Role of Compliance Officer in AML/CFT

The assignment explores the importance of compliance officers in banking institutions. They are responsible for ensuring that the bank adheres to AML/CFT regulations, incorporating policies, and assessing risks related to new services and products. Compliance officers also play a crucial role in detecting suspicious transactions and reporting them to the Financial Intelligence Unit (FIU). The assignment highlights the key duties of compliance officer teams, including undertaking forensic reviews and accounting, as well as addressing suspicious transactions in the sector.

Running head: MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
Money Laundering in Malaysia’s Financial Institutions
Name of the Student:
Name of the University:
Author’s Note:

1
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
Chapter 2:
Literature Review
2.1 Introduction
This segment of the paper brings forth an overview of the results found in the
previous researches that is in accordance to the research topic. In order to give out a larger
picture on the associated researches on forensic accounting and money laundering, this
section of the paper provides researches from the international and domestic aspect. By
depending on the assessed literature, the research framework and hypothesis are framed and
constructed. Distinctively, this section of the paper initiates with the background of Malaysia
and the history of the banking industry in the country. In the later sub-sections of the this
chapter an overview of forensic accounting and money laundering is addressed. The
implications of the skills of forensic accounting in the AML detection especially a focus from
the perspective of the AML experts and then followed by a research model is provided in this
chapter. This section even constructs the research hypothesis and lastly the chapter ends with
the conclusion of the literature review.
2.2 Malaysia and its Banking Industry
Malaysia is generally considered as a proper instance of a flourishing reasonable
Islamic nation (Hall and Page, 2016), a standard setter and global leader of the Islamic
finance (International Monetary Fund, 2017). It has developed in a tremendous manner and
has established to become a developed nation during the years after their independence more
than 50 years ago. The country was ranked to be the 24th successful nation and within the top
four among the Asian countries after nations like Singapore, Hong Kong and Taiwan in the
international ranking with regards to the easiness to do business in a country (The World
Bank, 2017).

2
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
The disclosure of the sustainable development, “Brand Finance” looked upon as the
top “500 Banking Brands” in the year 2017 disclosed that all the banks of Malaysia have
enhanced their international ranking out of which CIMB and Maybank retained their crown
of being the Top 10 ASEAN banks and furthermore, top two Malaysian banks in the
international brand ranking (Rao, 2017). In accordance to the other developing nations, the
banking process has a key role to play with regards to the financial intermediary in the
economy of Malaysia as it has an impact on the economic development of the nation (Levine,
1998). The banking system administers most of the financial transactions and flows and plays
a part in more than 70% of the total assets of the financial system. Hence, it is understandable
to admit that an effective and profitable banking sector may be helpful in making sure that an
effective financial process which can lead to sustainable economic development and growth.
The changes in the financial sector of Malaysia over the current decade give out a key
platform that has assistance for the future development and growth of the financial sector. It
has enhanced their role as an essential contributor to the development in the economy of
Malaysia where the financial sector has recorded a better growth of more than 6.2% in the
year 2017 in their third quarter (Bank Negara Malaysia, 2018).
In spite of their successful attainments, there are several underlying issues over the
development and perseverance of corporate falsifications especially laundering of money,

3
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
corporate cheatings and corruption that are increasingly disclosed to the banking industry;
ASG and FATF, 2015 with the help of their “Malaysian National Risk Assessments in the
year 2012 and 2013” as explained by Said et al, (2013) furthermore assists these issues. In
their “Global Anti-Money Laundering Survey” in the year 2014, KPMG even accepts that
money laundering still is a vital aspect and associates with a greater amount of risk towards
the financial institutions (KPMG, 2014). This information makes it obvious that laundering of
money is a key aspect and a practical issue to the financial industries and that their threats
cannot be undervalued. Provided any bank would be facing a huge amount of risk due to the
intrinsic nature of the banking activities as they provide various services and products that
unconsciously and consciously by taking assistance of the banking organizations, a launderer
transact illegal money by account transfer and fund remittance and the resource of the money
that is retained illegally will remain hidden (Wit, 2007). Reuter and Truman (2004) add
tonally explains that bank transfer with the help of check and wire are most the general
mediums for unlawful transfer of money. Even after saying this, it is commonly accepted that
the banking companies are most commonly utilised tools for the money launderers (Mat et al,
2015). From the point of view of the money launderers, the market of the banking sector
provides benefits like the relatively lower expenses related to laundering in accordance to the
other processes. This phrase was assisted by Sharma (2001) who discovered the evidence in
their research and explains that laundering has a cost that is approximately 6.9% by making
use of the financial markets in opposition to the conventional 20-25% that is given to the
expert money launderers by the terrorist organizations. In accordance to the British National
Crime Intelligence Service as explained by Kumar (2015), costs may be within the range of
6-8% while in certain extraordinary cases it can be 10-50% and the terrorists are satisfied and
happy if they eventually legalise and purify their money with the extent of 30-40%. In the
current regime of AML they have induced the banking organizations to take their

4
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
responsibilities to restrict direct contact with the unlawful money with the incorporation of
the reporting process and enhanced management techniques that make them less susceptible
for the operations of money laundering.
Therefore, in several nations, banking sector has been looked upon as the key source
of key information for the identification of money laundering. Nonetheless, with the
international process that has developed provided the tangible restrictions to utilise the banks
and its mainstream services and products for the operations of money laundering to occur and
effectiveness of the AML regime is very difficult to evaluate. In accordance to safeguarding
the integrity of the central financial process, the regime of AML created in the key
jurisdiction all over the globe transformed and how the banking industries function in their
business. However, from the prospective of the banks, the key reason for their presence is to
generate profit as much as possible.
Conversely, their commercial and cultural interests are entirely specific from that of
as they now think of money laundering mechanisms with respect to the supply and demands
of the unlawful services within an extrinsic and intrinsic price (Reuter and Truman, 2004).
This has put forth a vital pressure on the banking sector especially over the participation of
the smaller markets. Geiger and Wuensch (2004) and Hubli and Geiger (2004) as explained
by Buehrer, Hubli and Marti (2005), assists this point of view that the pressure for the smaller
banks is double higher than the bigger banks and distinctively this was supported by Hubli
and Geiger (2004) survey where the laundering of money restriction measures take 455 of the
overall regulatory pressure and 2% of the overall costs in the private banking of Switzerland.
Without any doubt, banking organizations has become the most susceptible organization
being the frontier of laundering of money ring in the current decade. In this aspect, the
banking sector in Malaysia have mechanised themselves with sufficient infrastructure to
assess the money laundering risks like the laundering of money risk evaluation mechanism,

