Raising the bar in AML/CFT compliance

Malaysia will host the third International Conference on Financial Crime and Terrorism Financing (IFCTF) on 19-20 Sept. IFCT 2011 is jointly organised by the Institute of Bankers Malaysia (IBBM) and the Compliance Officers' Networking Group (CONG), in collaboration with the Asian Institute of Finance (AIF), Islamic Banking and Finance Institute Malaysia (IBFIM), the Malaysian Insurance Institute (MII), Security Industry Development Corporation (SIDC) and Universiti Teknologi MARA (UiTM), with support from Bank Negara Malaysia's Financial Intelligence Unit (FIU). The first conference in 2009 focused primarily on raising awareness about money laundering and terrorism financing issues and the need to establish a legal framework that consists of regulatory and supervisory, compliance and enforcement. The next conference highlighted the need for capacity building to elevate compliance standards for reporting institutions (RIs), enforcement agencies and financial investigators. The IFCTF 2011, plans to provide insight into emerging trends, risks and threats, their impact on regulatory and enforcement aspects, and the avenues to counter these threats. WELL DEVELOPED AML/CFT FRAMEWORK Malaysia has adopted a collaborative, multi-agency approach in implementing an Anti-Money Laundering and the Combating the Financing of Terrorism AML/CFT programme that is in keeping with international standards. Over the decade since the enactment of the Anti-Money Laundering and Anti-Terrorism Financing Act (AMLATF) 2001, Malaysia has established the National Coordinating Committee to Counter Money Laundering (NCC), which brings together policy and implementing ministries and agencies to ensure that Malaysia implements an effective national AML/CFT system. The NCC has set in place a national Certified Financial Investigators Programme (CFIP), including a comprehensive training module for AML investigation process and procedure, forensic accounting, and computer forensics. As a result of such a rigorous effort, Financial Action Task Force (FATF) president Luis Urrutia Corral cited Malaysia as being a country with a well developed AML/CFT framework in his keynote address at last year's conference. The Paris-based FATF is the global standard setting body for AML/CFT. However, money launderers and terrorist cells have demonstrated great creativity in combining traditional money laundering techniques with complex money laundering schemes designed to thwart the ability of authorities to prevent, detect and prosecute. They change their modus operandi to suit emerging technologies and innovations in financial products and services. Invariably, improving AML/CFT compliance and enforcement is an ongoing process. Malaysia cannot rest on its laurels. RAISING THE BAR IN COMPLIANCE AND ENFORCEMENT IFCTF 2011, which carries the theme 'Raising the Bar in Compliance and Enforcement', will be the platform for enforcement agencies to swap success stories, as well as highlight the challenges they face in the vigil against money-laundering and terrorist financing. The exchanges will provide participating financial institutions with an overview of where they stand in terms of complying with the FATF recommendations and international standards and benchmarks, and the route they have to take to achieve the desired results, CONG chairman Kwan Keen Yew told Bernama. Through UiTM's participation in the conference - the first for a higher learning institution - the AML/CFT message will be accessible to students at higher education institutions who would eventually be absorbed into the industry, Kwan said. In 2009, Bank Negara Malaysia (BNM) launched the three-year National AML/CFT Strategic Plan which focused on coordinating implementation, enhancing the legal framework, improving institutional framework, and capacity building. The Plan covers not only preventive measures to be adopted by financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs), but also the legal aspects of financial intelligence and law enforcement, as well as domestic and international cooperation. At the IFCTF 2011, BNM will unveil a new National AML/CFT Strategic Plan geared to meet challenges in the face of emerging technologies and innovation in the industry. At the same time, IBBM, working in collaboration with the International Compliance Association (ICA), will be launching its Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) certification course. "Although AML/CFT certification is not compulsory for Compliance Officers, professionals in the financial services industry are encouraged to enroll in the course to enhance their knowledge and awareness of AML/CFT," IBBM Head of Professional Development Chow Oi Li said. The IFCTF 2011 is the perfect avenue for financial institutions to develop an understanding of their AML/CFT vulnerabilities and risks, and thereafter design effective responses that are in line with the requirements promoted by influential international and regional bodies like the FATF and the Asia Pacific Group on Money Laundering (APG). WIDENING THE COMPLIANCE 'NET' Over the years the FATF 40+9 Recommendations have become a 'one size fits all' template to be applied irrespective of their appropriateness to differing legal, social, cultural, financial and political systems. Critics say there are many elements which do have universal application, including those which purport to have universal application but cannot be implemented uniformly in economies with dramatically different structures. There are reservations as to whether the FATF prescription is the appropriate treatment, even amongst those who believe that money laundering and terrorist financing is a real threat to world economies. It is a valid concern that the 'one size fits all' approach is flawed. In view of these differing opinions, the FATF is currently conducting a review of its 40+9 Recommendations to ensure that they remain valid, up-to-date and relevant. The review is a focused and balanced exercise aimed at maintaining the necessary stability in the standards while addressing new or emerging threats and any deficiencies or loopholes in the current FATF standards. At also seeks to maintain a level playing field with equal treatment for all countries, while offering openness and transparency. FATF has further recognised that it needs to cover traditional informal value transfer systems. Future efforts are to focus on widening the compliance 'net' to include informal value-transfer systems such as the fei ch'ien (China), hundi (Pakistan and Bangladesh), hawala (India and the Middle East), padala (Philippines), hui kuan (Hong Kong), and phei kwan (Thailand). It would also involve efforts aimed at bringing the DNFBPs on board the AML/CFT bandwagon. The AML/CFT regime is about identifying criminals and terrorist cells so that authorities can investigate and eventually prosecute them. In the final analysis, laws that meet FATF's guidelines will do no good unless countries enforce them.