Every corrupt act in the world; modern day slavery, human trafficking, terrorism, organ trafficking, tax avoidance or online sexual exploitation of children (OSEC) is made possible by money laundering.
Accountants, real estate, company secretaries and lawyers, and our trusted non-profit organisations, our gatekeepers, are our last line of defence against organised crime but are some missing some obvious cues?
Complying with sanctions screening is an important step for businesses and organisations to take to prevent money laundering and terrorist financing activities. In Malaysia, sanctions screening is a requirement for compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations set by Bank Negara Malaysia, the Central Bank of Malaysia, and the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA).
Sanctions Screening Programs are the first step in complying with sanctions laws in Malaysia. This program should include a set of policies, procedures, and controls that are designed to detect and prevent transactions that involve sanctioned individuals or entities. This program should be reviewed and updated regularly to ensure that it is effective and in compliance with the latest regulations.
Implementing an effective sanctions screening program involves identifying and assessing the risks of transactions with individuals or entities that are subject to sanctions, and putting in place appropriate controls to prevent or detect such transactions. This can include using automated screening software that screens customer details against lists of sanctioned individuals and entities, as well as manual reviews of transactions that raise red flags.
Avid AML provide sanctions screening technology to screen against the United Nations (UN), the United States Office of Foreign Assets Control (OFAC), and domestic lists issued from the Ministry of Home Affairs, the Anti-Corruption Commission, and the Investor Alerts list from the Securities Commission Malaysia. Firms can also include their own internal watch-lists to screen against.
It is important for businesses and organisations to conduct regular internal audits to ensure that the sanctions screening program is effective and in compliance with the regulations. This can be done by an internal auditor or by an external auditor. The audit should include a review of the sanctions screening program, the transactions, and the customers.
Failure to comply with these regulations can result in severe penalties, including fines and imprisonment and leave vulnerable communities at risk. By screening transactions and customers against sanctions lists, businesses can help to identify and prevent illicit financial activities that could be used to fund terrorist organisations or other criminal activities
Terrorism and Human Rights Violations are harder to detect without a Sanctions Screening program. Sanctions are used to target individuals and organisations that are involved in human rights abuses, such as genocide, war crimes, corruption, terrorism or other serious human rights violations. By screening customers against sanctions lists, businesses can help to prevent transactions with sanctioned parties, which can help to support human rights and promote international peace and security.
Without appropriate support from sectors most at risk, Malaysia’s reputation, and its position as a hub for international trade and business, is at risk. Malaysia is a major trading nation and a major player in the global economy. By ensuring compliance with international sanctions, Malaysia can maintain its reputation as a responsible member of the global community and attract foreign investment and trade. As a member of Financial Action Task Force (FATF), Malaysia is required to implement and enforce AML/CFT measures, including sanctions screening.
It is important for regulated entities in Malaysia to conduct effective sanctions screening in order to comply with regulatory requirements and protect Malaysias financial integrity. The Central Bank of Malaysia, the Securities Commission of Malaysia, and other regulatory bodies have issued guidelines and regulations for compliance with international sanctions and AML/CFT measures.
Designated Non-Financial Businesses and Professions (DNFBPs) are our gatekeepers, our last line of defence.
The Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA) requires DNFBPs to put in place adequate systems and controls to prevent money laundering and terrorist financing, which includes sanctions screening.
Malaysian Designated Non-Financial Businesses and Professions, including legal firms, accounting firms, and real estate companies, are required to screen for sanctions as part of their compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations. By engaging in transactions with sanctioned entities, DNFBPs risk being involved in illegal activities and facing severe penalties, including fines and even imprisonment. DNFBPs that fail to screen for sanctions also risk damaging their reputation and losing business.
Customers, partners and staff may avoid working with firms if they suspect that the DNFBP is not taking adequate measures to comply with laws and regulations. By screening for sanctions, DNFBPs can ensure that they are not inadvertently involved in illicit activities and maintain the trust and confidence of their customers and the public.
