Combating Terrorism Financing 1 National Accountants Conference 2004, Kuala Lumpur “Combating Terrorism Financing” 13 October 2004 by Koid Swee Lian Financial

Combating Terrorism Financing

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National Accountants Conference 2004, Kuala Lumpur

“Combating Terrorism Financing”

13 October 2004

byKoid Swee Lian

Financial Intelligence Unit


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AGENDAAGENDA

What is Terrorism Financing?

International Initiatives

National Initiatives

Regulators Expectations

Challenges

FATF’s 8 Special Recommendations


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WHAT IS TERRORISM FINANCING?WHAT IS TERRORISM FINANCING?

Providing or collecting property for terrorist acts • directly or indirectly• reasonable grounds to believe that the property will

be used Providing services for terrorist purposes

• directly or indirectly• reasonable grounds to believe that the services or

facilities will be used Arranging for retention or control of terrorist property

• knowingly enters into an arrangement• facilitates the control by or on behalf of another

person of terrorist property Dealing with terrorist property

• Whoever knowingly deals, directly or indirectly, in any terrorist property


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MONEY LAUNDERING VS. MONEY LAUNDERING VS. TERRORISM FINANCINGTERRORISM FINANCING

APPARENTLY APPARENTLY LEGITIMATE LEGITIMATE

ASSETSASSETS

Laundering

Laundering

Legitimate Funds

Terrorist Network

150 Predica

te Offence

s

Criminal Proceed

s

TERRORIST ACTsTERRORIST ACTs


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INTERNATIONAL INITIATIVESINTERNATIONAL INITIATIVES 12 UN Conventions on Terrorism

• International Convention for the Suppression of the Financing of Terrorism 1999

UN’s Consolidated List of Sanctioned Terrorists, Associated Entities and Individuals

Mutual Evaluation by the Asia-Pacific Group on Money Laundering (APG)

IMF/World Bank Assessment Methodology on AML/CFT Measures

FATF’S 8 Special Recommendations


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NATIONAL INITIATIVESNATIONAL INITIATIVES

To enable Malaysia to accede to the U.N. Convention for the Suppression of the Financing of Terrorism, new provisions were incorporated into the following pieces of legislation:

Penal Code Anti-Money Laundering Act 2001 Subordinate Courts Act 1948 Courts of Judicature Act 1964 Criminal Procedure Code


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UNSCRUNSCR Freeze all assets of certain persons/

entities in the UN List

Declare specified entity through gazette order

Circulate orders

Freeze all assets of specified persons/ entities

Minister of Minister of Internal SecurityInternal Security

Regulatory / Regulatory / Supervisory Supervisory

AuthorityAuthority

Reporting Reporting InstitutionsInstitutions


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The new provisions added in the Penal Code to address the offence of terrorism financing are:

Providing or collecting property for terrorist acts Providing services for terrorist purposes Arranging for retention or control of terrorist property Dealing with terrorist property

Part VIA was added into the Anti-Money Laundering Act 2001, to provide for:

Declaration of specified entities as terrorist entities Measures to give effect to U.N. Security Council resolutions Minister’s power to obtain information Guidelines on discharge of Government obligations


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Section 130 O of the Penal Code

Providing services for terrorist purposes

Whoever, directly or indirectly, provides or makes available financial services or facilities to terrorists or for the commission of a terrorist act shall be punished by death if the act results in death and in any other case, a term not less than 7 years but not exceeding 30 years

Financial services include services and facilities offered by lawyers, accountants acting as nominees or agents for their clients


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REGULATORS’ EXPECTATIONSREGULATORS’ EXPECTATIONS

Record-keeping by reporting institutions to include:

• Identity and address of Person conducting transaction Beneficiary of transaction

• Accounts affected by transaction• Type of transaction• Where did the transaction occur• Date, time and amount of transaction• Other information as competent authority may specify in writing

Retention of records for 6 years


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REGULATORS’ EXPECTATIONSREGULATORS’ EXPECTATIONS

Compliance programme

• The development of internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees

• An ongoing employees training programme• Designate compliance officer at

management level who will be in charge of the application of the internal programmes including maintenance of records and reporting of STRs


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CHALLENGESCHALLENGES

Maintain a sound and robust financial system

Detect and deter criminal abuse of the financial system

Sustain public confidence in the financial system and the criminal justice system

Enforcement action against criminals and terrorists

Banking secrecy is not absolute

Safety and security of information, documents and personnel


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FATF’S 8 SPECIAL RECOMMENDATIONS

1. Ratification and implementation of UN Instruments

2. Criminalising financing of terrorism, terrorist acts and terrorist organisation

3. Freeze and confiscate terrorist assets

4. Reporting suspicious transactions linked to terrorism

5. International Co-operation

6. Alternative remittance

7. Strengthen customers identification measures in wire transfers

8. Non-profit organisations not to be used to finance terrorism

Documents

Combating Terrorism Financing 1 National Accountants Conference 2004, Kuala Lumpur “Combating Terrorism Financing” 13 October 2004 by Koid Swee Lian Financial