##erabilities could also come from the country ’ s economic and geographical elements, as well as our legal framework. as a highly open economy, there are certain economic factors that contribute to the attractiveness of money laundering risk in the country such as the high integration with international markets, cash - based economy, high existence of non - bank remittance transfer, exposure to international trade, high percentage of informal economy and large volume of physical movement of currency. vulnerabilities in the country ’ s geographical elements that may contribute to the attractiveness of money laundering risk is the country ’ s long and porous border. in the case of drugs trafficking for example, malaysia position that is close to the “ golden triangle ” and within the route of “ afghanistan opium ” make our country vulnerable to trafficking of drugs from these areas. in the case of human trafficking, our country ’ s proximity to conflict areas such as myanmar, makes us vulnerable to smuggling of migrants and trafficking of persons from rohingya areas. although in most cases malaysia is not the final destination, we are the favourite transit points for these refugees. the nra highlights the money laundering and terrorist financing risks faced by malaysia, and areas that warrant more resources and attention. some of the targeted mitigation measures undertaken by the authorities include : • intensified joint investigation efforts by the leas to effectively combat money laundering and terrorist financing. this is reflected in the increased number of raids, arrests and prosecutions related to money laundering and terrorist financing and predicate offences ; bis central bankers ’ speeches • another effort is the enhancement of the structure of the individual leas, which includes the formation of dedicated aml / cft unit within the leas and increase in manpower focusing on money laundering and terrorist financing investigations ; • another response by the government is the amendment to the anti - money laundering and anti - terrorism financing act 2001 ( amlatfa ) which is aimed at strengthening malaysia ’ s aml / cft framework against criminal activities. the amendments would provide clarity on reporting obligations so that preventive measures can be implemented more effectively, such as requirements to submit strs related to terrorism financing, tipping off provision and cdd requirement ; • the intensity of enforcement actions against financial institutions that failed to comply and implement aml / cft programs is also increased. in 2013 and 2014, bnm has compounded banks for various failures to implement effective compliance programs. with the coming into force of the amendments to the amlatfa on 1 september 2014, the

##ive action ( pca ) framework. this was done to compel banks to take pre - emptive action against what may constitute as emerging threats to their financial viability and thereby, ensure that they continue to operate in a safe and sound manner. as part of the pca framework, banks are guided to align capital with actual risk exposures, implement business improvement measures, and institute corporate governance reforms. corporate governance and disclosure to complement the above initiatives, the bsp has also been keen on promoting a culture of good corporate governance in the banking system. we have correspondingly issued appropriate regulations anchored on effective corporate directorship, sound audit and compliance systems, and enhanced disclosure in financial reporting. shift to ifrs / ias a related initiative is our move toward the adoption of prescribed international financial reporting standards ( ifrs ) and international accounting standards ( ias ) in 2005. this was a major step that we had to take in order to firmly establish meaningful and reliable standards for financial reporting in the banking system. with the implementation of the philippine financial reporting standards ( pfrs ) and the philippine accounting standards ( pas ), we expect to derive benefits in terms of improving the quality of financial information to be disclosed to market participants. this should contribute to enhanced risk disclosure and better market discipline in the banking system. risk - based capital adequacy framework in the time that we are building on these reform initiatives, we are simultaneously working on strengthening the risk - based capital adequacy framework. essentially, the shift to risk - based capital adequacy framework is much more than the application of mechanical risk weighting rules. the real challenge and benefit is actually greater in motivating banks to more deeply understand their risk exposures, develop models to capture the essence of those risks, and, consequently, fine - tune their business models to manage their risks to maximize value. we expect our domestic banks to rise to this challenge, particularly now that we are implementing tougher standards under basel ii. what makes the new basel ii - based framework even more challenging is that it will not only focus on the computation of the appropriate level of capital given a certain level of exposure, but will also underscore the need for more market disclosures by banks on their risk exposures and management practices. the required disclosures to the public of bank capital structure and risk exposures are aimed at promoting greater market discipline in line with the so - called pillar 3 of the basel ii recommendations. this is a