Anti-Money Laundering and Anti-Terrorism Financing

Are there any significant changes from the previous Guidelines on Prevention of Money Laundering & Terrorism Financing for Capital Market Intermediaries (Guidelines) to the new Guidelines issued?
The new Guidelines issued on 15 January 2014 take into account the updated international standards on combating money laundering and the financing of terrorism issued by the Financial Action Tasks Force (FATF). The new Guidelines provide for a more enhanced framework for the purpose of complying with the updated international standards.The significant enhancements can be found in the following provisions:-

Paragraph 7 – Risk Based Approach Application
Paragraph 8 – Customer Due Diligence Paragraph 8.5 – Politically Exposed Person
Paragraph 8.6 – High Risk Countries Paragraph 8.7 – Third Party Reliance

What are the steps to be taken by a reporting institution in applying a Risk Based Approach?
By adopting a Risk Based Approach (RBA), a Reporting Institution should be able to ensure that measures to prevent or mitigate money laundering and terrorism financing (ML/TF) commensurate with the risks identified to enable Reporting Institutions to make decision on how to allocate its resources in the most effective way. In implementing the RBA, a Reporting Institution should have in place processes to identify, assess, monitor, manage and mitigate ML/TF risk. The general principle of the RBA is that, where there are higher risks, Reporting Institution should take enhanced measure to manage and mitigate those risks and correspondingly where the risks are lower, standard measures may be permitted.
How does a Reporting Institution identify high risk countries?
For the purpose of complying with the Guidelines, the Reporting Institution is required to make reference to:-a) the “FATF Public Statement” – on jurisdictions subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial ML/TF risks emanating from such jurisdictions;b) the “FATF Public Statement”- on jurisdictions with strategic anti-money laundering and counter financing terrorism (AML/CFT) deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies; orc) Any jurisdictions identified by the Government of Malaysia as having on-going or substantial ML/TF risk or jurisdictions with strategic AML/CFT deficiencies.Please refer to the relevant links in SC’s website for reference to the countries identified by the Financial Action Task Force.
What are the customers due diligence measures to be undertaken for politically exposed persons (“PEP”)?
A Reporting Institution is required to have an appropriate risk management system to determine whether the potential customer is a PEP. Having identified the customer as a foreign PEP, the Reporting Institution is required to automatically conduct an enhanced CDD. On the other hand, for a domestic PEP and person entrusted with a prominent function by an international organization, a Reporting Institution is required to take reasonable measures to assess the ML/TF risks of such customer. Only where such customer is categorized as high risk, the Reporting Institution must perform an enhanced CDD.The chart below sets out the aforesaid requirements:

Can a Reporting Institution use a Third Party to conduct CDD ?
Yes, a Reporting Institution may rely on a Third Party who is a financial institution that is supervised and monitored by a supervisory authority on AML/CFT. Reliance on Third Party generally occurs through introduction made by another member of the same group or by another Reporting Institution.Notwithstanding the above, the ultimate responsibility and accountability of the CDD process shall remain with the Reporting Institution.
What are the foreign public listed companies that a Reporting Institutions are exempted from obtaining constituent documents and identifying and verifying the directors and shareholders of legal persons?
A Reporting Institution is exempted from obtaining constituent documents and identifying and verifying the directors and shareholders of foreign public-listed companies that are listed on exchanges recognised by Bursa Malaysia.In this regard, Bursa Malaysia’s Directive in relation to Recognised Stock Exchanges (R/R6 of 2012) provides that Recognised Stock Exchanges include all member exchanges of the World Federation of Exchanges (WFE). The list of WFE member exchanges is available on the WFE’s website at: www.world-exchanges.org/member-exchanges/key-information.