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AFC713: Money Laundering and Financial Criminology Mid-Term Examination 24th June 2012 2 Hours

Please Answer All Questions Question 1 During his in-class lecture on 10th June 2012, Inspector Mohd Noor Firdaus indicated that Malaysia is not a regional centre for money laundering. However, its formal and informal financial sectors are vulnerable to abuse by money launderer in general. To circumvent this issue, Malaysia has been progressively constructing a comprehensive Anti-Money Laundering regime. Listed below are some of the initiatives that the country has undertaken: The establishment of the National Co-ordination Committee (NCC) in 2000 Drafting of the AMLA, which came into effect in January 2002 The establishment of the Financial Intelligent Unit (FIU) Admitted as a member of the Egmont Group of FIUs in July 2003 AMLATFA came into force in 2007 Required a. Explain the roles of the NCC, FIU and the Egmont Group in supervising and monitoring money laundering activities in Malaysia (8 marks) NCC - A committee established by the Malaysian government to ensure effective implementation of AMLATFA and to counter Money Laundering and Terrorism Financing FIU - A committee established by the Malaysian government to ensure effective implementation of AMLATFA and to counter Money Laundering and Terrorism Financing Egmont Group FIUs of all member countries; international facilitation & collaboration b. Discuss the Amendments made to the AMLA-AMLATFA that came into force in 2007 (7 marks) Inclusion of Anti- Terrorism Financing. The reporting institution must report to the FIU by way of submitting an STR and should stop all dealings with the customer, unless otherwise notified by the relevant authorities Question 2

Following the revamp of the 40 + 9 Recommendations to 40 New Recommendations in February 2012, the Financial Action Task Force (FATF) has issued the following statement:
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The FATF Standards have been revised to strengthen global safeguards and further protect the integrity of the financial system by providing governments with stronger tools to take action against financial crime. At the same time, these new standards will address new priority areas such as corruption and tax crimes.

Required: a. Explain why the revamp was necessary?. What were the aims for such revamp? ( 5 marks)

b. Discuss the key changes which have been included in the new FATFs Recommendations in its March 2012 announcement (10 marks)

The revision of the Recommendations aims at achieving a balance:

On the one hand, the requirements have been specifically strengthened in areas which are higher risk or where implementation could be enhanced. They have been expanded to deal with new threats such as the financing of proliferation of weapons of mass destruction, and to be clearer on transparency and tougher on corruption. On the other, they are also better targeted there is more flexibility for simplified measures to be applied in low risk areas. This risk-based approach will allow financial institutions and other designated sectors to apply their resources to higher risk areas. The FATF Recommendations are the basis on which all countries should meet the shared objective of tackling money laundering, terrorist financing and the financing of proliferation. The FATF calls upon all countries to effectively implement these measures in their national systems.

Question 3

In 2007, the Asia-Pacific Group on Money Laundering (APG) conducted its first Mutual Evaluation Assessment on Malaysia. Premised on the original 40 + 9 Recommendations, Malaysia received the following results:
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Ratings Full Compliant (C) Largely Compliant (LC) Partial Compliant (PC) Non-Compliant (NC) Total

Total Recommendations 9 24 15 1 49

Required: a. Choose any five (5) items that received the PC Rating and explain the summary of factors underlying such rating. (10 marks) Refer to APG Mutual Evaluation 2007 and choose any 5

b. Item Special Recommendation No 9 (SR. IX) related to Cash couriers" was given an NC rating. Recommend relevant initiatives that should be undertaken to counter the factors underlying the rating. (10 marks)
No 1 Comments While Malaysia has a system for completing a crossborder declaration for cash and travellers cheques, in practice the systems is deficient and does not meet the requirements as set down in the FATF recommendations. While sanctions are available for false disclosure of cross border currency movements, they are rendered ineffective due to deficiencies in the declaration system. Recommendations Malaysia should establish a cross-border currency & bearer negotiable instrument declaration & disclosure system that meet the purpose & intent of FATF standards Theres a need for enhanced coordination between agencies to design and implement an effective crossborder currency declaration system which is supported by effective power of competent authority, information sharing provisions and sanction for non-compliance Country should establish a specialized unit to detect cross-border transportation of currency and bearer negotiable instruments in relation to money laundering and terrorism financing

While a limited number of cross border currency detections have occurred over the past 10 years, they generally do not derive from the operation of the declaration system.

Total 50 marks