Scammed and Frozen

Scammed and Frozen: How a Section 420 Cheating Report Can Lead to Your Bank Account Being Frozen

A single police report of cheating can set off a money laundering investigation that freezes the accounts of the suspect, the suspect’s family, and anyone whose account the money passed through. This article explains how it happens, who is at risk, and what you can do.

Introduction

Many Malaysians first learn about the anti-money laundering law when their bank tells them their account has been frozen. Often the story begins somewhere else entirely. Someone was cheated, lodged a police report, and the money they lost was traced through a chain of accounts. One of those accounts turned out to be yours, your company’s, or a relative’s.

Cheating under section 420 of the Penal Code is one of the most common offences behind these freezes. It is listed as a serious offence under the Anti-Money Laundering, Anti-Terrorism Financing, Anti-Restricted Activity Financing and Proceeds of Unlawful Activities Act 2001 (Act 613), commonly known as AMLA. Once money is linked to cheating, it becomes proceeds of unlawful activity, and the powers to freeze, seize and forfeit it under AMLA come into play.

This article explains how a cheating report becomes a money laundering case, whose accounts can be caught, how the courts decide whether a person knew the money was tainted, what life under a freeze looks like, and what both account holders and victims can do. Earlier articles in this series cover the procedures for challenging freezing orders and forfeiture in more detail.

Cheating as a predicate offence

Cheating is defined in section 415 of the Penal Code as deceiving a person and thereby dishonestly or fraudulently inducing them to hand over property, or to do or omit something that causes them harm. Section 420 covers the more serious form, where the deception induces the victim to deliver property or deal with a valuable security. It carries imprisonment of one to ten years, whipping and a fine.

AMLA does not create a separate offence for cheating. Instead, it deals with what happens to the money afterwards. Section 4 makes it an offence to engage in a transaction involving proceeds of unlawful activity, or to receive, possess, transfer, use, conceal or otherwise deal with them. Unlawful activity means a serious offence or foreign serious offence, and the serious offences are listed in the Second Schedule to AMLA. The list covers offences under many different laws, and cheating under section 420 is among them. This is why a cheating offence is often described as the predicate offence in a money laundering case.

The penalties are heavy. A person convicted of money laundering faces imprisonment of up to 15 years and a fine of at least five times the value of the proceeds, or RM5 million, whichever is higher. The fine alone can be enormous. In Jamsari Abdul Rahim lwn Pendakwa Raya, discussed below, the fines on eleven money laundering charges totalled more than RM142 million.

Importantly, a person can be convicted of money laundering even if no one has been convicted of the cheating itself, and even if no one has been charged with it. The prosecution must still show, through evidence, that the money came from the unlawful activity. But it does not have to wait for the predicate case to be decided. The same is true for forfeiture. Property can be forfeited as proceeds of cheating even if the cheating charge is dropped, as the Federal Court confirmed in JJ Power Groups Enterprise v Public Prosecutor [2025] 5 MLJ 197.

From police report to frozen account

The process usually follows a familiar pattern.

A victim lodges a police report. The report describes how they were cheated and which accounts they paid into.

The police investigate the cheating. They obtain bank records and trace where the money went after it left the first account.

A money laundering investigation begins. Once the money trail is established, an AMLA investigation is opened, sometimes by a different investigating officer.

Accounts are frozen. Under section 44, an enforcement agency that has reasonable grounds to suspect a money laundering offence may freeze property. A freeze ends after 90 days unless the person concerned is charged with an offence under AMLA.

Accounts are seized. The Public Prosecutor may order money in banks to be seized under section 50, and land under section 51. Seized property generally must be released after 12 months unless the person is charged or a forfeiture application is made.

Forfeiture follows. The Public Prosecutor applies to forfeit the property, either as part of a prosecution or, under section 56, without one.

The scale can be striking. In Public Prosecutor v CPO Resources & Ors [2019] MLJU 756, a crude palm oil investment scheme promised returns that never existed. One of those involved told investigators that it was simply a money game. Some 188 police reports were lodged, and the founder had been charged with cheating under section 420. The authorities seized the company’s bank balances, about RM1 million in cash, luxury cars including a Lamborghini, a Bentley and two Porsches, a boat, and three houses. In 2019, the High Court ordered all of it forfeited to the Government.

Whose accounts can be frozen?

