Targeted financial sanctions related to the proliferation of weapons of mass destruction (WMD) is an international standard introduced by the Financial Action Task Force (FATF) under the FATF 40 Recommendations published in February 2012.

Under this standard, countries are required to implement targeted financial sanctions without delay to comply with United Nations Security Council (UNSC) resolutions relating to the prevention, suppression, and disruption of the proliferation of weapons of mass destruction and its financing.

The UNSC has imposed sanctions on individuals and entities involved in the proliferation of WMD activities through the resolution 1718 (2006) relating to the Democratic People’s Republic of Korea (DPRK). Please refer to the link on the UN’s updated consolidated list: https://www.un.org/sc/suborg/en/sanctions/un-sc-consolidated-list.

In implementing Malaysia’s obligation in relation to the above UNSC resolution, the Ministry of International Trade and Industry (MITI) through the Strategic Trade Act 2010 (STA) and the Strategic Trade (United Nations Security Council Resolutions) Regulations 2010 (the Regulations) issued several Orders to designate the individuals and entities listed in the above UNSC resolutions.

Pursuant to Regulation 3 of the Regulations, intermediaries are amongst others, required to:

• Freeze funds or other financial assets of such individuals and entities that are located in Malaysia; or
• Prohibit investment in Malaysia by such individuals and entities; and
• Prevent the provision of financial services.

For ease of reference for compliance by the intermediaries, the links to the Regulations, Orders and Directive issued by MITI are as provided below:-

• Strategic Trade (United Nations Security Council Resolutions) Regulations 2010 (pdf)
• Strategic Trade (Restricted End-Users and Prohibited End-Users) Order 2010 (pdf)
• Strategic Trade (Restricted End-Users and Prohibited End-Users) (Amendment) Order 2011 (pdf)
• Strategic Trade (Restricted End-Users and Prohibited End-Users) (Amendment) Order 2014 (pdf)
• Strategic Trade (Restricted End-Users and Prohibited End-Users) (Amendment) Order 2016 (pdf)
• Strategic Trade Controller Directive Amendment 2024

In order to ensure capital market intermediaries’ compliance with the targeted financial sanctions on proliferation financing (TFS-PF) obligations and restrictions under the Strategic Trade Act 2010 (STA) and its subsidiary legislations, the SC had previously on 6 April 2018 issued a Guidelines on Implementation of Targeted Financial Sanctions Relating to Proliferation Financing for Capital Market Intermediaries (PF Guidelines). On 13 June 2024, the SC issued the revised Guidelines on Prevention of Money Laundering, Countering Financing of Terrorism, Countering Proliferation Financing and Targeted Financial Sanctions for Reporting Institutions in the Capital Market (AML Guidelines), whereby the TFS-PF obligations have been included in Part VIII of the AML Guidelines. The PF Guidelines is now superseded by the revised AML Guidelines. The AML Guidelines can be found HERE.

The SC has also issued a revised Quick Guide on the AML Guidelines to facilitate capital market intermediaries understanding of the TFS-PF obligations. The Quick Guide summarizes the requirements of the AML Guidelines, provides example of a proliferation financing case and situations indicating possible proliferation financing activities. The Quick Guide can be found HERE.