5
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
mechanised administering solutions, IT framework which is inclusive of the information
process within the company that acts as an assistance tool for the purpose of risk evaluation,
generation of compliance department and regulatory need (Isa et al, 2015; Reuter and
Truman, 2004). .
In this aspect, Malaysia has even joined with the other nations putting in critical
exertions to fight operations of money laundering through the performance of “AMLATFA
2001” under the surveillance of numerous organisations and headed by “Central Bank of
Malaysia”, which was constructed to stay in traditional values with the international
agreements in accordance to money laundering specifically the FATF40 suggestions on
“Money Laundering” and the “Ninth Special Recommendations” on criminal funding
(Shanmugam, 2004; Rahman, 2013). “AMLATFA 2001” is the initial act with the
enforcement of several agencies in Malaysia. In the year 2014, on 8th August, the “Anti-
Money Laundering and Anti-Terrorism Financing Amendment Act 2014” was authorised to
reform the “Anti-Money Laundering and Anti-Terrorism Financing Act 2001” and currently
is known as the “Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of
Unlawful Activities Act 2001” (AMLATFPUA) where the treaty was extended in order to
add in anti-terrorism investments where AMLATFPUA gives out for the wrongdoing of
laundering of money and offences that are anti-terrorism in nature and the actions that can be
undertaken for the restriction of money laundering, power of investigation and the penalty of
the involved property or attained from money laundering and offences related to terrorism
financing along with the proceeds of the terrorist property from the illegal operations and the
instrumentalities of a fault (Bank Negara Malaysia, 2018b; Malaymail Online, 2016). As the
banks developed their control of detecting, restricting, regulating and reporting anti-money
laundering initiatives and still laundering of money is still regarded to be one of the
significant restrictions to an efficient financial process in Malaysia and even globally. This is

6
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
due to the fact that the launderers and the terrorists have learned to spread their activities and
extend into their financial organizations or the channel for the financial operations (FATF,
2006). The sequences of the financial businesses in several financial organizations among
many several dominions makes it complex to make a trace (Mohamed and Ahmad, 2012).
However, electronic banking which has made life simple in making transactions with the
banking organizations has even hugely facilitates with the movement of billion dollars in the
illegal funds. Significantly, it not only generates a key dilemma for the banks as it
manufactures a change in the process in which the banks communicate with their customers
but even has the probability to badly impact the activities of the banks (Rahman, 2013). It
cannot be denied that the banks of Malaysia have given desirable amount of money on the
programs associated to ant-money laundering. From these elements it seems relevant to
remember that laundering of money is one of the major risks in the banking sector.
2.3 Money Laundering
2.3.1 Concept and History
There is certain disagreement in the literature in accordance to where the meaning of
money laundering generated from as there is no proof that recommends when the word
“money laundering” was created. Chaikin and Sharman (2009); Steel (1997); and Hardani
(2017) cites that money laundering is a metaphorical word that looks to have generated from
the United States of America during the 1920s in which the Al-Capone’s story of using the
strategy of the launderers and their small businesses in order to costume their profit from the
illegal alcohol during the time of prohibition. This ownership of the mafia of the
Laundromats in USA creates a bigger amount of cash from the illegal proceeds from a
number of profitable offences like the trading of the unlawful drugs, prostitutions, extortions
and murders in order to mingle with the true and fair income from the business of laundry to
confuse the enforcement of the law examinations by revealing a true and authentic source for

7
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
the money (Malinoski, 2007). The Laundromats were selected by the criminals as they were
the cash businesses and this was a certain benefit to decriminalize their profits. With the
assistance of the legalised businesses, the money that was illegitimate in nature was
diversified with the legitimate earnings and the overall value was reported as the overall
earnings of the legal businesses. By utilising this process, the unlawful income was
eliminated as the money took the image of the business that is legal. After this mechanism,
the money could therefore be utilised independently without giving any hint to the law
enforcement people. On the other hand, Al-Capone was questioned and convicted in the year
1931 for evading tax which triggered the business of money laundering getting off the ground
(Steel, 1997).
On the other hand, Shehu (2000) discovered a different result and in his paper, he
discovered that the word money laundering came into existence in the year 1932 in the
scenario of Mayer Lansky in USA. In this scenario, Mayer carried out an account that is
offshore in a bank in Switzerland which was exploited to cover the illegal incomes of the
“Governor” named “Huey Long” of Louisiana. Mayer on a later period created a slot device
in New Orleans and the banks that is in Switzerland provided money in the manner of loans
to the company named Lansky & Co. With the help of this process, it permitted the unlawful
money to come back to United States. From that time onwards the activities of money
laundering have developed by making use of innovations that is seen in the development of
new and improved technologies.
On the other hand, looking at the historical sense and in the light of the features of the
term money laundering, the process of concealing the money from the government has huge
history, even though the idea of laundering money may have been unknowing in China. Li
(2009) supports that there are several forms and principles of laundering money that have

8
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
been observable and related in the history of China even though the term laundering has
currently has been given to these adverse results.
A similar observation was seen in the book named “Lord of the Rim” by Sterling
Seagrave, who was an American historian. He wrote that “more than 2000 years ago the
Chinese merchants laundered with their profits as the local governments banned various
forms of commercial trades” (Seagrave, 1995). He wrote that the government considered the
activities of the merchants with a huge amount of doubt as they were looked upon as greedy,
ruthless and they followed a rule that was different. Along with this, a huge amount of the
merchant’s income evolved from black marketing, bribe and extortions. The merchants who
remained hidden were successful in keeping their income and wealth safeguarded from the
sustainable extortions by the diplomats. Therefore, they used the mechanisms like changing
their money into assets that are movable easily and taking the cash out of the area, trading at
a higher price in order to make the money invested in the businesses and tax exile funds. This
process is even used in the current time period by the professional money launderers
PHPWind (2008), He (2002) and China Culture (2006) as explained in Li (2009) addtionally
are in line with this idea.
For instance, during the Hans Dynasty (206BC-AD220) reported that theere were
exterme fines to punish a tomb theft who used to lauder their illegal income by working on
behalf of the pawnshops and the antique dealers. The tomb theives had their individual
legalrecognitions and therefore had to conceal their criminal actions from the authority and
public and it is seen till the poresent time the authorities of the tomb raiders is ongoing. The
msot recent evidence is the arrest of the leader of a group and his gang members in the
Northern China authenticates the presence of this group since 206 BC to the current time
period and most of them have been working as archaelogists in certain Chinese national
projects (Yan, 2016). By assessing the extensive degree of the sources that have been

