Combating money laundering and the future of banking secrecy laws in Malaysia

Pages219-229
Date06 May 2014
Published date06 May 2014
DOIhttps://doi.org/10.1108/JMLC-09-2013-0036
AuthorAspalella A. Rahman
Subject MatterAccounting & Finance,Financial risk/company failure,Financial compliance/regulation
Combating money laundering
and the future of banking
secrecy laws in Malaysia
Aspalella A. Rahman
School of Law, College of Law, Government and International Studies,
Universiti Utara Malaysia, Sintok, Malaysia
Abstract
Purpose – The purpose of this paper is to analyze banking secrecy laws against the background of the
Malaysian anti-money laundering laws. It has been argued that the anti-money laundering law makes
greater inroads into the banking secrecy rule when compared to the common law or other statutes.
Banks can disclose customer’s information on even grounds of suspicion of money laundering. Banking
secrecy is a customer privilege, whereas combating money laundering is critical for public safety and
security. Indeed, achieving a proper balance is a desirable goal. But how do we go about achieving such
a balance is a question encountered by many law enforcement authorities. This paper looks into these
issues.
Design/methodology/approach – This paper mainly relies on statutes as its primary sources of
information. As such, the relevant Malaysian laws that provide the banking secrecy rule will be
identied and analyzed. It will be necessary to examine the banking secrecy rule in the Anti-Money
Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA) and other relevant statutes in detail,
as these are the most important legislation for the purpose of this paper.
Findings – On closer inspection, it is submitted that AMLATFA provides sufcient safeguards to
ensure that the disclosure of customer’s information is carried out in a manner that is not prejudicial to
the interest of legitimate customers. This is a positive approach that could protect the innocent
customers from being mistreated by the law. Ultimately, it can be said that the growing threat of global
money laundering and terrorism makes the overriding of banking secrecy justied because without a
ow of information from the banks, the effective prevention of the menace is not possible.
Originality/value This paper analyzes the inroads into the banking secrecy rule under the
Malaysian anti-money laundering laws. It would provide some guidelines into this particular area for
academics, banks, their legal advisers, practitioners and policy makers, not only in Malaysia but also
elsewhere.
Keywords Money laundering, Condentiality, Anti-money laundering law, Banker – customer
relationship, Banking secrecy
Paper type Research paper
Introduction
It has been pointed out that the reporting of fraud against banks, the investigation of
fraud and the tracing and conscation of criminal proceeds have intruded into the
principles of banking secrecy (Levi, 1991). The inroads into banking secrecy present
serious threats to democracy and, more importantly, to the traditional banker-customer
relationship (Latimer, 2004). In Malaysia, there are various statutory exceptions to the
secrecy rule. The exceptions allow some information to be disclosed to facilitate police
investigation. It is generally accepted that this rule is a powerful tool in investigations
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
Combating
money
laundering
219
Journal of Money Laundering Control
Vol. 17 No. 2, 2014
pp. 219-229
© Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-09-2013-0036

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