Many elements of requirements for the risk management framework contribute to risk governance. For instance, the requirement for effective board audit and risk committee, regular reviews of the effectiveness of the framework and its implementation and so on. The Board plays a critical role in risk governance. The Board sets standards and expectations that would influence the culture and management of the business, and ultimately, the quality of risk governance. Common shortcoming occurs when Board fails to serve as a sufficient “check and balance” on the activities of the senior management, causing the business to focus excessively on short-term growth at the expense of long term stakeholders’ interest. For this reason, Bank Negara Malaysia places greater expectation on the roles and responsibility of Board and senior management. This expectation can be found in many policy documents issued by Bank Negara Malaysia since the past several years and specifically provided for in the Financial Services Act (FSA) and the Islamic Financial Services Act (AFSA). For an institution’s risk governance to be effective, there must be a strong risk culture which is consistent with the institution’s espoused values and risk appetite. You may asked, how does Board assess risk culture? There isn’t simple and straightforward answer to this question. Some institutions undertake “climate review” among its management and staff to gauge the culture whilst another approach could involve focus group. Ultimately, audit, compliance and risk management functions would have opportunities in the course of their work to observe the risk culture throughout the business.

However, given that the controls on money laundering risks implemented at the financial institutions are increasingly tightened, there is this emerging consequence that DNFBPs, particularly the legal professionals, are increasingly becoming more attractive for the criminals to launder their ill-gotten gain. According to the report published by the FATF on money laundering involving legal professionals, key among those factors are the perception that the involvement of legal professionals provides a further step in the chain to frustrate investigation by law enforcement authorities. Thus, it is imperative for DNFBPs to increase their awareness and understanding on how their industry can be susceptible to money laundering and takes necessary measures commensurate with the money laundering and terrorism financing risks faced in offering such business activities. We hope that with higher awareness among the DNFBPs, we will be able to see higher number of submission of suspicious transaction reports from the DNFBPs. As the industry is aware, Bank Negara Malaysia is finalising the revised AML/CFT policies for DNFBPs and we are targeting to issue the policy before end of October. I would like to take this opportunity to thank the various associations and self-regulatory bodies who had provided comments and feedbacks to the draft policy papers that we had issued earlier. Bank Negara Malaysia will continue to support and partner the financial institutions to weather the challenges in fighting emerging trend in financial crimes. For this purpose, I would like to reinforce your attention that Malaysia’s AML/CFT regime will be undergoing the 3rd Mutual Evaluation Exercise commencing August 2014.