9
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
mentioned earlier, it is looked upon as the fact that the justification behind these trail of
money is that the illegal proceeds are sold generally in cash and therefore has to be
transferred into financiual resources that can be utilised that have an appearance of a legal
origin.
Li (2009) in his reserach cited that the effect of money laudnering on Chine did not
give out any attnetion of their laws and the policy makers like in case of the western parties.
According to OECD (2005), China has been looked as a magnet for the purpose of activities
like money laundering which comprises of approximately up to USD 24 Billion of the assets
that have been illegally obtained for the purpose of laundering each year and the values are
secretly taken out of the country has been increasing. It is justifiable to recommend that the
adversity of money laundering was not observed to be a posting threat to the country as a
whole. A less amount of work was done distinctively in accordance to the efforts of anti-
money laundering and the anti-money launderers within the nation was not as motivated as in
USA in fighting with the crimes as no publishing in the law or the regulation in the year
1980s was generated to address clearly the money laundering term.
However, the word money laundering as an idea was already into existence in USA in
the early periods of 1970s when the country passed the Bank Secrecy Act that looked to
provide enforcement personnel with the weapon that is essential to fight with money
laundering (Madinger, 2012). This Act is in need of the financial organizations in order to
keep a record of the file and requirement of reporting for the Suspicious Activity Report, a
Currency Transaction Report, a report on the accounts in the foreign banks and the reports on
the movements of the currency that is taking place through cross-border movements and
administering of the mechanism. The justification for this reporting reliant process is to
generate a paper trail that would assist the law enforcement personnel in examining money
laundering scenarios. Furthermore, the efficient incorporation and enforcement of BSA of

10
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
1970, Congress acted the Money Laundering Control Act (MLCA) of 1986 that was followed
by the incorporation of the “United Nations Conventions” that is in contradiction of unlawful
“Traffic in Narcotic Drugs and Psychotropic Substances” that made money laundering into
the global stage and thereby played a key role in the initiation of the idea of money
laundering internationally (Amrani, 2012). Thereafter, “Financial Action Task Force”
(FATF) established in the “G-7 Summit” in Paris in the year 1989 on July was generated as a
free inter-governmental agency looking to further promote and enhance the policies and
safeguard the international financial system against things like money laundering and
criminal financing (FATF, 2018). During the time of the early 1990s, the efforts from the
international AML experienced a quick and huge development as the key global
organizations diffused and endorsed the rules of the AML. The actual FATF 40 suggestions
were constructed in the year 190 as an initiation to fight the mishandling of the financial
process by the individuals who are laundering the drug money. In the year 1996, the
suggestions had to be changed for the first time and thereafter revises continuously till the
year 2013 in order to reflect the developing money laundering which extensively created new
threats of anti-money laundering, anti-criminal activities, rise in the level of financing and
incorporation of the risk evaluation rule of the nation’s criminal financing and terrorism of
money laundering (FATF, 2018; Mei, Ye and Gao,2014). The measures of the FATF are
looked upon as the leading international standards of international money laundering that
provides an improved, consistent and complete structure for fighting laundering of money
and criminal financing that functions as a global benchmark for the national agencies and the
governments to incorporate within their national boundaries, for the identification, restriction
and suppression of laundering of money and financing of the criminals. It is the most
effective body in constructing the standards of AL from their establishment to the current day

11
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
as it is not an official treaty company but is more dependent on the frequent decisions to
renovate their existence by the states where the meetings are held three times within a year.
2.3.2 Definition
The significance of the crimes of money laundering has led to the academic research on
this aspect from all sections of the world encompassing the practical and the legal issues
which cover the research on the offences, restrictive actions, cases, regulations and
discovering the patterns of money laundering operations in which it is covering the crime.
Therefore, there are several and numerous explanations of money laundering in the articles
that have been published which may be different among the companies and the jurisdictions
(Adewale, 2008). The UN explained the process of money laundering as an action that is
associated with the transfer or the conversion of a property or the hiding of the true character
of the property as a knowledge is there that this property is attained from drug and other
trafficking. The FATF (2012) explained money laundering to be the mechanism of the
earnings of the criminals to costume their unlawful source, in order to legalise the unlawful
revenue from the crime which is gained through the unlawful operations like the sale of the
illicit drugs, wildlife sales and sales of arms and ammunitions, forgery of tax, insider trading,
embezzlement, fraud in the securities, bribery and corruption (Johnson, 2001). AMLAFTA
2001 explains that money laundering is the performance of a person who:
(a) Directly, indirectly engages in a financial dealings that is associated with the proceeds
of any illegal operations:
(b) Possesses, gains, receives, converts, carries, transfers, utilises, exchanges and
eliminates from or brings forth into the proceeds in Malaysia of any illegal operations:
or
(c) Covers, hides or obstructs the creation of location, origin, true, disposition,
movements and the title of proceeds, rights and ownership of any illicit operations.

12
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
On the other hand, IFAC (2004) explains money laundering as the channelling of the cash
or other kinds of funds created from the illicit operations through legal companies and
business to hide the source of the funds. Altogether, these explanations provide a key insight
in to the laundering of money as the resource for the illegally gathered funds which is
generated from a series of transfers and dealings in such an order that the same money is
gradually created to be looked as legal earnings. In an overview, the money laundering idea
addresses distinctly to the unlawful transfer of money. Takas (2007) provides in his research
an extensive degree of the illegal money transfers that comprises of two sorts and they are the
conventional money laundering which involves transferring of the funds that have been
gathered illegally to hide their actuality and transfer them until the money appears to generate
from legal resources and criminal financing is related to the transferring mostly the legitimate
funds for the unlawful intentions. On the other hand, Amrani (2012) attained a different point
of view of money laundering and in this research, he cited that money laundering should be
looked upon from the legal and the technical elements where the technical point of view
explains money laundering as the method that generates the acts of the laundering of money
from the initiation to the end. On the other hand, the legal point of view addresses the
construction of several legitimate tools like the legislations, conventions and arrangements.
Most of the articles that have been constructed in money laundering are from the technical
point of view. Booth et al. (2011); Compin (2008); Lehman and Okcabol (2005); and
Schroeder (2001) looks to create technical researches on money laundering as they have the
knowledge that money laundering pictorially is a mechanism and an action plan from which
black money were collected with the help of crime is out with the help of the cycle of
transaction so that it converts into white money. Whilst Goyel (2011); Bjelajac (2011);
Robinson (1998);Beare and Schneider (2007); Shelton, (2003); D’Souza, (2012); and Blum et
al. (2013) cited that extensive level of research undertaken on money laundering is more

13
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
associated to the legal angle where they look to manufacture in-depth and technical
assessment of few elements of the law in accordance to money laundering which is inclusive
how the legal structure requires to be explained, what and how crimes should be made the
base of money laundering, how money laundering needs to be regarded as a key offence and
how the law enforcements is key.
Geiger and Wuensch (2007) have tried to create a fine point of similarity among these
legal and the technical elements where they have explained that money laundering at the end
will create indirect expenses and damages because of the demands of the AML that are
namely economic and societal damages. From these two point of views, the provisions for
AML will create a threat to the privacy of an entity and raise the direct expense of the
transactions that are taking place in the market. The question generates as to who should look
to pay for these restrictive actions and what happened to the damage of the civil
independence specifically secrecy? In this aspect, Ferwerda (2009) addresses that if the duty
of the law, the organisational structure, the obligations of the private sector in the
enforcement of law and global cooperation are in order, it can be helpful in deterring the
potential immoral from the unethical behaviour and thereby mitigating the cost of
transactions of money laundering and exploitation of the private information. On the other
hand, Cuellar (2003) explained that measures of AML explained by the Ferwerda are not
every efficient and thereby fails in restricting the rise in crimes like the trafficking of drugs,
corruption and terrorism. In a research, which is constructed to ascertain the expense benefits
to AML for the risk reliant measures and approach, PwC (2007) discovered that 82% of the
participants explained that they had not observed any advantage of incorporating these
measures. This was effective discoveries that addressed the authentic feedback on a present
state incorporation of the provisions of AML. The efficiency of the measurements of AML
can be regarded as effective of their benefits are surpassed the incurred costs in combating

14
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
the criminal financing and money laundering. It can be said that where one should undertake
investment in a given path as long as the advantages attained from these investments remain
bigger than the advantages that can be reaped from undertaking investments in other
activities. This statement is assisted by Biagoli (2008), who explains that theory of
opportunity cost where the advantages gained from devoting resources to AML can be higher
than the ones that are coming from the substitutes. In this research, of calculating the cost-
efficiency of AML, Biagoli (2008) recognised yet another process that is to attain the
breakeven point in a scenario where the crimes are mitigated lower than the serious social
alarm entrance. In spite of the fact that Tanget al. (2010) and Carrington and Shams (2006)
took the view in discovering dependent amounts relating to the expenses and the advantages
of incorporating the measurements of AML is logically not feasible as there is no precise
formula to evaluate whether the system of AML has been efficient in attaining the existing
objectives. The query about the effectiveness is indefinable when an authentic process of
assess the level of money that is being laundered or circulated is not existent. Therefore,
evaluating the efficiency of the AML process distinctively in evaluating the effect of AML is
a debatable and challenging job.
On the aspect about making discussions about a dependable process to assess the amount
of laundered money or the money that is circulated, various researches have been undertaken
by the governmental and the international organizations, professionals, NGOs, enforcement
agencies and others have tried to create a framework in order to project and quantify the
amount of laundered money and a provide figures as well in order to explain the expense of
how much money has been laundered in a year. The “Walker Model” or John Walker’s
framework was highly used and the first essential attempt at quantifying the process of
money laundering globally.

15
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
This framework projects the method of level of money laundered by making use of a kind
of gravity framework that comprises of four key steps:
1. Recognise all the precise data related to crime for all the nations of the world
2. Project the amount of money is created with these wrongdoings
3. Project the amount of percentage of these earnings that are laundered
4. Project the amount of money that is assigned throughout the globe
Unger et al. (2006) was the first who incorporated the Walker Model and projected that
money laundering and its impact in Holland. In his research, he debated that that the Walker
Model is a positive framework for interdisciplinary criminology work and economics. In this
respect Reuter (2013)’s observations looks to be more credible. In their assessment of the
Walker Model, the outcome revealed by this framework is doubtful scientifically as the
projection in the quantity of money laundering in the “underground economy” were not weak
as very little was known about the amount of share of the proceeds either legal or illegal was
assessed in the methods that was constructed to hide the originality. Reuter (2013) adds in
that Walker Model estimated that all the nations bring in criminal money for similar reasons
and various economic frameworks are disregarded generates vagueness on the amounts that
are manufactured. In the same manner, Ferwerda (2012) provided the suggestion that Walker
Model potentially undervalues the overall money that is actually flowing and hence it is not
really helpful for the policy setters that for instance to have knowledge where the huge
amount of money laundering comes into their nation. It is even worse that a lot of double
counting would take place without this limitation and projection are difficult to back up
principally due to their improper information and strong estimations which create doubts on
their dependability.

16
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
There are even other researches and studies undertaken by (Bagella, Busato and
Argentiero,2009; Schneider, 2008; and Zdanowicz,2009) who have taken actions to construct
a framework in the projection of the value of money laundering. It is seen that Walker Model
is currently one of the most effective process to project the laundering of money with an
efficient intuition on how to come up with such projections. The condemnations have
provided new data to extend on like the distribution of the criminal earnings discovered by
van Duyne (1999) and the framework of the model and the significance of their parameters
given by Ferwerda (2012) which will raise the dependability of the Walker Model during the
times when the data that has been taken into consideration enhances.
In a collective manner, even though several frameworks have been constructed to
measure and project money laundering, an internationally granted framework to enumerate
laundering of money in a provided financial process does not exist (Mohd, 2008). This is
because of the intrinsic insufficiency of knowledge about money laundering which is similar
to the insufficiency of transparency and unity specifically in the explanation of money
laundering. Unger et al. (2006) recognises three key differences in the explanations with
respect to the subject, goals and sources of the money laundering where the researcher
gathered the explanations utilised by various professionals, international companies and
legislations and each one of them have been compared with one another.