A common misconception is that only the scammer’s own accounts are at risk. In fact, AMLA powers follow the money, not just the suspect. The table below summarises the types of account holders who have been caught.

Account holders whose property has been frozen or seized in cheating-related cases

The suspect and the suspect’s businesses

In James a/l Kolandaisamy lwn Pendakwa Raya [2024] 5 MLJ 543, a lawyer and a man who claimed to be a consultant to the chairman of the Malaysian Rubber Board persuaded a public company that it could secure a joint venture to develop the board’s land. The company was told it had to pay RM3.4 million as commitment money. The sum was paid into the lawyer’s law firm client account, supposedly to be held as a stakeholder and returned if the deal did not go through. The joint venture did not exist, and the land had already been provisionally awarded to another party.

Instead of being held, the money was spent. It was used to pay credit card bills, repay loans, complete property purchases, pay stamp duty and buy two Mercedes cars. Both accused were convicted of cheating under section 420 and sentenced to four years’ imprisonment and a RM100,000 fine. The lawyer was also convicted on 22 money laundering charges, and her associate on one, each carrying two years’ imprisonment and a RM5 million fine. The Court of Appeal upheld the convictions in 2024. The case shows that even a law firm client account can be the channel for proceeds of cheating.

Family members and others holding assets

Family members and others close to a suspect are frequently affected, sometimes because assets were placed in their names and sometimes simply because money passed through their accounts.

In the CPO Resources case, the founder had been a bankrupt since 2008, and several of the houses and cars were registered in the names of two other people. They argued that they had bought the assets with their own business income, savings and inheritance. The court was not persuaded. Statements recorded from those involved showed that the houses had been bought in cash by the founder and that the vehicles were also his purchases, and the founder could show no lawful source of income that could explain them. All of the assets were forfeited.

Family accounts can also be frozen and later released. In Nor Badli Munawir bin Mohamad Alias Lafti v Public Prosecutor [2024] MLJU 107, a case involving criminal breach of trust rather than cheating, the accused’s wife and family members had their accounts frozen by the MACC for almost twelve months before the freeze was lifted. The Inland Revenue Board later found that their assets were not derived from his funds. The Court of Appeal nonetheless upheld several of his own convictions, and the trial judge had observed that the return of seized property did not show that the accused had not received the money. A release does not necessarily mean the investigation found nothing.

Nominee accounts and “mules”

Scammers often use accounts opened in other people’s names. In Liew Ket Boh & Anor v Public Prosecutor [2024] 2 MLJ 73, investors in a scheme promising high returns from durian exports paid their money into accounts linked to the scheme. The money was then moved through businesses whose licences and bank accounts had been registered using nominees, and which were found to be indirectly controlled by one of the appellants. The Court of Appeal upheld the forfeiture of money in the organisers’ accounts, holding that the prosecution did not need to trace every individual transaction back to the cheating.

The risk for anyone who lends their account is shown by Jamsari Abdul Rahim lwn Pendakwa Raya [2022] MLJU 1245. A former employee of Petronas Carigali arranged for three false invoices totalling about USD5.57 million to be submitted and paid for work that had never been done. The money was then received and moved through accounts belonging to a company registered in his father-in-law’s name, his own company and two other businesses, all of which he controlled. Some of it went into his children’s investment accounts. His father-in-law and wife both gave evidence about how the money flowed. He was convicted on eleven money laundering charges. The underlying offence there was making false claims, rather than cheating under section 420, but the lesson for account holders is the same.

Relying on the Federal Court’s earlier decision in Azmi Osman v Public Prosecutor, the High Court emphasised that there are no safe harbours in bank accounts for proceeds of crime. An account holder must be vigilant about the money that comes into their account and must know that its source is lawful. Deliberately closing one’s eyes to obvious warning signs is treated as knowledge.

People who benefited from a bank system error

Account holders can also be caught up in cases that do not involve a classic scam. Earlier articles in this series discussed the cases in which the police froze the accounts of 31 people in 2015 in connection with an alleged scheme that exploited a weakness in a bank’s debit card system, causing losses of about RM36.9 million. In Raqeem Rizqin Enterprise v Ketua Polis Negara [2019] 5 MLJ 693, the Federal Court ordered property to be released where no consent to prosecute had been given and no warrant issued within the statutory period. In Hazrin Izzuddin v Public Prosecutor [2019] 5 MLJ 545, the Court of Appeal held that a person is treated as charged, for the purpose of keeping a seizure alive, once the court has taken cognisance of the offence through the consent to prosecute and the issue of an arrest warrant.

