AML/CFT Engagement Session with Dealers in Awareness... AML/CFT Awareness AML/CFT Engagement Session

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  • AML/CFT Awareness

    AML/CFT Engagement Session with Dealers in Precious Metals & Stones

    (DPMS)

    Orchard Room 2, Thistle Hotel JB Sunday, 24 April 2016

  • AML/CFT Awareness2

    Engagement Objectives

    Understanding on the ML/TF risks faced by DPMS

    DPMS’ obligations as a Reporting Institution within Malaysia’s AML/CFT

    Framework

    Understanding on the nature of business and operation of DPMS

  • AML/CFT Awareness3

    Presentation Outline

    Overview of ML/TF & the AML/CFT system

    ML/TF Vulnerabilities of DPMS

    Recent AML/CFT Developments

    AML/CFT Requirements on DPMS

    Compliance to AML/CFT Requirements

  • AML/CFT Awareness4

    “A process of converting cash

    or property derived from criminal activities to give it a legitimate appearance. It is the process of cleaning and disguising the criminal origin

    of ‘dirty’ money”

    “Process of

    financing terrorist

    activity either

    through legitimate

    or illegitimate

    sources.”

    Critical for a country to have an effective AML/CFT regime…

    1. Reduces rewards associated with crime and hence, overall crime rates;

    2. Increases government revenue, reduces leakages within the economy;

    3. Preserves the integrity and reputation of the market place; and

    4. Creates conducive environment for businesses and investors to flourish.

    Money Laundering (ML) & Terrorism Financing (TF) defined

    Why Launder?

  • 5

    Why Criminals Launder Their Money?

    To remove or distance themselves from the criminal activity generating the illicit proceeds, thus making it more difficult to identify & prosecute key perpetrators

    To distance proceeds gained from conduct of criminal activity to prevent confiscation if the perpetrators is

    caught

    To enjoy the benefits of the illicit proceeds without bringing undue attention to themselves

    To reinvest the profits in future criminal activity or in legitimate businesses

    Back to Slide 4

  • 6

    The Impact of ML/TF

    Known costs

    Unknown costs

    • Amount lost • Amount involved

    Weaken the national security and economic development

    • Proliferation of criminal activities

    • Existence of “underground businesses” competing with

    legitimate businesses

    • Weaken investors and business confidence

    • Lower real sectors’ competitiveness affecting country’s

    long term economic development

    Increase integrity risk and cost for businesses and financial

    transactions

    • Lower integrity and reputation of financial system

    • Risk of being blacklisted as jurisdiction with high risk of

    ML/TF that will affect business and investment climate

    • Increase the business and operation costs of various

    economic sectors

  • AML/CFT Awareness7

    Since AMLA was effected in 2001, Malaysia has established a

    comprehensive AML/CFT framework for prevention of ML/TF activities

    FATF

    Standards

    • BNM the competent authority for AMLA

    • Criminalisation of ML/TF i.e. 362

    offences from 44 legislations

    • Freezing, seizure & forfeiture of

    properties

    • Identify & respond to emerging

    risks through National Risk

    Assessment process

    • Adequate investigation &

    enforcement powers

    • Fully-functional Financial

    Intelligence Unit (FIU) in BNM

    • AML/CFT Units set-up in key law

    enforcement agencies (LEAs)

    • Structured training programs for

    financial investigators

    • National Coordination

    Committee for integrated

    approach across 16

    Ministries/Agencies

    • MoUs and Strategic

    Partnerships with Foreign FIUs

    & Counterparts

    • Strong networks with

    International/regional bodies  FATF, APG, Egmont Group

    Responsibilities of Reporting

    Institutions (RIs)

     More than 43,000 RIs

     Implement effective AML/CFT

    compliance programme to

    detect and deter ML/TF

     Submit Cash Transaction

    Reports (CTR) and Suspicious

    Transaction Reports (STR) to

    FIED, BNM

  • AML/CFT Awareness8

    Presentation Outline

    Overview of ML/TF & the AML/CFT system

    ML/TF Vulnerabilities of DPMS

    Recent AML/CFT Developments

    AML/CFT Requirements on DPMS

    Compliance to AML/CFT Requirements

  • AML/CFT Awareness9

    Key Findings from Mutual Evaluation Exercise (MEE) 2014

    • On-site visit by Asia/Pacific Group (APG) & FATF Assessors from 13/11 to 25/11/2014;