17
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
In the above table, Unger et al. (2006) addressed that sections of the explanations into
three segments, in which the first column the operations addressed are recorded, the next two
columns explains which of the actions are regarded as money laundering and the aims for the
crimes. The scenario that has been explained above explains considerable variations in the
national explanations of money laundering. This is seriously an issue provided that the trans-
national features and explanations of the crime of money laundering. It discloses the fact that
what might comprise of money laundering in Germany may not be the same in Netherlands.
In the same manner, an individual who can be questioned for the purpose of laundering of
money in Switzerland may not be questioned in Belgium. The availability of such differences
in the jurisdictions in a scenario where the actual crime has occurred in one nation but the
incomes attained from there were laundered in some other nation and this will be difficult to
enumerate the amount, level and impacts of money laundering effectively which indirectly
creates issues with respect to the international exchanges of data along with twists of the
economic values: either undervaluation or overvaluation. Unger et al. (2006) stated by

18
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
utilising the various explanations, several areas, professionals and international bodies will
gain various results and would make various projections of the similar scenario. Stessens
(2002) further addressed that a variation in the explanation in the aspect of money laundering
leads to certain offences which may create technical legitimate issues which may obstruct the
combat against laundering of money. In the same manner the combat against laundering of
money is a general attempt from the international bodies and the regulations that governs the
crime of money laundering in several nations requires being similar as possible (He, 2010).
This is due to the fact that extensively laundering of money can have an impact on the actual
economy, community and even on the politics by disrupting the savings with the help of
criminal operations, impacts the development, disruption in distinct sectors with respect to
crime and the rise in the rate of crime that leads from money laundering. Certain empirical
studies that have been undertaken regards the impact of money laundering by making a
variation among the long term and the short term impacts of crime and on the other hand the
others concentrate on creating methodical attempts to evaluate the worldwide money
laundering by utilising several alternatives (Chong and Lopez-de-Silanes, 2007). Ferwerda
(2012) in her assessments of money laundering was able to construct an extensive review of
literature that provides twenty four indirect impact that laundering of money can have on the
actual specifically the financial companies which is explained in Table 2.2.
In the same manner, the literature review disclosed that money laundering not only
has an impact on the financial sector with a rise in the level of risk on the reputation,
solvability, integrity and liquidity of the sector and on the other hand, it can be effective for
the economy because it will raise the proceeds for the accounting sector and creates an
enhanced access of the credits (Ferwerda, 2012). This reveals by how much Netherlands can
make a profit of 0.1% more development from 1 billion more money laundering as they are
the transit nation of the criminal operations and financial flows of the criminals (Unger et al.

19
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
2006). Therefore, they are most likely to make profits rather than endure from these
laundering operations. In spite of this, assessment of the literature shows that is a scarcity of
researches that extensively backs up any of the impacts that have been recorded in Table 2.2.
It is seen that maximum number of them are theoretical and some even don’t have perceptible
sources. Bartlett (2002) explained that a precise instance of this defection is that” it is lucid
from the indications that is available” deprived of even addressing this evidence. In some
other words, these recommended evidences is not existent as one looks to consign to the other
sources without much any solid and precise back up. Levi and Reuter (2006) and Walker and
Unger (2009) additionally assists these issues and addresses the fact that most of the review
of the literatures on money laundering has an impact on their actual projections and the
failure in their principal investigation on the impact of money laundering gets affected by the
absence of dependable projections of the level of money laundering. Furthermore, the
researchers have come up with the problem of authentic projection of the money laundering
amount as they have a belief that disruptions in the economic figures can have a serious
impact in ascertaining the impact of money laundering as well as for the preciseness of the
economic policy implemented as a result thereof. Leaving behind what the option is
preferred, the international junction in accordance to the generalization of money laundering
offences becomes mandatory. One of the effective ways to highlight the issues that have been
explained earlier would be the incorporation of a huge approach to project the offences to
extend their scope as much as possible (Unger et al. 2006). This in a way would raise the
opportunities that the dual necessity of criminality would therefore be contented and thereby
would lead to international effectiveness of the law enforcement projections. In addition, a
larger list of the offences was undertaken within the same nation as the offence of money
laundering (Ferwerda,2012).

20
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
There are even other articles that have been disclosed that concentrated on explaining
the behaviour of the money launderer framework (Masciandaro, 1999 and Barone, 2003),
attitude of the nations in the international combat against money laundering (Masciandaro
and Portolano, 2003 and Gnutzmann, McCarthy and Unger 2010), the function of technology
in the laundering of money compliance and the size and the extent of money laundering and
criminal financing issues by Irwin, Choo and Liu (2011).

