Us Banks Deem Malaysia A High Risk Money Laundering Destination
US banks named Malaysia a destination for money laundering, prompting the banks to flag various transactions involving Malaysian firms as "suspicious".
In several reports, Malaysia was listed as a "high-risk jurisdiction for money laundering and financial crime" alongside countries like Angola, Togo, Cambodia, Niger, Indonesia, British Virgin Islands, leaked documents show.
The reports by US banks were filed to the US Treasury, reviewed by Malaysiakini as part of the FinCEN files investigation led by the International Consortium of Investigative Journalism (ICIJ) and BuzzFeed News.
The FinCEN Files involve volumes of suspicious activity reports (SAR) filed by the banks to the US Treasury's Financial Crimes Enforcement Network (FinCEN), which collects information to combat money laundering or other financial crime.
Nine Malaysian banks were flagged as facilitating suspicious transactions worth more than US$18 million (approximately RM75.76 million).
They are OCBC Bank, Public Bank, United Overseas Bank, AmBank, Standard Chartered, CIMB, Alliance Bank, HSBC Bank and Maybank.
The Malaysian banks have correspondent accounts with the US banks, which facilitate international fund transfers and transaction settlements.
Sanctions and unknown sources
Malaysian banks featured in a suspicious activity report for various reasons, ranging from being in a "high-risk jurisdiction" to facilitating payments which were found to breach US sanctions.
The value of transactions also ranged from several hundred to several hundred thousand American dollars.
In the case of 1MDB-linked transactions - facilitated by AmBank - the amount was in the millions of US dollars.
One bank which repeatedly noted Malaysia as a "high-risk destination for money laundering and financial crime" was Bank of New York Mellon (BNYM).
In one such report, BNYM flagged six "suspicious" wire transfers of about US$230,000 (approximately RM950,000) facilitated by HSBC Malaysia.
It said "the true ordering customer of the wires could not be identified" and "source of funds and purpose of transactions could not be ascertained".
Similarly, JP Morgan Chase said Maybank facilitated nine wires worth US$429,795 (RM1.78 million) from a firm in Bahrain to a Malaysian "money services and digital payments" firm.
The sender stated that the transactions were to "cover" their accounts, the US bank said.
The bank felt the transactions were "suspicious" because it involved "significant large, round dollar wire transactions were conducted with unknown originators and beneficiaries, for an unknown economic purpose" - all red flags for money laundering.
When contacted by ICIJ, the US banks said they could not comment as the SARs are confidential.
Not evidence of criminality
US banks are obliged to file SARs within 60 days of detected suspicious activities, but the US Treasury notes that these reports are not evidence of criminality.
This is similar to the suspicious transaction report (STR) Malaysian financial institutions are required to submit to Bank Negara Malaysia upon finding suspicious transactions.
However, in Malaysia, the STR must be filed within the next working day after the suspicion was established.
Like the SAR, the STR is also confidential, and a breach of confidentiality could lead to imprisonment.
In many cases, reports filed by the US banks were triggered by negative news reports involving some parties in the transactions. Not all named in the SAR would have a direct link to the suspected criminal element.
In some instances reviewed by Malaysiakini, the links to the actual criminal element are tenuous.
For instance, one SAR filed by Standard Chartered US was triggered by reports of money laundering linked to deceased Libyan leader Muammar Gaddafi.
The report flagged transactions involving an international recruitment firm because one of the firm's clients was implicated in the Gaddafi money laundering scheme.
Malaysian firms were named in the SAR because it had also used the recruitment firm, and used Malaysian banks to make payment.
Despite US banks' suspicions, international money-laundering watchdog Financial Action Task Force does not place Malaysia on the list of high-risk jurisdictions for money laundering and global terrorism.
Countries on the FTAF's list are Albania, The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen and Zimbabwe. - Mkini
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