KUALA LUMPUR: The authorities are facing new and increasing challenges following the increasing sophistication of financial tools and products in their fight against money laundering (ML), terrorism financing (TF) and proliferation financing (PF).

       Bank Negara Malaysia Deputy Governor Marzunisham Omar said on Tuesday despite these challenges, the authorities remain vigilant in the fight against ML, TF and PF.

       In his welcoming remarks at the 23rd Asia/Pacific Group on Money Laundering (APG) Typologies Workshop, he shared four observations on the recent developments and challenges that are pertinent in strengthening AML/CFT/CPF measures.

       “First, on the rapid changes of ML/TF/PF methods and risks that are driven by technology.

       “As the shift towards digitalisation especially in the financial industry accelerates, the emerging risks presented are intensifying. The rapid change in technology sometimes result in AML/CFT/CPF measures undertaken by authorities to be reactive.

       “For example, we see this in the virtual asset sector given its rapid development and widespread innovations,” he added.

       Marzunisham said knowledge sharing platforms such as this workshop were useful to enhance their knowledge on the latest changes and trends in this space.

       However, he also said it was crucial to continuously adopt new approaches and tools such as data analytics and artificial intelligence to elevate their surveillance and enforcement capability in keeping up with the increasingly complex and innovative financial instruments.

       “Remaining reactive and defensive would limit our opportunity to proactively shape the orderly development of the financial landscape while managing any potential ML/TF/PF risks that accompany it,” he said.

       As for the second observation, he said there should be greater scrutiny by both the domestic stakeholders and global community on AML/CFT/CPF measures and implementation.

       He cited revelations of high-profile information such as Panama Papers, FINCEN leaks and more recently, the Pandora Papers, have attracted great interest within the domestic and international communities on the AML/CFT/CPF regime.

       Marzunisham said this has led to higher expectations for authorities to take prompt action against activities involving cross-border flow of illicit funds as well as the broader ML/TF/PF threats.

       “While efforts by the Financial Action Task Force (FATF) to enhance and provide greater clarity on related Standards, including on transparency of beneficial ownership is underway, authorities and gatekeepers are also expected to ensure that blind spots are effectively addressed.

       “More often than not, the information regarding these illicit activities resides with multiple parties across the public and private sectors.

       “Hence, any suspicion will only surface if we are able to link and integrate that information. In this pursuit, greater collaboration among the law enforcement agencies (LEAs) as well as between LEAs and the private sector is essential for us to efficiently and effectively connect and assess all relevant information, which will no doubt further strengthen our efforts to fight ML/TF/PF threats,” he said.

       Marzunisham said in this respects, the Public-Private Partnership (PPP) is gaining momentum and is fast becoming known as a key success factor for effective information sharing in the AML/CFT/CPF ecosystem.

       He cited the Joint Money Laundering Intelligence Taskforce (JMLIT) established by the United Kingdom in 2016 has prompted a key shift in addressing ML/TF threats.

       As of June 2020, JMLIT has completed over 750 cases and detected more than 5,000 suspected accounts linked to financial crimes.

       Similar achievement was also experienced by the Fintel Alliance in Australia where within the span of one year between 2018 to 2019, over 300 cases were successfully completed through the partnership.

       Other countries within the region have also followed suit – Hong Kong’s Fraud and Money Laundering Intelligence Taskforce (FMLIT) and Singapore’s Anti-Money Laundering and Countering the Financing of Terrorism Industry Partnership (ACIP).

       “In Malaysia, the PPP is undertaken through the Financial Intelligence Network (MyFINet), which involves collaboration and information sharing between LEAs such as the Central Bank, Royal Malaysia Police and Malaysian Anti-Corruption Commission, and private sectors such as financial institutions,” he added.

       Marzunisham said the third observation is on changes in the international AML/CFT/CPF standards.

       The FATF is continuously enhancing its standards through various workstreams to ensure the availability of up-to-date policy responses and to facilitate better incorporation of the Standards into domestic laws and regulations, he said.

       He pointed out a recent change to the FATF Standards was the introduction of a requirement to identify and assess the risks of potential breaches, non-implementation or evasion of the targeted financial sanctions related to PF and to take action to mitigate these risks.

       “As authorities and the private sector are expected to promptly take necessary steps to implement this new requirement, it is timely for our workshop to have further discussions on this matter,” he said.

       Marzunisham said that compared to ML and TF, proliferation financing is usually considered a relatively new area and less understood.

       He said that to date, only a few countries have conducted their Proliferation Financing Risk Assessment (PFRA), for example, Cayman Islands, Gibraltar, Latvia, Portugal, and the United States, as well as the recent assessments by Malaysia and the United Kingdom in 2021.

       His fourth and final observation was on the importance of greater understanding of risk associated with AML/CFT/CPF measures which will help the authorities mitigate any unintended consequences from such measures.

       “The FATF’s recent project on mitigating unintended consequences of its Standards has found financial exclusion and de-risking as among the consequences which are often observed from the incorrect understanding and implementation of AML/CFT/CPF measures.

       “Taking pre-emptive steps to better understand the risks will help us avoid those potential consequences while supporting access to financial services and other developmental agendas which are equally important,” he added.