Nor Shamsiah Mohd Yunus: Raising the bar in compliance and
enforcement
Opening address by Ms Nor Shamsiah Mohd Yunus, Deputy Governor of the Central Bank of
Malaysia, at the International Conference on Financial Crime and Terrorism Financing
(IFCTF) 2011 - "Raising the Bar in Compliance and Enforcement", Kuala Lumpur,
19 September 2011.
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It is my pleasure to wish all of you a warm welcome to this Third Annual International
Conference on Financial Crime and Terrorism Financing. We are indeed privileged today to
have the presence of Yang Berhormat Dato' Seri Hishammuddin Tun Hussein, Minister of
Home Affairs of Malaysia, who has kindly agreed to deliver the keynote address, and officiate
the opening of this conference. His presence reflects the significance placed by the
Government of Malaysia on the roles and contributions of the financial sector in supporting
the national agenda to combat and reduce crime, particularly economic and financial crime
as well as terrorist financing, which is crucial in maintaining the integrity and stability of our
financial system. On behalf of the financial sector, I wish to extend our gratitude to
Yang Berhormat Dato' Seri for gracing today's event.
I also am heartened by the continuous and encouraging participation of the private and
public sectors in this conference. Now in its third year, this conference has become a
hallmark event that brings together various stakeholders in Malaysia and from abroad, to
discuss issues relating to financial crimes and terrorist financing. In addition, this conference
continues to receive support from, and participation of, renowned international experts and
our regional counterparts. I bid you a warm welcome to Malaysia, and would like to take this
opportunity to extend our appreciation for your support and contributions.
Allow me to also to congratulate the organiser of this event, the Compliance Officers
Networking Group of Malaysia (CONG) and the collaborating partners, namely the Institute of
Bankers Malaysia, the Securities Industry Development Corporation, the Malaysian
Insurance Institute, Islamic Banking and Finance Institute Malaysia (IBFIM) and the Asian
Institute of Finance for successfully putting this event together. I have been made to
understand that for the first time, this conference has also received support from the
academia, with the participation of Universiti Teknologi MARA as a collaborating partner.
Financial crime continues to evolve in modus operandi, multiply in scale and complexity, and
hence, the greater the potential harm they can inflict on the smooth functioning of the
financial markets and payment systems, financial sector stability and economic development
globally. As an unintended consequence of enhanced access to financial services and
greater mobility of funds, facilitated by increased globalisation, technological advancements
and ongoing efforts to promote financial sector development and financial inclusion, the
opportunity and attractiveness for criminal elements to abuse the financial sector, and use it
as a conduit to move illicit funds, and to disguise criminal activities, have increased. The
International Monetary Fund or the IMF has estimated the amount of money laundered
worldwide to be in the region of 2% to 5% of global GDP annually or equivalent to
USD800 billion to USD2 trillion a year. Indeed, the financial community now regards financial
crime such as fraud, money laundering and terrorist financing, including cyber terrorism and
crime, as one of the top operational risks that they face.
While the direct cost of financial crimes to individual financial institutions may be substantial,
it pales in comparison to the damage to the overall financial system that can arise from the
failure to implement adequate measures to effectively combat financial crimes, in particular
those relating to money laundering and terrorist financing. Such costs include reputational
damage to the institution and country, loss of confidence of key stakeholders such as
depositors, investors and the public at large and perhaps more damaging, the loss of or
restricted access to international financial system, including correspondent banking
relationships. With the increasing trend by supranational bodies to publicly name jurisdictions
that are seen to be uncooperative, and to call on their respective members and the broader
international community to implement appropriate countermeasures in dealing with
institutions and entities from these jurisdictions, the implications, both financially and socially,
can be devastating to the countries concerned.
Over the years, the risk areas and thus the scope of regulations to prevent the use of the
financial system as a conduit for illegal and other undesirable activities that can pose threats
to global security have also increased. From money laundering to terrorist financing, the
regulations and standards are being extended to comprehensively address new and
emerging threats. This is evident in the ongoing review of the Financial Action Task Force
(FATF) 40+9 Recommendations, where among others, several policy goals and initiatives for
combating corruption, and addressing proliferation financing more effectively, are being
thoroughly discussed and deliberated. A major development in the review of the standards,
that is relevant to the industry, is the higher emphasis that will be placed on assessing the
effectiveness of measures implemented to counter the risks of money laundering and
terrorist financing, rather than merely looking at technical compliance.
This is indeed very relevant to the theme of this year's conference "Raising the Bar in
Compliance and Enforcement". As Malaysia's AML/CFT regime grows in maturity, the
benchmark for compliance by financial institutions will be measured more in terms of its
effectiveness in deterring and preventing financial crimes before they occur, and in effectively
supporting the relevant law enforcement agencies to bring the perpetrators to justice when
such crimes happen, despite our best efforts. In this regard, I urge the industry to take
advantage of the knowledge and experience of the panel of experts assembled here at this
conference, to better understand and prepare for the implications of the review of the
FATF 40+9 Recommendations, and the expectations on financial institutions and boards of
directors moving forward.
For Bank Negara Malaysia, the enhancement to the nation's infrastructure to combat
financial crimes will remain as one of our key priorities. In this regard, our role as Malaysia's
primary financial regulator will continue to focus three broad areas. The first is to deter and
prevent criminals from abusing the financial system to be the conduit for illegal activities by
ensuring the continued effectiveness of Malaysia's legal and other relevant infrastructure,
systems and processes in combating financial crimes. Secondly, is to ensure all financial
institutions continue to strengthen their defences against such threats and risks via our
regulatory policies as well as risk-based supervisory and surveillance activities; and thirdly, to
strengthen collaboration between the financial industry with other domestic and international
stakeholders in AML/CFT initiatives to protect the integrity and stability of our financial
system, including implementing capacity building programmes, such as this Conference.
While the financial sector has, over the years, strengthened its risk management and control
functions to combat financial crimes, a higher degree of emphasis and attention by senior
management and the Board, on issues relating to AML/CFT, can further improve the
standards of compliance and the effectiveness of measures put in place to fight against
money laundering and terrorist financing. We also observed that financial institutions
exhibiting effective defences against financial crimes shared four common attributes in their
AML/CFT framework. These are: (i) well developed and clearly articulated policies and
procedures; (ii) effective governance structure, particularly on the compliance function;
(iii) incorporation of AML/CFT compliance assessments in the audit and capacity
development programmes; and (iv) increased and effective use of information technology
and management information systems for AML/CFT risk monitoring and management.
therefore, talent development in this area is becoming increasingly critical. A well trained
workforce is a valuable asset that would contribute to the implementation of an effective
compliance framework with impactful results. This can be achieved through the formulation
of structured and coordinated capacity development programmes aimed at elevating the
level of technical skills, leadership and professionalism.
On this note, Bank Negara Malaysia lauds the initiative by the financial sector in formulating
the AML/CFT Certification Programme for compliance officers that will be launched during
this conference.
This conference and indeed the theme "Raising the Bar in Compliance and Enforcement" is
very timely and relevant. It is our hope this and other similar platforms will foster greater
collaboration and sharing of ideas among the industry, compliance practitioners, regulators,
law enforcement agencies and other relevant stakeholders and further contribute towards the
enhancement of our framework and initiatives to combat financial crimes and preserve our
financial and macro-economic stability. With that, I wish to thank you for your kind attention
and wish you a productive conference.