Financial Loss and reputational damage can impact the health and wealth of the firm and its shareholders. DNFBPs may be held liable for any financial losses incurred as a result of their involvement in money laundering or terrorist financing activities. By implementing a robust sanctions screening program, DNFBPs can reduce the risk of financial loss and protect their assets.
Non-profit organisations (NPOs) in Malaysia, like in any other country, may be vulnerable to being used for terrorist financing. Terrorist organisations and organised crime often use NPOs as a means to raise funds and move money internationally without detection. NPOs are legitimate organisations that are not subject to the same level of scrutiny as for-profit businesses or financial institutions and are attractive to those looking to remain in the shadows.
In Malaysia, the government has implemented several measures to combat terrorist financing, including the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA). The AMLA requires NPOs to register with the Registrar of Societies and submit annual financial reports, among other requirements.
Sanctions screening is an important tool for preventing non-profit organisations (NPOs) from inadvertently being involved in money laundering or terrorist financing activities, which can have severe consequences for the organisation and the communities they serve. NPOs play an important role in providing humanitarian aid and support to vulnerable communities. NPO integrity is important to its survival and we should be doing all we can to ensure aid is being used to the fullest extent to address the needs of the vulnerable communities.
Money laundering and terrorist financing activities can damage the reputation of a charitable organisation, leading to loss of credibility and support from donors and stakeholders. By screening for sanctions, NPOs can ensure that they are not inadvertently involved in illicit activities and maintain the trust and confidence of their donors, stakeholders, and the public. This is crucial for NPOs, as public trust is a major factor that drives public support and donations.
Another way to mitigate the risk of terrorist financing in the NPO sector is to enhance cooperation between government agencies, NPOs, and the private sector. The government can work with NPOs to provide training and education on terrorist financing and money laundering. The private sector can also play a role by providing financial and technical assistance to NPOs. Avid AML and Muhamad Nazri provide training and affordable technology to the sector, working to strengthen its defences.
By implementing a sanctions screening program, NPOs can reduce the risk of financial loss and protect their assets. This is particularly important for NPOs as they often operate on tight budgets and cannot afford to lose funding due to non-compliance issues. A sound screening program helps to prevent the proliferation of terrorism and other criminal activities and an industry wide commitment to sanctions screening contributes to the stability and security of Malaysia and the communities NPOs serve.
Non-compliance with sanctions screening can be brutal and the ramifications are vast. These include financial penalties, reputational damage, criminal liability, potential sanctions, loss of business opportunities and of course legal risk.
Financial penalties: Financial institutions (FIs), Designated Non-Financial Businesses and Professions (DBFBPs), Non-Profit Organisations (NPOs) and other reporting organisations that fail to comply with sanctions screening regulations can face significant financial penalties. These can include fines, penalties, and restitution costs, which can have a significant impact on the bottom line of the organisation.
Reputational damage: Organisations that fail to comply with sanctions screening regulations can also suffer reputational damage, which can lead to lost customers, damage to the organisation’s brand, and a loss of trust among stakeholders.
Criminal liability: In some cases, failure to comply with sanctions screening regulations can also result in criminal liability, which can lead to fines, penalties, and even imprisonment.
Potential sanctions: Non-compliance with sanctions screening may lead to the imposition of sanctions from international organisations, and this can lead to a range of economic, financial and diplomatic penalties.
Loss of business opportunities: Organisations may also lose business opportunities and contracts as a result of being non-compliant with sanctions screening regulations.
Difficulty in complying with regulations of other countries: Non-compliance with sanctions screening can also make it difficult for an organisation to operate in other countries and comply with their regulations.
Legal Risks: an organisation not complying with sanctions screening may also face legal risks and complex legal proceedings if they were found doing business with a sanctioned entity.
It is important to note that non-compliance with sanctions screening regulations can also have a broader societal impact, as it can contribute to the proliferation of illicit activities, including money laundering, terrorist financing, and the funding of illegal organisations. It is important for organisations to maintain compliance with sanctions screening regulations.