WhiteCollar Crime and Money Laundering

White Collar Crime and Money Laundering: What Every Individual and Business Owner Should Know

1. What Is White Collar Crime?

White collar crime, also known as commercial crime, refers to non-violent crimes committed for financial gain, usually in a business, professional or financial setting. Common examples include cheating, criminal breach of trust, corruption, investment fraud, online scams and tax evasion.

Unlike other crimes, white collar crime is mainly about money. The person who commits it will usually want to hide, move or spend the proceeds without attracting attention. This is where money laundering comes in.

In Malaysia, money laundering is itself a serious offence under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613), commonly known as AMLA. Many commercial crimes are listed as “serious offences” under AMLA. This means a person involved in a commercial crime may face not only a charge for the original offence, but also a separate money laundering charge. His money and property may also be frozen, seized and, in some cases, permanently forfeited, even without a criminal conviction.

2. What Is Money Laundering?

Money laundering is the process of making money obtained from crime look as though it came from a legitimate source, so that it can be spent, invested or saved without drawing the attention of the authorities.

The original crime that produces the money is known as the “predicate offence”, while hiding or dealing with the money afterwards is a separate offence of money laundering.

3. The Three Stages of Money Laundering

Money laundering is generally described as taking place in three stages.

The first stage is placement, where the illegal money is introduced into the financial system, for example by depositing cash into bank accounts or buying assets with it.

The second stage is layering, where the money is moved around through a series of transactions, such as transfers between several accounts, companies or countries, to make its origin difficult to trace.

The third stage is integration, where the money re-enters the economy looking “clean”, for example through the purchase of property, luxury goods or investments in a business.

4. The Law That Governs Money Laundering in Malaysia

The main law is AMLA. It sets out the money laundering offence, imposes reporting duties on certain businesses and professionals, and gives the authorities wide powers to investigate, freeze, seize and forfeit property.

Malaysia’s framework is also shaped by international standards, including those of the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering, which monitor how countries fight money laundering and terrorism financing.

5. When Does a Person Commit Money Laundering?

Under Section 4 of AMLA, a person commits money laundering if he deals with the proceeds of unlawful activity in various ways. These include receiving, possessing, transferring, converting, using or disposing of such money or property, bringing it into or taking it out of Malaysia, or concealing its true nature, origin, location or ownership.

Importantly, a person does not need to be the one who committed the original crime. It is enough that he dealt with the money while knowing, or having reason to believe, that it came from unlawful activity. A person may also be caught if he failed, without a reasonable excuse, to take reasonable steps to find out whether the money was clean.

The prosecution also does not need to first secure a conviction for the original crime before charging a person with money laundering.

The penalties are severe. A person convicted under Section 4 may face imprisonment of up to 15 years and a fine of not less than five times the amount involved or RM5 million, whichever is higher.

6. Who Must Report Suspicious Transactions?

AMLA places special duties on “reporting institutions”. These include banks and other financial institutions, as well as certain professionals and businesses such as lawyers, accountants, company secretaries, licensed casinos and dealers in precious metals and stones.

Reporting institutions must identify and verify their customers, keep proper records of transactions and have internal compliance programmes. Where a transaction appears suspicious, they must file a suspicious transaction report with Bank Negara Malaysia, which acts as the competent authority under AMLA.

Once a report has been made, it is an offence to “tip off” the customer or anyone else that a report has been filed or that an investigation is under way.

7. How an AMLA Investigation Works

Money laundering may be investigated by the competent authority and by enforcement agencies such as the Royal Malaysia Police, the Malaysian Anti-Corruption Commission, the Inland Revenue Board and the Royal Malaysian Customs Department.

Investigating officers have wide powers. They may enter and search premises, seize documents and records, examine persons and require them to give information or produce documents. A person called to give a statement is expected to cooperate, and obstructing an investigation or giving false information may itself amount to an offence.

Money laundering is also a seizable offence, which means a suspect may be arrested without a warrant.

8. Freezing and Seizure of Property

One of the most immediate effects of an AMLA investigation is the freezing or seizure of property.

Under Section 44, an investigating officer may freeze property, including money in a bank account, where it is suspected to be connected to an offence. A freeze order stops the owner from withdrawing, transferring or otherwise dealing with the property. The Act also provides a route for a freeze order to be varied or revoked.

The authorities may also seize movable property such as cash, vehicles and jewellery, money held in financial institutions, immovable property such as land and houses, and even an entire business. Where property is held outside Malaysia, the Public Prosecutor may apply to the High Court for an order prohibiting any dealing with it.

Once property has been seized, any dealing with it is void. In practical terms, the owner cannot sell, transfer or charge the property while the seizure remains in force. Seizures are also subject to time limits under the Act, after which they may lapse if no further action is taken.

9. : Losing Property Permanently

Freezing and seizure are temporary measures. Forfeiture, however, means the property is permanently taken over by the Federal Government.

Forfeiture may happen in two ways. Under Section 55, the court may order forfeiture when a person is prosecuted and convicted.

Under Section 56, the Public Prosecutor may apply to the High Court for forfeiture even where no one has been charged. This is known as civil forfeiture. The focus is on the property itself rather than on the guilt of the owner. The court only needs to be satisfied on a balance of probabilities, which is a lower standard than the criminal standard of “beyond reasonable doubt”.

This means a person may lose property even if he is never charged with any crime. The Act further provides that a forfeiture order is not affected merely because a person is later acquitted.

10. Protection for Innocent Third Parties

The law recognises that innocent people may be affected by a forfeiture application. Under Section 61, a notice is published in the Gazette calling on anyone who claims an interest in the property to come forward and show cause why it should not be forfeited.

A third party, such as a genuine purchaser or a bank holding a charge over the property, may be able to protect his interest if he can show, among other things, that he acted in good faith, had a legitimate interest in the property and did not know, and had no reason to suspect, that it was connected to an offence. These conditions are strict and must all be satisfied.

11. Compounding of Offences

In some cases, an offence under AMLA may be compounded. This means the person pays a sum of money instead of facing prosecution. The amount cannot exceed 50% of the maximum fine for the offence, and compounding requires the consent of the Public Prosecutor. Once the compound is paid, no further prosecution will be brought for that offence.

12. Practical Lessons for the Public

Many ordinary Malaysians become involved in money laundering without realising it. A common example is allowing another person to use one’s bank account in exchange for a small commission. Such accounts, often called “mule accounts”, are frequently used to receive money from scams. The account holder may face investigation, have his account frozen and even be charged, even if he did not know the details of the scam.

The public should therefore never lend, rent out or sell their bank accounts, ATM cards or online banking credentials, and should be cautious about receiving large or unexplained sums of money from strangers.

Business owners should keep proper records of their income and transactions, know who their customers and business partners are, and be alert to unusual payment arrangements.

If you receive a notice from the authorities, are called to give a statement, or find that your bank account or property has been frozen or seized, you should seek legal advice promptly. You should also avoid moving, hiding or disposing of any affected property, and gather documents that show the legitimate source of your money.