Anti-Money Laundering, Countering Financing of Terrorism, Countering Proliferation Financing and Targeted Financial Sanctions for Financial Institutions (AML/CFT/CPF and TFS for FIs)

Money laundering and terrorism financing (ML/TF) are financial crimes with farreaching and deleterious socio-economic effects. Criminal networks, money launderers and terrorist financiers are highly adaptive and quick to exploit any weak links within an increasingly borderless world to obscure detection of such illicit funds. The globalisation and advancement in technology, including the emergence of new players and innovative products, pose challenges to regulators and law enforcement agencies alike in curbing criminal activities.

In line with the international standards established by the Financial Action Task Force (FATF)1, the anti-money laundering, countering financing of terrorism and countering proliferation financing (AML/CFT/CPF) reporting obligations imposed on reporting institutions are risk-informed, and subject to periodic review in tandem with any material changes to the international standards or the evolving risk of ML/TF and proliferation financing (PF) situation in Malaysia.
In view of potential development opportunities brought about by the era of digitalisation, enhancements to the existing AML/CFT/CPF reporting obligations are important to ensure areas of higher risk are subject to enhanced controls, while areas of low risk are accorded some policy accommodation, to ensure that the integrity of the financial system is preserved, just as development objectives are facilitated.

Consistent with the FATF’s action to strengthen the response to the growing threat of weapons of mass destruction (WMD) PF, reporting institutions are required to assess PF risks and implement commensurate mitigation measures. This aims to ensure that reporting institutions are not subject to abuse, unwittingly support or become part of the PF networks, given the emerging trends on PF risks and techniques adopted by the designated individuals and entities to evade targeted financial sanctions on PF.

Domestically, the National Risk Assessment (NRA) by the National Coordination Committee to Counter Money Laundering (NCC) assesses and identifies the key threats and sectoral vulnerabilities that Malaysia’s financial system and economy is exposed to, has guided the strategies and policies of Malaysia’s overall AML/CFT/CPF regime. The NRA is the primary tool used for periodic assessment and tracking of effectiveness of the relevant Ministries, law enforcement agencies, supervisory authorities and reporting institutions in preventing and combating ML/TF/PF.

In line with the United Nations Security Council Resolutions (UNSCR), financial institutions are also required to adhere to, and implement sanctions imposed on designated countries and persons to combat terrorism, TF, proliferation of weapons of mass destruction and PF as well as suppress other forms of armed conflicts or violence against humanity. These obligations have been further elaborated and clarified in accordance with the relevant UNSCR.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking