Module 11: Financial Intelligence, Investigation and Enforcement Learning objectives The purpose of this module is to: understand the role of the BNM Financial Intelligence Unit (FIU) understand the range and powers of Malaysia s investigation agencies comprehend the role, responsibilities and powers of an investigation officer under AMLATFA provide an overview of the freezing and seizure of the illicit proceeds of crime understand the main forfeiture procedures compare orders and powers used in other jurisdictions 1. Financial Intelligence The stated aims of BNM Financial Intelligence Unit is to formulate and implement AML/CFT laws and measures to deter and detect financial crimes by gathering and sharing financial intelligence in order to enhance the integrity and stability of Malaysia s financial system. 106 Reporting Institutions are required to promptly submit STRs in a prescribed form to the FIU wherever there is a suspicion of money laundering. On-line submission via the Financial Intelligence Services (FINS) is now the preferred method of submission by reporting institutions. The Reporting Institution must establish an internal reporting mechanism within its organisation via a designated reporting compliance officer. The FIU has access to a range of databases to assist in undertaking analysis of STRs, including those of BNM, National Registration Department, Companies Commission, Royal Malaysia Police, Royal Malaysia Customs, Immigration Department and Road Transport Department. The FIU works closely with the enforcement agencies and releases and shares financial intelligence with them. Under s9 of AMLATFA the FIU can authorize, in writing, any enforcement agency to have access to appropriate information to assist in any investigation or other specified purpose. 2. Disclosure to corresponding authority of a foreign state Wherever an arrangement has been entered into between Malaysia and a foreign state, the FIU is permitted to disclose financial intelligence to that state 107 provided the provisions in s10 are adhered to. The sharing of information between the BNM FIU and similar foreign institutions is now permitted following the signing of a Memorandum of Understanding between the respective FIUs. Agreements have been entered into with a range of FIUs, including Australia, China, Indonesia, Thailand and the Philippines. 106. APG Mutual Evaluation Report, Malaysia (2007) p 67 107. AMLATFA, s10 255
Advanced Certification in Anti Money Laundering and Counter Financing of Terrorism 3. Investigations Malaysia has a range of investigation agencies authorized to detect and investigate serious offences. The largest of these is the Royal Malaysian Police (RMP), who has a number of divisions assigned to investigate AML and CFT. These include the AMLA units of a Commercial Crime Investigation Department (CCID), the Criminal Investigation Department (CID) and the Special Branch (SB). BNM has a Specialist Investigation Unit (SIU) that liaises closely with the FIU in respect of breaches of the banking laws, many of which have been investigated as a consequence of the submission of an STR. A number of special investigative techniques are adopted in AML/CTF investigations as highlighted by the APG Mutual Evaluation Report on Malaysia. 108 These include: Use of agent provocateurs (undercover agents) allowing uncorroborated evidence in court to be used in prosecutions Interpretation of communications Use of informants disclosures to an enforcement agency are protected Controlled deliveries where an arrest is delayed to enable the delivery of smuggled/illegal goods so that further evidence can be obtained Declaration of assets a suspect may be required to furnish a statement in connection with the identification of property with which they are connected. This may assist the authorities in tracking and tracing illicit assets. 4. Investigating Officers For the purpose of an investigation the Competent Authority or Enforcement Agency may appoint an Investigating Officer. The person can be a member of the Agency or Authority or an outside expert such as a forensic accountant, IT or banking specialist (s30 AMLATFA). These officers may act alone or as part of a team. Many agencies have permanent teams that support investigations. Based upon reasonable suspicions an Investigating Officer has extensive powers under AMLATFA, Section 31, to: 1. a. enter any premises belonging to or in the possession or control of the person or his employee, and in the case of a body corporate, its director or manager; b. search the premises for any property, record, report or document; c. inspect, make copies of or take extracts from any record, report or document so seized and detained and detain it for such period as he deems necessary; d. take possession of, and remove from the premises, any property, record, report or document so seized and detained and detain it for such period as he deems necessary e. search any person who is in, or on, such premises, if the Investigating Officer has reason to suspect that that person has on his person any property, record, report or document, including personal document, necessary in the investigating officer s opinion, for the purpose of investigation into an offence under this Act; f. break open, examine and search any article, container or receptacle; or g. stop, detain or search any conveyance. 2. An investigating officer may, if it is necessary to do so: a. break open any outer or inner door of such premises or conveyance and enter such premises or conveyance 256 108. p75
