In addition, it is also worth noting that in terms of management information system (MIS), more investments were made to either upgrade or enhance their existing MIS to facilitate effective monitoring of suspicious transactions. This is encouraging. Now let me share the not so good news. Implementation of AML/CFT policies and procedures, although has shown improvement as compared to the last review, is still an area that needs to be strengthened particularly with regards to CDD and customer monitoring. While we acknowledged that in almost all cases, CDD were conducted, the extent of due diligence in some instances were inadequate and not reflective of the level of money laundering and terrorist financing risks posed by the customers and/or transactions. We believe that to address this issue, strong risk culture must be inculcated and the performance and reward system should reflect that culture. Self-regulation Institutions with strong wisdom in risk governance and culture do not solely depend on the regulator and supervisor to tell them what to do. Self-regulation is important, particularly for financial institutions. In performing the intermediary functions, depositors and shareholders depend on the decision and practice of the financial institutions to balance the risks and rewards in their operations with the changes in operating environment and risk management expectations. We have learned and relearned abundant lessons from the experience of the past crisis and many of those lessons lead to changes in regulation, supervision, enforcement and risk management practices throughout the world.

As these new rules are designed and implemented, we are expected to adapt and change our business models and risk practices. Bank Negara Malaysia is adapting as well. I have highlighted earlier the development on the regulation and supervision’s front. Allow me to highlight key developments on the enforcement front. Given that combating financial crime continues to be one of our key priorities in sustaining financial sector integrity, Bank Negara Malaysia is intensifying enforcement actions on AML/CFT non-compliances and breaches of legislations. Since 2012, Bank Negara Malaysia had compounded several banks and money service business operators for various non-compliances with the Anti-Money Laundering and Anti-Terrorist Financing Act 2001 (AMLATFA). Besides AMLATFA, the new AML/CFT policies are also issued under The FSA and IFSA. FSA and IFSA provide Bank Negara Malaysia with wider enforcement powers including the administrative and civil sanctions for breaches under these Acts. FSA and IFSA also allow for enforcement actions taken under these legislations to be made public. This means that the reputational stake for non-compliance has been set higher. BIS central bankers’ speeches  3  This is necessary to strengthen financial sector’s compliance to AML/CFT Policies and preserve the integrity of the financial system from being abuse for criminal activities. Bank Negara Malaysia recognises that the vast majority of the DNFBPs seek to comply with the law and for certain profession such as the lawyers and the accountants, through their ethical obligations.