    • Assessment made based on Technical Compliance and Effectiveness of Malaysia’s AML/CFT regime in line with FATF Recommendations & Methodology;

    • Outcome – Malaysia has achieved high levels of technical compliance. But, significant improvements needed in: a. Implementation of AML/CFT preventive measures on risk-basis

    by all RIs, especially Designated Non-Financial Businesses & Professions (DNFBPs) sector,

    b. Effectiveness of international cooperation for cross-border crime prevention and investigations,

    c. Conduct of parallel investigations and prosecution of ML/TF

    • Key Findings on Financial Institutions and DNFBPs: o Several sectors are still transitioning from rules-based to risk –

    based approach; o RIs have a mixed understanding of risk and application of

    Customer Due Diligence (CDD) requirements, including CDD on Beneficial Owners (BOs), on a risk sensitive basis, but rather in a prescriptive formal manner.

    • Key Recommendation: The authorities should enhance existing outreach so that there is a more detailed and systematic program of outreach to DNFBPs and to FIs generally.

  • AML/CFT Awareness10

    National ML/TF Risk Assessment 2013 – Sectoral Risk Assessment

    Likelihood

    POSSIBLE LIKELY VERY LIKELY

    E x te

    n t

    o f

    V u

    ln e

    ra b

    il it

    y

    HIGH

    MEDIUM

    LOW

    • Casino

    • Gaming Companies

    • Jewellers

    • Accountants

    • Offshore Trust

    • Company Secretaries

    • Real Estate

    • Trust Companies

    • Lawyers

    • Pawn Brokers

    • Notaries

    Legal Entities* –

    onshore / offshore

    Non Profit Orgs.

    * Companies and partnerships

  • AML/CFT Awareness11

    Presentation Outline

    Overview of ML/TF & the AML/CFT system

    ML/TF Vulnerabilities of DPMS

    Recent AML/CFT Developments

    AML/CFT Requirements on DPMS

    Compliance to AML/CFT Requirements

  • AML/CFT Awareness

    Reporting institutions (RIs) are the first line of defence

    Criminals and

    Criminal Activities

    Financial Institutions

    Law enforcement

    Agencies (LEAs)

    Non-bank FIs

    DNFBPs

    • Placement of proceeds from unlawful activities

    • Apply loan and use illegal proceeds for repayment

    Supervisory authorities

    BNM, Securities Commission,

    Labuan Financial Services

    Authority

    Financial Intelligence Unit

    FIED, BNM Submit

    Suspicious Transaction

    (STR) & Cash Threshold

    Reports (CTR)

    Collect, analyse,

    disseminate financial

    intelligence

    Feedback on effectiveness of financial intelligence

    Identify illicit activities and investigate crimes

    Monitor & enforce AML/CTF

    requirements

    AML/CFT PREVENTIVE MEASURES • ML/TF Risk Assessment & Client Risk Profiling • CDD and Enhanced CDD on Clients • Record Keeping • On-going Monitoring of Clients’ Transactions • Promptly Detect & Report Suspicious Transactions

    Supervisory authorities

    BNM in collab. with licensing bodies & Self-

    Regulated Organizations

    1

    2 3

    45

    12

  • AML/CFT Awareness13

    ML/TF Risk Example of red flags indicators

    • Purchase of product using proceeds of criminal activities

    • Sale of gold which was purchased using illicit funds to gold brokers

    • Online trading of physical gold using illegal proceeds

    • Sale of robbed jewellery to scrap or used jewellery dealers

    • Trade in robbed jewellery for new products

    • Supply of product received from unknown source

    • Unusual payment methods such as the use of large amount of cash or payment from unknown third parties

    • Purchases or sales that are unusual i.e. bulk/large quantity purchases inconsistent with customer’s profile

    • Attempt by customer to maintain high and unusual degree of secrecy such as request for records to be destroyed or purchase made anonymously

    • Payments seem to be structured into small amount to avoid detection

    • Unwillingness by customer or supplier to provide identity information

    Sale & Purchase

    Specific ML/TF risks in DPMS sector

    Customer

    Geographical Location

    Product