21
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
NO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Alldridge (2002) p.308, Bartlett (2002) p.18-19, Camdessus
(1998), FATF (2002), Keh (1996) p.11, McDowell (2001),
Tanzi
Bartlett (2002) p.18-22, FATF (2002), Ferwerda (2009),
Levi(2002) p.183, Mackrell (1997), Masciandaro (2004)
p.137,
McDonell (1998) p.9, McDowell (2001), Quirk (1997) p.19,
Levi (2002) p.183
Distortion of investment and savings
Baker (2005), Boorman and Ingves (2001) p.9, FATF (2002),
Walker (1995)
Alldridge (2002) p.310, Aninat et al. (2002), Boorman and
Ingves (2001) p.9-11, Camdessus (1998), FATF (2002),
McDonell (1998) p.10, McDowell (2001), Tanzi (1997) p.98,
Levi (2002) p.183-184
Alldridge (2002) p.310, Takáts (2007), Levi (2002) p.183-18
Aninat et al. (2002) p.19, Bartlett (2002), Boorman and
Ingves (2001) p.9-11, Camdessus (1998), FATF (2002), Levi
(2002) p.184, McDonell (1998) p.9, McDowell (2001), Quirk
(1997), Tanzi (1997) p.92-98, Walker 1995)
Alldridge (2002) p.315, Camdessus (1998), FATF (2002), Levi
(2002) p.184, McDonell (1998) p.11, Quirk (1997)
Alldridge (2002) p.306, McDonell (1998) p.10, Quirk (1997),
Tanzi (1997) p.96, Zdanowicz (2004b)
Alldridge (2002) p.135, Boorman and Ingves (2001) p.9,
Mackrell (1997), McDonell (1998) p.10, McDowell (2001),
Quirk (1997)
McDowell (2001), Keh (1996) p.11
Bartlett (2002), p.18, Boorman and Ingves (2001),
Camdessus
(1998), FATF (2002), McDonell (1998) p.10, McDowell
(2001),
Quirk (1997), Tanzi (1997) p.97
Tanzi (1997) p.8, McDonell (1998) p.10, Camdessus (1998)
p.2, FATF (2002) p.3, Boorman and Ingves (2001) p.9
Tanzi (1997) p.6, Levi (2002) p.183-184
Baker (2005), Gnutzmann et al. (2010), Keh (1996) p.4, TanziHigher capital inflows
Anina et al. (2002), Bartlett (2002) p.19, Camdessus (1998),
Mackrell (1997), McDonell (1998) p.10-11, Mcdowell (2001),
Quirk (1997), Tanzi (1997) p.95-96, Walker (1995)
Keh (1996) p.5, Alldridge (2002) p.314, FATF (2007)
Mackrell (1997), McDowell (2001), Walker (1995)
Baker (1999) p.33, Baker (2005), Bartlett (2002) p.18-20),
Walker (1995), Zdanowicz (2004b)Anina et al. (2002), Bartlett (2002) p.19, Camdessus (1998),
Mackrell (1997), McDonell (1998) p.10-11, Mcdowell (2001),
Quirk (1997), Tanzi (1997) p.95-96, Walker (1995)
Bartlett (2002) p.18, Boorman and Ingves (2001) p.8,
McDowell (2001), Quirk (1997), Tanzi (1997)
Profits for the financial sector
Reputation of the financial sector
Ilegal business contaminates legal business
Distorting of economic statistics
Corruption and bribery
Increase in crime
Threatens privatisation
Changes in the demand for money, interest
and exchange rates
Increase in the volatility of interest and
exchange rates
Greater availability of credit
Changes in foreign direct investment
Risk for the financial sector, solvability and
liquidity
Artificial increase in prices
Unfair competition
Changes in imports and exports
More (or less) economic growth
Change in output income and employment
Lower revenues for the public sector
Law enforcement gets a second chance
SOURCESEFFECTS
Levi (2002) p.182, Levi and Reuter (2006) p.292 and 349
COMPILATION LITERATURE EFFECT OF MONEY LAUNDERING (Source by: Ferwerda,2012)
Distortion of consumption Bartlett (2002), Mackrell (1997), Walker (1995)

22
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
2.3.3 Process of money laundering
By making a comparison with the traditional crimes, the generation of money
laundering has a special feature. The conventional processes of money laundering as most of
the experts and professionals agree can be categorised widely into three segments which may
take place concurrently phase by phase or in certain instances can overlap. The steps can be
defined by taking assistance of the picture that has been given below:
Placement is looked as the method when the illegal funds are initially incorporated in
the financial sector with the help of shops, casinos and other businesses in the domestic and
abroad in a manner that the systems are unable to identify. This can be undertaken with the
help of depositing the cash directly in the financial organizations which can move the money
with the help of wire transfer and even convert the cash into agreeable equipments like the
cashier’s cheque, money order and traveller’s cheque. (Sultzer,1995). Li (2009) cited that
placement is the most susceptible and challenging step of money laundering but is identified

23
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
very easily as the money launderer requires to make contact with the gatekeepers directly and
thereby exposé themselves to the investigation with the help of the customer depicting
mechanisms like the KYC and documenting the requirements. This recommends that
placement is much like the forefront of the fight among the two parties where in the scenario
if the launderer was able to influence the management liabilities because of their non-
compliance with the regulations of AML at the entrance and it is unlikely that the illegal
funds that have been discovered at a stage later on. In order to restrict this issue, the
launderers may look to make use of other mechanisms with the help of smuggling, frame
working, placement of the illegal funds into the banks that are in the offshore and the
smuggling of the currency (Amrani, 2012). Kumar (2015) and Krzyztof (2006) acknowledges
because of the nature of cash related to money laundering with its absence of paper trail and
it is attractive and may surpass the negatives as long as they accomplish successfully in
depositing the illicit funds. In the same manner, the process of placement associated with the
illicit operations that create huge level of cash such as smuggling and drugs activities
(Simser, 2012) as it is essential to transfer these into the financial system and to make them
easier to administer (Li, 2009). On the other hand, this may be least effective where the
laundering is associated to embed and frauds in the practices of the business that are
integrated already into the financial sector. The form of the placement that is used by the
launderers, its objective is to rest the money so that their originality can be concealed with the
help of layering.
The second stage is known as layering which has been explained as the method of
creating a series or layers of difficult transactions to distance the proceeds from the illicit
source and to incomprehensible the audit trail and thereby provide anonymity. The general
layering mechanisms are inclusive of the outbound transfers through electronic funds that is
generally directly and thereby into the bank secrecy or a jurisdiction with the tax record

24
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
keeping and documenting the requirements and the withdrawals of deposits that have been
already placed in the form of increasingly liquid monetary tools like the money orders,
traveller’s cheque (Van Duyne, 2003). Unlike Li (2009) who explained that placement is the
most susceptible and a risky stage. Suresh (2016) explains that layering is a vital and
significant amongst the three phases of money laundering as the cash is distributed into
various intermediaries within the process which it may be from one or many person to person
which makes it untraceable. In the same way, Sultzer (1995) in his research explained that
layering is the complex stage especially from the viewpoint of the law implementation
authorities due to the adverse daily quantity of the wire transfers all over the globe in finding
out easy fund transfer.
The process of laundering is the last end of the stage of integration. This is the last
stage in which the reinsertions that are not noticed of that has been laundered successfully,
funds that are not noticeable within an economy. This is gained by investing, lending in
increased value of good along with the trans-border, legalised looking transactions (Duyne,
2003). Kumar (2015) observed that the key stages of money laundering is contradicted by Li
(2009) and Suresh (2016) as they have a belief that incorporation is the most key stages as it
is very difficult to distinguish and even project among the illicit and legal wealth.
By overlooking which stages are significant in identifying the illicit incomes, the
launderers have evolved and developed over the time by undertaking these traditional
methods of laundering operations not only with the help of the financial organizations, but to
the non-financial companies as well. This is due to the fact that incorporation of the measures
of anti-money laundering operations leads to the money laundering operations that became
very difficult to undertake in this sector which led to look for the any other sectors like the
non-banking financial organizations that have loopholes when it is associated with anti-
money laundering policies (Fath, 1998). The non-financial organizations like the security