Buyers of the suspect’s property

Even buyers can lose out. In Lau Yong Ying v The Bank of Punjab & Ors and other appeals [2018] 4 MLJ 88, three Pakistani nationals allegedly defrauded the Bank of Punjab of about nine billion rupees and fled to Malaysia. The police froze and then seized a house in Country Heights bought by one of them. The original owners, who were still owed part of the purchase price, sued him, obtained judgment and had the house sold at auction. The buyer paid over RM3.5 million, was registered as owner and charged the house to a bank.

The Court of Appeal held that, under section 54 of AMLA, any dealing with property while it is under seizure is void. This was so even though the land registrar had failed to endorse the seizure notice on the title. The court proceedings, the auction and the buyer’s registration were all set aside, and the victim bank was registered as owner under a vesting order made by the High Court. The case is a warning that buying property from someone under investigation can be very risky, and that a registered title offers no protection if the property was already under seizure.

How do the courts decide whether you knew?

A money laundering offence requires a mental element, but the prosecution does not have to prove actual knowledge. Under section 4 of AMLA, the court may infer from objective factual circumstances that the person knew, had reason to believe, or had reasonable suspicion that the property was proceeds of unlawful activity. It may also infer the offence where the person, without reasonable excuse, failed to take reasonable steps to find out whether the property was tainted. The inference is usually drawn from circumstantial evidence and the person’s conduct.

The cases show how this works in practice.

Personal involvement. In James a/l Kolandaisamy, both accused had taken part in the negotiations that led to the RM3.4 million being paid. The court held that they knew or had reason to believe the money was the proceeds of their own deception.

How the money was used. The spending of stakeholder money on cars, credit cards and personal debts, when it should have been held untouched, was strong evidence of a guilty mind.

Implausible explanations. The lawyer claimed the RM3.4 million was her professional fee. This was never put to the victim’s witnesses, was contradicted by her co-accused, and was rejected. In Jamsari, the accused said he believed the millions he received were a 25% commission on a drilling project, but no project or bid was ever produced.

No inquiries. In Jamsari, the court found that the accused had made no effort to check the source of large sums passing through accounts he controlled. His failure to take reasonable steps supported the inference that he knew.

Unexplained wealth. In CPO Resources, a bankrupt with no lawful income was found to have bought houses and luxury cars for cash. The court concluded that they had been acquired with proceeds of the scheme.

Forfeiture: a lower standard of proof

Criminal convictions require proof beyond reasonable doubt. Forfeiture does not. In an application under section 56, the court asks whether it is more probable than not that the property is proceeds of unlawful activity. The focus is on the property, not on whether any person is guilty. This is why property can be forfeited even when the cheating charge is withdrawn or no one is prosecuted.

In CPO Resources, the High Court held that statements recorded from the respondents under section 112 of the Criminal Procedure Code could not be used against them in the forfeiture application. It nevertheless ordered forfeiture on the basis of other evidence, including statements recorded under section 32 of AMLA, which section 40 of AMLA makes admissible, the investigation into the cheating reports, and the money trail. The Court of Appeal in Liew Ket Boh later took a different view, holding that statements under section 112 are admissible in AMLA proceedings through section 71 of AMLA. The practical point is that anyone who gives statements to investigators should assume they may later be used in forfeiture proceedings.

Life under a freeze: your debts do not stop

A frozen account does not freeze your obligations. CIMB Bank Bhd v Tan Hoo Eng [2021] MLJU 935 illustrates this. The customer had an overdraft of up to RM26.5 million, secured against structured deposit investments, and a flexi loan. In 2014, the police froze all her accounts with the bank under section 44, followed by a seizure order under section 50. She was charged with criminal breach of trust and money laundering offences.

Because of the orders, the bank took the view that it could not move money out of or between the frozen accounts, including to reduce her loans. Meanwhile, her loan repayments continued to fall due. When she did not pay, the bank obtained judgment for over RM24 million, and her appeals up to the Federal Court failed. It also foreclosed on a charged property, which was sold at auction. The accounts were only released by court order in 2020, six years later, after which the bank set off her investments against the debt under a settlement agreement. Even then, a dispute continued over whether interest should have been credited during the freeze.

