What is money laundering?

FORMER prime minister Datuk Seri Najib Abdul Razak has been slapped with numerous counts of money laundering. As has lawyer Tan Sri Shafee Abdullah. Under a law that goes by the mouthful of a title – Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
The public is intrigued. What is this crime of money laundering?
Malaysia brought the newly minted law into effect in 2002 to deal with persons who clean dirty money to conceal its illicit or criminal source. This includes stolen money and presenting it as money acquired from legal sources.
"Laundering" is akin to washing. The culprit can thereafter use it freely as though it is legitimately acquired. Property derived from money laundering can be forfeited.
How is it done?
Money is distanced from its criminal origin by a variety of methods. One is by placing it into bank accounts or broken into many smaller value transactions ("smurfing") and used or distributed.
To prevent the tracing of funds, multiple complex transfers are done through bank accounts or wire transfers ("layering"), often through banks of several countries to camouflage the illegal source.
Finally, the illegal money is integrated into the economy by, for example, the purchase of property (luxury condos, jets, yachts and the like) and other high-value goods.
Pink diamonds
Because it is easy to move around and hide, dirty money is hidden increasingly through buying precious stones and jewellery – such as diamonds. These can easily be converted into cash.
Pink diamonds are particularly targeted because they can sell for 40 times more than white diamonds. Consequently, the Paris-based Financial Action Task Force, which assesses the ability of countries to fight illicit financial flows, had in 2016 flagged Australia – which produces 90% of the world's pink diamonds – the risk of their use for money laundering.
Last month, Singapore proposed a new law requiring dealers of precious stones and metals to be registered and to report suspicious transactions and other reports, and perform customer due diligence for cash transactions over S$20,000 (RM60,611). As well as keep records of money laundering.
Wide scope
The net is cast wide to catch any form of activity to launder money. This includes persons who:
>> Participate, directly or indirectly, in a transaction involving the proceeds of an unlawful activity.
>> Acquire, receive, possess, disguise, transfer, convert, exchange, carries, disposes of or uses proceeds of such activity.
>> Brings such proceeds into Malaysia.
>> Conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of such activity.
The penalty: Imprisonment for a term not exceeding 15 years as well as fine exceeding five times the sum or value of the proceeds of such activity at the time the offence was committed or RM5 million, whichever is higher.
Source ignorance
It is not so easy for an accused to feign ignorance of the receipt of the laundered money. The court will examine the evidence and infer that he:
>> Either knows or has reason to believe or has reasonable suspicion that the property is the proceeds of an unlawful activity; or
>> Without reasonable excuse failed to take reasonable steps to ascertain whether or not the property is the proceeds of an unlawful activity.
Reporting
The law requires banks and other listed institutions to report any cash transaction above RM50,000 to Bank Negara Malaysia (BNM) as well as any transaction that gives the bank reason to suspect that the transaction appears unusual. Or has no clear economic purpose, or that cannot be matched with, for example, the income level of the customer. BNM must then ask the account holder to justify the transaction and provide the source of the money.
Additionally, there is an obligation to declare the receipt of cash from another country into one's bank account.
1MDB-related convictions
So far, Singapore courts have jailed three persons for money laundering offences linked to 1MDB.
>> Yvonne Seah, a former Swiss BSI banker for aiding in forging documents and failing to report suspicious transactions allegedly related to Malaysian financier Jho Low. Jho Low was identified by Singapore authorities as a key person in its 1MDB-linked probe.
>> Her supervisor, Yak Yew Chee, for similar offences.
>> Former BSI wealth planner, Yeo Jiawei, for money laundering and cheating in relation to misappropriated billions from 1MDB.
BSI bank was shut down by the Monetary Authority Singapore in May 2017.
Last month, a Singapore court ordered the return of RM46 million misappropriated from 1MDB and SRC International. Millions more are expected to be recovered shortly.
Other jurisdictions
Switzerland's attorney-general has promised to return stolen 1MDB-funds to Malaysia. A process long delayed because then Malaysian attorney general (and former Federal Court judge) Tan Sri Apandi Ali refused to cooperate in the Swiss 2016 investigations.
The US is in full throttle for the recovery of properties (luxurious apartments, paintings) seized in relation to 1MDB.
Malaysia
While the rest of the world was, and is, ablaze recovering properties and levying charges in relation to the biggest ever kleptocracy scandal, in 1MDB's home country, the alleged perpetrators remained insulated. That is, until Najib was deposed in the May 2018 general elections.
Now the drama climaxes as charges after charges are rolled out against those who allegedly partook of the stolen monies.
Gurdial Singh Nijar, a former University of Malaya law professor, currently practises law. Comments: letters@thesundaily.com