25
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
sectors, insurance sector, travel and tourism agencies, casinos, real estate companies,
underground banking system like the Hawala process and the international trading
transactions (Amrani, 2012) that are currently facing vital issues especially in the developed
and developing nations all over the globe like in case of Germany, Spain, Italy, Canada,
England and Japan as the more advanced money laundering mechanisms that is associated
with the increased use of these non-financial organizations for the wire transfers and
placements (Sultzer, 1995). Mohamed & Ahmad (2012) agreed that companies that are
related to trading, insurance, real estate, banking etc are very much exposed to the operations
of money laundering.
The National Risk Assessment (NRA) has explained that in HM Treasury (2015)
disclosed the conclusion of the evaluation on the risk of the money laundering within a
degree of the sectors which can be discovered in the following table.

26
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
In accordance to the table above, it can be said that the non-financial companies are scoring
good after the financial organizations in susceptibilities to money laundering where the
banking system that is underground like the money service business (MSB) and skilled
sectors like the accounting and the legal services comprise of the top three to the highest risk
susceptible to the laundering of money on the contrary to the real estate and the casino
industry. Furthermore, an international US Customs Service assessments as explained by in
Lawrence (2008) and FATF in the HM Treasury discovered extensive use of the products
related to insurance for the purpose of the laundering mechanisms where it identifies the
assurances of life to be the risk takers to the laundering of money too. In the same manner,
the National Risk Assessment 2017 as disclosed by The Law Society (2017) explains that
expert services like the accountants and lawyers along with the money service business are
recognised and still remain the huge areas of risk of money laundering in UK. In Ghana and
Serbia, their National Risk Assessment explains that the real estate companies have become a
key problem in battling the money laundering due to the absence of the effective legal
structure and the AML/CFT provisions in comparison to the other regulated sectors like the
accountants, lawyers and casino operators. In the same manner, the proof that is given in this
section recommends that non-financial companies are very much susceptible to money
laundering and now are increasingly higher risks equivalent to the financial companies as
well. In the classic vulnerability critique of the non-financial companies, Amrani (2012)
recognises four factors why the non-financial companies are very much exposed to the
method of laundering money:
(i) The transactions in the area of non-financial companies are done predominantly in
cash and therefore it makes it simpler for the launderer to utilise the illegal money
by looking at the facts that are used by the non-financial companies and thereby
transfer a huge level of money and thereby mitigating the suspicion.

27
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
(ii) There are several steps of laundering the illegal money in the area of the non-
financial organizations due to the ground of the legalised economic operations
where discovering the origin of the fund in this area are becoming difficult
(iii) Restricted boundary of the non-financial companies is added under the anti-money
laundering doctrine in several nations as well as the limitations in incorporating
the regulations.
(iv) Non-financial companies have an absence of power and management in
undertaking an assessment.
Li (2009) attained a new view on these non-financial organization susceptibilities to
money laundering from the aspect of China. In comparison to the worldwide experience,
these non-financial companies and their susceptibilities to money laundering has been
recognised in China previously in comparison to the financial companies. The main factor
has been the fact that there exists a Chinese tradition of substitute banking process in the
present social and economic challenges in which China has a huge history of making use of
the underground banking as a substitute to the financial companies. In accordance to the
matters that have been explained so far, it can be said that the non-financial companies are
now becoming the preference because of their rapid, cost efficient and safe process of
transferring funds internationally and nationally and require minimum level of documentation
and even follows a less regulatory process in comparison to the traditional banking process
who needs to maintain keeping of the records, customer recognition and reports of suspicious
transactions which are accountable to the formal banking process. The other reasons for the
usage of this process are because of the unfaithfulness of the banks, evasion of tax and
avoidance of regulations related to the currency (Lambert, 2002).
After the doctrine specifically concentrates on these financial and non-financial
companies, the launderers are in search for alternate processes by making use of electronic

28
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
money like the store value cards or smart cards, services related to the internet payment and
online banking as they look to launder money with the help of transactions that are non-face-
to-face in nature (Filipkowski, 2008). Office to National Statistics (2015) as explained by the
National Crime Agency (2016) there were around 2.46 million cybercrimes and 2.11 million
cybercrime victims in the year 2015 in UK. On the other hand, there are no yearly data on the
extent of laundering through cyber money. Hence, it generates a doubt that the tools that are
available are not effective enough in detecting the cyber laundering instances. This creates a
threat because of the fact that there can be a rise in threats and risks as the launderers would
be looking for new ways to clear up their illegal funds in order to maintain an edge over the
law enforcement personnel, which is a similar scenario in situations of a wire transfer during
the 1980s and 1990s (Filipkowski, 2008).
After the assessment of these scenarios, the anti-money launderer and the professionals in
the law enforcements and even in the cybercrimes have a belief that the potentiality in the
vast movement of the huge amount of e-money transaction over the internet will make it
difficult for the personnel of the law enforcements to track or detect the illicit fund transfer
(FATF, 1997). The studies presented so far provides a proof that in undertaking the process
of money laundering, criminals make attempts to discover the various victims and targets
with the utilisation of various techniques and methods from complex to simple skilled
processes. The money laundering movements and their operations from the banking industry
to the non-banking financial companies, and then transferred to the experts and developed
from a nation to an international scope that addresses the rising diverse process constructed
by the launderers to place, integrating and layering the illicit money to make it legal for the
purpose of using. As a result, the authorities associated with the law enforcement face bigger
challenges in examining the questioning these developing risks of money laundering
operations.

29
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
2.4 Money laundering in the financial institutions of Malaysia
There are numerous processes that are available to launder money but the launderers
look to make use of the financial companies in order to hide their illegal earnings as they can
undertake investments and administer their money in several ways that are inclusive of
exchanges, deposits, fund delivery and transfers to the accounts under several names and
nations. This would permit the wrong doers to conceal and cover up the source and the nature
of the money that is gained in an illegal manner (Amrani, 2012). The rise in the extent of
integration of the world’s best financial process and the elimination of the boundaries to the
independent movement of the money are the two reasons why laundering of money through
the financial organizational system are rising at a vast pace (Sohn, 2002). Hopton (2016)
addressed that it is vital to make a note that the process of laundering can take place with or
without the knowledge of the financial companies where the employees and the other
obligated authorities in the bank can plot and permit the launderer play with the money or the
launderer may take the benefit of the weakness of the anti-money laundering mechanism in
order hide their activities without the knowledge of the financial companies (Menezes, 2017).
As a result, the FATF gave out numerous suggestions to restrict the usage of the financial
companies for the determination of laundering money. The FATF even puts the banking
companies as the base in restricting practices related to money laundering by incorporating
the principles to restrict money laundering from taking place in the financial organizations
which is inclusive of the maintenance of records, customer identification and documentation
of transactions that are suspicious in nature.
2.5 Roles of AML experts
Since the establishment of the FATF in the year 1989 who performs as a free inter-
government body in order to safeguard the international financial process from the hands of
money laundering, the financial companies have had difficulties in predicting the actual role

30
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
that is the “watchdogs” of the financial markets, with a distinct compliance of groups who are
dedicated towards Anti-Money Laundering (AML) (Perezts, Fay and Picard, 2015). Cassella
(1994) cited that the financial companies are able to control their AML systems and plans
with the selection of a team of employees. In most of the financial companies, this job falls
under the compliance role, even though the others would have the job under various titles like
the financial crime team. The compliance department in Malaysia is a new role in the banking
companies in ensuring that the compliance with the AMLATFPUA and the other bodies are
maintained. The function of the compliance in terms of risk evaluation in association to
money laundering is the second line of defence (Mat, 2015). The department of compliance is
associated with assessing the transactions and it could be a hard task if the frontline officers
have been unable to pre-screen the customers with the pertinent risk of money laundering.
Hence, Menezes (2017) claims that the choice of assisting the teams who have
professional expertise is vital for AML team to operate in an effective manner. “Tom
Rollauer, Executive Director Deloitte Center of Regulatory Strategies, addressing at the 2014
Annual Compliance Week Conference” puts forth his worries on the demand of appointing
executives and the employees with compliance associated expertise in the financial
companies and other highly reputed firms. Whelan (2018) and Ehret (2017) additionally
assists to this concern and agrees that the demand for experts with the skills in the crime
related to finance remained existent for the previous few years and is still existent.
In Malaysia, Section 19(4) of AMLATFA asks the banks to appoint compliance
personnel at the management in every branch and auxiliaries who would be in authority of
the incorporation of AML/CFT events. “Paragraph 10.3.1 of the Standard Guidelines”
explains that the senior level management who is ideal and effective to undertake the
AML/CFT obligations in an effective manner discharge the same. The banks therefore need

31
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
to inform the FIU written on the selection or transformations in the appointment of the
compliance officer. The compliance officer is required to make sure the following:
(i) The compliance of the banks with the requirements of AML/CFT;
(ii) Incorporation of the AML/CFT policies;
(iii) The ideal AML/CFT process are incorporated in a precise manner
(iv) The mechanism of AML/CFT is assessed regularly to make sure that is precise
and adequate to address any transformations in money laundering and criminal
financing patterns;
(v) The medium of interpretation from the individual employees to the branches or
the subordinate officers and thereby to the compliance officers is safeguarded and
that the data is kept secret;
(vi) All the employees are conscious of the measures of the banks related to
AML/FCT that are inclusive of the policies, control techniques and the medium of
reporting
(vii) Internally created transactions that are suspicious are reported by the branch or the
compliance officers are suitably assessed prior to the submission to FIU;
(viii) The detection of money laundering and criminal financing risks related with the
new services and products coming from the operational transformations of the
banks that is inclusive of the incorporation of the new processes and technologies.
Usually, compliance group is ordinarily the reporting expert inside the banking
companies to report of any suspicious exchange or action through “BNM's Financial
Intelligence System” (FINS) (Mat, 2015). Any suspicious exchange or operations will move
through compliance office and it ought to be surveyed whether it is authentic to goodness and
warrant risk administering before any submissions to FINS can be undertaken. Nonetheless,
some banking organizations may have avoided the compliance bureau of which any single

32
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
bank officer may specifically report to FINS. It is seen that, if this is the scenario, the quantity
of STRs submitted to FINS is huge and of poor quality as they are not being pre-evaluated by
the compliance office. This is the reason; the Standard Guidelines explains that it is essential
for the compliance officer to perform as a second line resistance and to have fundamental
knowledge, expertise and required professional and in particular to have specific expertise to
release their responsibilities.
A first report that can be implied in assessing the required abilities is the McDowell
and Novis (2001) audit. The audit was an assessment of the roles played by the AML groups.
In such manner, the assessment noticed that through the AML groups, banking organizations
manage and recognize the suspicious exchanges. One of the prominent elements of the
employees was the distinguishing proof of suspicious exchanges. In this unique situation, it
was noticed that through the employee operations, the procedure of money placement and
layering where suspicious exchanges are divided into various cash and different tools
separately. In this unique situation, the investigation inferred that one of the vital elements of
the function employees is to create signal in case of any suspicious exchanges.
Furthermore, Adams (1992) noticed that the employees in the compliance roles are
incorporated into directing significant system reviews. For this situation, the research
assessment noticed that the employees are engaged with creating forensic review and
accounting in the frameworks to assess both the present and recorded patterns in transactions.
The historical assessment of past laundered exchanges, the employees, frames a basis through
which the current AML frameworks adequacy has actualised the control over tax evasion
exchanges. Antoinette (2009) assessed the information from 75 compliance officer and
presumed that the greater section of the participants express that they initially think of staring
their own investigation, supplemented with playing out an exhaustive screening background
of the customer; his or her points of reference or past suspicious nature, the amount of money

33
MONEY LAUNDERING IN MALAYSIA’S FINANCIAL INSTITUTIONS
associated with the exchange in evaluating the suspicious characteristic of transaction, the
destination of the fund either international and domestic—global transactions and the
association between the nature of the exchange and the profile of the customer. In order to do
so, AML experts needed to prepare for their preparation in the both risk controlling and
regulations and the financial operations and products they have been monitoring.
Hence, by looking at the above two scenarios, the paper concludes that the two key
duties and pillars of the AML employee teams were in undertaking the forensic reviews and
accounting and addressing the suspicious, vital transactions in the sector.