Zeti Akhtar Aziz: Welcoming remarks to the Asia/Pacific Group on Money
Laundering
Remarks by Dr Zeti Akhtar Aziz, Governor of the Bank Negara Malaysia, to the Asia/Pacific Group on
Money Laundering's 4th Annual Meeting, Kuala Lumpur, 22 May 2001.
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Yang Berhormat Tun,
Distinguished Guests,
Ladies and Gentlemen,
I am pleased to welcome you to the 4th Annual Meeting of the Asia/Pacific Group on Money
Laundering. Let me also welcome our distinguished delegates from abroad to our country. I hope that
you will also have the time to experience Malaysia while you are here. It is indeed an honour for
Malaysia in partnership with the Asia/Pacific Group on Money Laundering, to host this Meeting.
The APG, the Asia/Pacific Group on Money Laundering was established in 1997 at the Fourth
Asia/Pacific Money Laundering Symposium in Bangkok and is based in Sydney, Australia. Malaysia
and Australia are the current co-chairs of the APG. The APG consists of 19 members and, I
understand, will be welcoming 3 new members into its fold at this Meeting. The APG also has several
'observer' jurisdictions. Malaysia became an APG member a year ago in May 2000 and has since
participated in the APG as co-chair and now as host to this Meeting. It reflects our commitment to the
efforts in fighting money laundering in Malaysia and in the region.
The FATF, the Financial Action Task Force on Money Laundering was founded in 1989 by the G7
countries and today consists mainly of OECD members. The APG is one of the FATF regional groups
and its work is underpinned by the 40 Recommendations of the FATF, which has become the
internationally accepted standards against money laundering. Malaysia, as well as all other APG
members, have made a commitment to implement legislation and other measures based on the 40
FATF Recommendations. The APG's primary purpose therefore is to provide a regional focus for
cooperation against money laundering, especially in the implementation of the 40 FATF
Recommendations in the legal, financial and law enforcement sectors.
This Meeting brings together official representatives from government, finance and the private sectors
providing a platform for discussion and co-operation. The Meeting is important as it brings about a
better understanding of, and action against, money laundering and promotes the establishment of
extensive and useful working relationships among countries in the Asia/Pacific region. The event is
designed to support members in their efforts to prevent and deter money laundering and provides an
opportunity to discuss the practical issues associated with the implementation of money laundering
measures while taking into account each member's own particular economic, social and political
characteristics. The Meeting will also review work done and set a course for future regional
cooperation and progress against money laundering.
Malaysia recognises that it is important to have a co-ordinated national effort in the fight against
money laundering and realises that this fight requires a multi-disciplinary approach. For this purpose,
the National Co-ordination Committee to Counter Money Laundering was set up involving 13
ministries and government agencies as its members. The NCC provides a forum for co-ordinating
national anti-money laundering strategies and policies in Malaysia. It is responsible for developing
national policies and measures to counter money laundering and co-ordinates Malaysia's responses
to international initiatives against money laundering.
The members of the NCC who are present here this morning have also provided their support in
moving forward Malaysia's effort in enacting the anti-money laundering legislation that criminalizes
money laundering. However, enacting the Anti-Money Laundering Bill 2001 is only the first step, albeit
a very important step. The Central Bank of Malaysia, as the lead agency of NCC, looks forward to
working closely with the ministries and agencies through the NCC to ensure the success of the
national anti-money laundering strategies. In this respect, I am pleased to inform the Meeting that the
Bank Negara Malaysia has been part of the process spearheading the formulation and enactment of
the Anti-Money Laundering Bill 2001 that was recently passed by the Parliament.
Let me now turn to the banking system, which has long since been the focal point of money
launderers. In the initial stage of money laundering, the criminal and the money launderer will need to
place their ill-gotten gains into the financial system to legitimise the funds. Thus, these illicit funds are
introduced into the financial system. After these funds have entered the financial system, the second
stage typically involves a series of transactions to distance the funds from their illegal source and to
disguise their origin as being from criminal activity.
The Central Bank is committed to ensure that the integrity of the Malaysian financial system is not in
any way compromised by these criminal activities. In this connection, the Central Bank has introduced
a number of initiatives to counter money laundering including, the "Know Your Customer' Guidelines
which was issued in June 1989 and revised in December 1993 in compliance with the FATF's 40
Recommendations through the requirement of customer identification and verification, financial record
keeping and mandatory reporting of suspicious activity. The Guidelines were issued to prevent
banking institutions from being used as a conduit for money laundering. It requires banking institutions
to determine the true identity of customers opening accounts and to develop a "transaction profile" of
each customer and setting document retention policies with the objective of identifying unusual or
suspicious transactions. Banking institutions are also required to identify a single reference point
within their organisation to which unusual or suspicious transactions can be reported promptly.
Banking institutions are also required to report to the Central Bank all cases of unusual or suspicious
transactions that they have knowledge of, irrespective of the amount.
In addition, the central bank's Minimum Guidelines on the Provision of Internet Banking Services,
which was issued in May 2000, requires banking institutions to have face-to-face interaction with
customers prior to the opening of accounts or the extension of credit. Banking institutions are also
required to establish appropriate measures to identify customers reached over third party websites
and the customer verification process as stringent as that for face-to-face customers. In providing
Internet banking services, banking institutions are also required to implement monitoring and reporting
mechanisms to identify potential money laundering activities. This enables the Central Bank to ensure
that the banking industry, while keeping abreast with developments in ICT, that is, information,
communications and technology, would maintain the integrity of the financial system and prevent it
from being abused by the money launderers.
On 25 April 2001, the Central Bank also issued "Guidelines on Anti-Money Laundering Measures for
the Insurance Industry". These Guidelines require insurance intermediaries to put in place controls to
counter money laundering in accordance with the concept of due vigilance which requires the
verification of the identity of their customers, keeping of records, recognition and reporting of
suspicious customers or transactions.
With the enactment of the Anti Money Laundering Bill 2001, the reporting requirements and
obligations in the Guidelines would have the force of law. In addition, financial institutions have to put
in place more stringent and efficient measures and mechanisms to fight against money laundering.
These obligations are not new as the banking institutions are already complying with them. To
complement these obligations, the new law has also provided these institutions protection from any
action taken against them for reporting the activities of money launderers.
Rapid developments in the financial system and globalisation have made the world increasingly
borderless. As countries implement countermeasures, criminals with their ill gotten gains and money
launderers who disguise the criminal proceeds have developed new and more sophisticated methods
for moving money around the globe. Money launderers are swift in probing the financial system for
vulnerabilities and using their ingenuity to devise new methods to circumvent the system and adapt
their methods to exploit these vulnerabilities. It is, therefore, imperative that the banking industry be
vigilant to ensure that all efforts of the money launderer are thwarted. While, we do not expect banking
institutions to be detectives, there should be an awareness of the potential for money laundering
activities and the need to report any suspicion of such activities. Banks have to ensure that they have
sufficient controls to prevent their institution from being used by money launderers. The need to have
rigorous processes in place to minimise any risk of banking institutions dealing, even unwittingly, with
the proceeds of criminal activity cannot be over emphasised in order to protect against them against
credit, reputational and other risks.
Offshore financial centers have been the focus of the international community as being vulnerable to
being abused by money launderers. as you may be aware Malaysia has its own offshore financial
center the Labuan International Offshore Financial Centre. With regard to Labuan IOFC, the Labuan
Offshore Financial Services Authority (LOFSA) will continuously assess and upgrade the legal and
supervisory framework to ensure that it is on par with the latest international supervisory requirements.
The relevant supervisory structures within LOFSA had been enhanced, particularly the compliance
function, to preserve Labuan IOFC's image as a reputable offshore centre conducive for quality
players and genuine players. In addition, LOFSA, being an NCC member would continue to promote
Labuan IOFC's image as a well regulated and clean centre. This is reflected in the stringent policy of
admitting only reputable and full-fledged players to Labuan. To demonstrate Labuan's commitment in
fighting money-laundering activities, Labuan had voluntered to be assessed by the APG. The
evaluation team comprising evaluators from the APG and the Offshore Group of Banking Supervisors
(OGBS) has met with the respective ministries and government agencies and the Labuan offshore
players. I understand that the report of the evaluation on Labuan would be tabled accordingly.
Although the focus of my remarks has been confined to the banking industry, money laundering, and
the need for proper controls to prevent it, are not confined to banks. Virtually any financial service
provider can be used as a vehicle. To effectively combat money laundering, the whole financial
system has to be vigilant and work together.
The APG Secretariat and members of the NCC have worked together with the Secretariat of the
Central Bank in organizing this Meeting and for this, I would like to take this opportunity to express our
sincere appreciation for their contribution, time and effort in making this Meeting a success.
Last but not least, I would like to thank Yang Berhormat Tun Daim Zainuddin for having so graciously
accepting to deliver the keynote address on this occasion at the fourth annual meeting of the Asia
Pacific Group on Money Laundering.
On that note, I wish you meaningful discussions over the next three days.