The shockwave of the terrorist attacks on 11 September 2001 has entirely merged the two distinct processes – money laundering and terrorist financing ( Munshani, 2008 ). The FATF at the time of the incident with massive support from 130 states and international organizations formulated a system of voluntary regulatory structures which includes amongst others, the obligations to report any suspicious financial activities and transformed such obligations into a mandatory procedure1. The efforts could then be seen in the October 2001 issue of “Anti-Money Laundering of Nine Special Recommendations on Terrorist Finance”2.
The changes that have changed the entire system of the international world have concurrently caused the changes to the Malaysian legislation. In July 2001, the government gazetted the Anti Money Laundering Act (AMLA)3 as it was then referred to. The Government of Malaysia did not just stop there but continued making amendments4 as an effort to curb with the uprising money laundering by terrorist cell groups. Subsequently this Act was then amended with special Recommendations on Terrorist Financing and the Act is now commonly referred to the Anti-Money Laundering and Anti Terrorism Financing Act 2001.
Money laundering has been criminalised by the AMLATFA. The provisions in this Act also bridged the boundaries set by the bank secrecy5 provisions that previously have impeded many criminal investigations involving clients of financial institution. Such changes have been absolutely necessary in order to ensure that money launderers be brought to justice by effective enforcement carried out with the co-operation of the banking and financial institutions in reporting any forms of suspicious activities to the Bank Negara.
In general, the AMLATFA contains the offences involving money laundering which include amongst others the procedures of investigations, the mandatory obligation of reporting and recording of evidence as well as the forfeiture of properties and assets of the suspected individuals corporate bodies. The AMLATFA provides the power to freeze and seize any property when there is existence of a reasonable ground to suspect any gains or any involvement in the money laundering activities6.
This paper will first focus in the discussion involving money laundering activities as this will provide the milieu understanding of how money laundering is associated with financing of terrorism ( Morais, 2002 ). In this context, money laundering activities are considered as the most adequate and probably most exploited form of activity in the role for financing terrorism. It was once being viewed that money laundering and terrorism funding were two different legal, financial and political issues but since late 2001 then has evolved into a merged system in our current modern society7.
According to the FATF8, money laundering could be best defined as “The processing of the proceeds of crime so as to disguise their illegal origin”. Money laundering is also found to have its own definition in the 1988 Vienna Convention which states as any form of activities that involve conversion or transfer of property at the state of mind of knowing or aware of such property is derived illegal activities as stated in the sub-paragraph (a)9 of the said document also stated for the same convention that money laundering involves any individuals or bodies participating in the act of concealing the origin of any property or asset.
Generally, organised crime groups, drug syndicates as well as corrupted politicians are involved in the activities of money laundering. It is due to the need to transfer large sum of money which are “dirty” or illegal to another place to avoid detection, and transformation of such monies into clean funds is being carried out.
The next question arises: why would they do so? The answer to it is simple. The money that was transformed was initially from illegally illicit means monies would be prime for the law enforcing to first, detect and reveal of illegal activities and second, to the court when charging these individuals of the illegal dealings. Other reasons to be used with evidence bolstering money laundering activities are to protect such assets and funds from seizure and forfeiture by the law enforcement authorities as well as avoiding large the payments.
It is worthy to have an awareness that national and international legislations in curbing money laundering are not simply to put a halt to money laundering. The true nature of these legislations are to end illegal activities associated with money laundering which includes amongst others fraud, illegal prostitution as well as narcotic drug trafficking.
Money laundering is the livelihood of the criminal activities because of the effectiveness of the act to have concealed the criminals and their activities which provide them with a safe haven to have use and invest the “ill-gotten” money to expand their empire and dominance of crimes globally. Without a doubt, money laundering is a peril and if it is left legislated and enforced against, paralyse the financial system of a country as well as being detriment to the national and international security globally and hence, it would indeed very important to have established counter measures which are flexible to curb with the ever-evolving money laundering activities and arm the law enforcement authorities with effective tools to detect these illegal illicit activities and proceed to whereas prosecution of the said crime well in theory anyway.
In common practise, there will be three distinct stages of money laundering:
Each transaction could be undergoing dilution in amount or in another words being reduced into smaller proportions in order to destroy the audit trail. Activities such as trading in the financial markets or through investment could accomplish such objectives of the perpetrator. The difficulty and complexity are multi-folded when these funds are transferred across transnational borders especially to countries with low-compliance and weak enforcement of money laundering laws, or countries with heavily adhered banking secrecy provisions. The other limitation arises when these countries involved in the transactions of money laundering do not comply to the international conventions and FATF recommendation have do not co-operate to share information which disallowing authorities the link to the audit trail is of have many launderers will be halt right there.