The lesson is that a person whose accounts are frozen should not assume that loans, card payments and other commitments are suspended. It is important to seek advice early, to communicate with lenders, and to consider asking a more senior officer of the enforcement agency to vary the freezing order under section 44A where there is a good reason to do so. The related case of Lim Hui Jin v CIMB Bank Bhd [2018] MLJU 981, discussed in an earlier article, concerned the same family. There, the Court of Appeal ordered the son’s account to be released because he himself had not been charged within the statutory period.

Getting a frozen account released

The routes for challenging freezing and seizure orders are discussed in detail in an earlier article in this series. In summary, account holders should consider the following.

Check the time limits. A freeze lapses after 90 days if the person concerned has not been charged, and a seizure generally lapses after 12 months unless a charge is brought or forfeiture is applied for. Courts have released property where these limits were not met, as in Raqeem Rizqin and Md Nawi bin Ab Aziz v Public Prosecutor [2024] MLJU 1812.

Consider judicial review. Freezing orders may be challenged where there is evidence of bad faith or improper purpose, as in Rosli bin Dahlan v Inspector-General of Police [2024] MLJU 1727, where a police report by an airline had been used to freeze a lawyer’s accounts. Bad faith must be clearly pleaded and supported.

Explain the source of the money. Documents showing the lawful origin of funds, such as salary slips, business accounts, sale agreements and tax records, are often decisive.

Claim as a third party. If property you own or have an interest in is the subject of forfeiture, you may respond to the Gazette notice and claim under section 61, but you must prove all five conditions in that section.

What about the victims?

Victims are often surprised to learn that money recovered from a scammer may be forfeited to the Government rather than returned to them. Forfeited property vests in the Federal Government. However, there are routes to recovery.

In Lau Yong Ying, the victim bank obtained an order from the High Court vesting the seized property in it, and its ownership was upheld against a later buyer. Victims may also bring civil claims against the wrongdoer, although the Public Prosecutor’s consent is required under section 54(3) of AMLA while the property is under seizure. A claim filed without that consent may be declared void. Victims should keep all records of their payments, lodge police reports promptly, and take legal advice on whether to claim in the forfeiture proceedings, bring a civil claim, or both.

There is a caution too. A victim who paid money for an improper purpose, such as to secure a government contract through lobbying, may find that the courts do not treat them as an innocent party. This was the position in Teh Tek Soon v Pendakwa Raya [2015] MLJU 2212, discussed in the previous article in this series.

A practical checklist

To protect yourself

Never lend your bank account. Do not let anyone, including friends, relatives or employers, use your account to receive or move money, whatever reason they give or payment they offer.

Do not spend unexpected deposits. If money arrives in your account that you do not recognise, inform your bank in writing and do not withdraw or transfer it.

Ask questions about large sums. If you receive substantial payments, make sure you understand where they come from and keep documents showing the source.

Be careful with investment offers. Unusually high returns are a warning sign. Check whether the business is licensed or registered before you invest.

Be cautious when buying property. Check for seizure notices and caveats, and be wary of sellers who are under investigation or selling in unusual circumstances.

If your account has been frozen

Get legal advice immediately. Note the date of any order you receive, as time limits may be critical.

Gather your records. Collect documents showing the lawful source of funds in the account.

Keep paying your debts. Talk to your lenders. A freeze does not suspend your obligations.

Be careful what you say. Statements you give to investigators may be used later, including in forfeiture proceedings.

Do not deal with seized property. Any dealing with property while it is under seizure is void and may expose you to further risk.

Conclusion

A cheating report under section 420 of the Penal Code can quickly become a money laundering investigation under AMLA. Once money is linked to cheating, the authorities can follow it through any number of accounts, and freeze, seize and ultimately forfeit it. The people affected are not only the scammers themselves, but also their companies and families, those who lend their accounts, those caught up in alleged frauds on the banking system, and those who buy the scammer’s property.

The courts infer knowledge from conduct, and wilful blindness is no defence. At the same time, AMLA contains time limits and safeguards, and account holders with a genuine and documented explanation for their money can and do succeed in getting it back. The best protection is prevention: never lend your account, never spend money you cannot explain, and seek advice early if your account is frozen.