stage, analysis and evaluation are also conducted to identify the following:•

Other criminal issues;•Information requirements;•Witnesses-protection requirements under the Whistle Blower Protection Act 2010 and theWitness Protection Act 2009;•Requirements for the use of the Mutual Assistance in Criminal Matters Act (MACMA),
Mutual Legal Assistance (MLA), bilateral & multilateral arrangements or treaties, goodpractices, both locally and internationally; and•

Other legal issues.

The analysis also includes aspects of identifying other possible offences that may have beencommitted such as offences under the Penal Code and other applicable laws. Analysis needs to bemade from all angles regarding violations of existing laws and regulations.
1. Profiling
Profiling activities include:•Profiling personal & corporate information,•Profiling of criminal information,•Profiling financial & investment information,•

Property information profiling,•Vehicle information profiling,•Communication information profiling,•Travel information profiling,•Import / export trade information profiling, and•Open Source information profiling.

The sources for the above records are available from the database of the Malaysian AntiCorruption Commission, the Royal Malaysian Police, the Central Bank of Malaysia, the Attorney
General's Chambers (Special Task Force) and relevant government and private agencies. The
above agencies will also act as the data centres where the latest data are housed on their own orthrough the tap of the relevant agencies.

- 66 -2. Financial Analysis
In addition to the above profiling, financial and investment analysis will be conducted on Cash
Threshold Reports (CTR) and Suspicious Transaction Reports (STR), which contain data obtained
from the Financial Intelligence Unit, including account statements and cheques provided byfinancial institutions.
3. Targeting Analysis
In addition to the profiling stage above, the data obtained will be analysed to identify thebackground of the target being investigated, to determine the level of risk that will be met before
planning appropriate on-the-ground intelligence and open investigations.
VII.

REPORTING INSTITUTION

Under this Act, several institutions have been named as reporting institutions that need to reportto the competent agency (Central Bank of Malaysia) any suspicious transactions that may haveelements of money-laundering. Included in the list of reporting institutions are banks, currency
exchange agencies, insurance brokers, Coastal Trustees, the Pilgrims’ Board, Malaysian PostalService, the National Savings Bank, the People's Cooperative Bank of Malaysia Berhad andlicensed casinos. In addition, the Securities Commission, stockbrokers, external auditors, lawyers
and company secretaries also fall into the category of parties who are required to report any
suspicious transactions. In addition, banks have also been directed to conduct customer due
diligence checks to ensure that criminals cannot use financial institutions in Malaysia for thepurpose of money-laundering or terrorism financing.
VIII. OBSCURED BENEFICIAL OWNERSHIP
Increasingly, sophisticated criminals seek access to the country’s financial system by masking
the nature, purpose or ownership of their accounts and the sources of their income through the useof front companies, shell companies or nominee accounts with unknown beneficial owners. Front
companies typically combine illicit proceeds with lawful proceeds from legitimate business
operations, obscuring the source, ownership and control of the illegal funds. Shell companies
typically have no physical operations or assets and may be used only to hold property rights orfinancial assets. Nominee-held “funnel accounts” may be used to make structured deposits in
multiple geographic locations and corresponding structured withdrawals in other locations. All ofthese methods obscure the true owners and sources of funds.
IX. CASE STUDY
The information comes from a financial analysis conducted by the OTC in which the initialinvestigation found that the first suspect had enjoyed the purchase of luxury goods and the receipt
of a check paid by Mr. B2 (Suspect 2), owner of Company XXX Sdn Bhd, YYY Sdn Bhd andZZZ Sdn Bhd. Initial investigations revealed that the three companies had been awarded projects
through the KKK Sports Council (KKK) for a programme under the Ministry of SSS. All projects
awarded to the three companies were paid by the KKK from the National Trust Fund's (trust fund)provided by the Ministry of SSS.

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Each year the Ministry of SSS will be allocated a total of RM 150 million in funding from theMinistry of Finance (MOF). The allocation of the trust fund will be distributed based on project
proposal requests by the agencies under the Ministry of SSS including KKK, the National SSS
Institute and more. The approval of this application will be presented at the Trust FundManagement Committee Meeting chaired by the Secretary General of the Ministry of SSS. Suspect
1 was also one of the members of the Trust Fund Management Committee.
Initial investigation also revealed that the three companies owned by Suspect 2 had tender
projects from SSS, but the work was not implemented. This is because each payment claim
received by the company was paid to Suspect 1 by way of AMEX and credit card repayment andother payments. Based on financial analysis, Suspect 1’s accounts were found to have beencredited via cheques and cash from the three companies.
In this case, the CA had profiled the individual suspects, directly or indirectly, involved in thecommission of the corrupt activities. Then, the CA profiled the suspected individual family
members. After identifying individuals and their family members, the CA will review if they haveany companies. In addition, the CA also conducted an open source search to identify lifestyle,hobbies and so on. This information was used to identify the suspects and their associates favourite
meeting places, favourite places to spend their spare time and other information that might beuseful in assisting an open investigation.
Subsequently, the CA obtained financial information from the FIU for financial analysis andtracing. Based on financial and tracing analysis, the CA will be able to identify the patterns andmodes of operation of the criminal. After all the profiling and financial information, the CA was
be able to identify the offences that had been committed and proposed that an open investigation
be conducted. The information provided will be used by the investigating officer in conducting an
open investigation. This method expedited the investigation process.
X. CONCLUSION
Malaysia has been through difficult times for the past few years due to major issues affecting
its efforts to fight corruption; but this difficult episode is not expected to be repeated in the future.
Quoting the words of Prime Minister Tun Dr Mahathir bin Mohamad, Malaysia should be known
for its integrity and not for corruption. By that, in the face of the challenges of globalization andthe political scenario of uncertainty, the Government needs to set its direction throughdevelopment of an integrated and comprehensive strategic effort to fight corruption. Enforcement
agencies also need to increase their expertise in various fields, especially in cases of transnational
corruption.

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