The impact of reporting suspicious transactions regime on banks: Malaysian experience

Published date03 May 2013
Pages159-170
Date03 May 2013
DOIhttps://doi.org/10.1108/13685201311318502
AuthorAspalella A. Rahman
Subject MatterAccounting & finance
The impact of reporting
suspicious transactions regime
on banks: Malaysian experience
Aspalella A. Rahman
School of Law, Universiti Utara Malaysia, Alor Star, Malaysia
Abstract
Purpose – Reporting suspicious transactions under anti-money laundering (AML) laws creates a
major dilemma for banks. On the one hand, failure to report suspicious transactions is an offence under
the laws. On the other hand, if they report the transaction, they may breach their duty of confidentiality
to their customer or could be liable for tipping off the suspected customer. More importantly, it can also
undermine customers’ trust. The purpose of this paper is to look into these issues and analyse them
against the background of the Malaysian AML laws.
Design/methodology/approach – This paper mainly relies on statutes as its primary sources of
information. As such, the relevant Malaysian AML that affect the reporting obligations will be
identified and analyzed. It will be necessary to examine not just the provisions of the Malaysian
Anti-Money Laundering and Anti-Terrorism Financing Act, but also its regulations and guidelines
which affect banks in detail, as this is the most important legislation for the purpose of this paper.
Findings – It is apparent that the reporting suspicious transactions regime has had a significant
impact on the operations of banks in Malaysia. While the regime is based on sound principles, the
effectiveness of the regime is still unknown. As such, only time will tell whether the banks will be able
to cope sufficiently with the increased AML obligations. Obviously, it is critical at this stage,
to establish effective coordination between legislators, regulators and the banking industry, in order to
minimize problems faced by the banks and thereby to ensure effective implementation of the regime.
Originality/value – This paper provides an examination of the impact of the reporting suspicious
transactions regime on Malaysian banks. It is hoped that the study would provide some insight into
this particular area for academics, banks, their legal advisers, practitioners and policy makers, not
only in Malaysia but also elsewhere. In view of the international nature of money laundering and
banking, there will be significant interest in how the AML laws affect banks operating in Malaysia.
Keywords Malaysia, Banks,Legislation, Compliance, Moneylaundering, Suspicious activity,
Anti-money laundering law
Paper type Research paper
Introduction
Money laundering may be defined as a process of cleaning “dirty money” which is
normally derived from criminal activities, so that it appears to have originated from a
legitimate source. In Pendakwa Raya v. Ong Seh Sen[1], Abang Iskandar bin Abang
Hashim JC noted at p. 244:
Money laundering is indeed a relatively new form of commercial crime that had just been
codified as criminal offence. It can be categorised as a form of white collar crime. Although
apparently no physical violence would be normally associated with the perpetration of this
crime, nevertheless its impact, if left unchecked could lead to economic ruins to any country.
As such, the underlying rationale behind anti-money laundering (AML) laws is
that prosecution would distance criminals from the criminal activities.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
Journal of Money Laundering Control
Vol. 16 No. 2, 2013
pp. 159-170
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685201311318502
Reporting
suspicious
transactions
159

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