Module 11: Financial Intelligence, Investigation and Enforcement b. remove by force any obstruction to such entry, search, seizure, detention or removal as he is empowered to effect; or c. detain any person found on such premises, or in such conveyance until the search is completed These powers can be exercised without a warrant except where being exercised in respect of a financial institution, in which case the permission of the DPP is required. An Investigating Officer may seize, take possession of and detain any property, record, report or document produced before him in the course of the investigation (s31). Similarly, the Investigating Officer has the power to examine (under oath or affirmation) any person in connection with the investigation. Such person can be required to attend an interview, produce any property or record or provide a statement on oath. The person examined is legally bound to answer all questions (save where it will selfincriminate him). Failure to comply is a criminal offence. The statements taken are admissible as evidence in court. Where the investigation powers are in relation to a financial institution, the Public Prosecutor may authorise in writing in relation to an investigation, the investigating officer to: (a) (b) (c) (d) inspect and take copies of any book, record, report or document belonging to or in the possession, custody or control of the financial institution; inspect and take copies of any share account, purchase account, expense account or any other account of any person kept in the financial institution; inspect the contents of any safe deposit box in the financial institution; or request for any other information relating to any record, report, document, account or article referred to in paragraphs (a) (b) and (c). (AMLATFA s.48) In appropriate circumstances the investigating officer may take possession of the accounts, books, records, reports, documents, titles, securities or cash if this is deemed necessary for e.g., inspection or prevention from destruction. 5. Tipping off Wherever a person: Knows or has reason to suspect that an investigating officer is conducting or about to conduct an investigation, or Knows or has reason to suspect that an STR has been made and discloses this to an unauthorized person then an offence is committed with a potential penalty of up to RM1, 000,000 or up to one year imprisonment or both. Defences that may be raised by an accused person include: The accused had no knowledge that the disclosure would be harmful to the investigation. A lack of knowledge may be provable but it may be more difficult to establish that the person had no reason to suspect That the accused had a reasonable excuse or lawful authority to disclose the information To ensure protection from preservation a financial institution should try to ensure strict confidentiality in such matters. See Module 2 - for further discussion of Tipping Off 257
Advanced Certification in Anti Money Laundering and Counter Financing of Terrorism 6. Confiscation, Freezing and Seizure of Illicit Assets Malaysian legislation that enables the freezing, seizure and confiscation of the proceeds of crime can be found in many statutes, including AMLATFA, the Dangerous Drugs Act and the Anti Corruption Act. Under Section VI, sections 44-66 of AMLATFA, enforcement agencies have extensive powers to freeze, seize and forfeit property that is deemed to be involved in money laundering or terrorist financing. 6.1 Freezing of property Under s44 an enforcement agency can freeze assets for the purpose of an investigation prior to effecting a seizure of those assets. Such an order prevents the person named in the order from dealing with the property during the period of the order (normally 90 days). The named person may also be precluded from leaving Malaysia and be required to surrender any travel documents within one week of the publication of the order. 6.2 Seizure of movable and immovable property (ss45-55) Under AMLATFA a range of freezing and seizure orders can be made including: Seizure of movable property (e.g. money, stocks and shares, cars and jewellery) by an investigating officer Seizure of moveable property in a financial institution where the public prosecutor is satisfied such property is the subject matter of an offence, e.g. monetary instruments including currency Freezing or seizure of immovable property (land) wherever the property is the subject matter of an offence. This precludes all dealings with the property Seizure of a business or activities carried on by a business, including its accounts, profits, etc. 7. Forfeiture The ability to forfeit or confiscate criminal assets under Malaysian law can be found in a range of statutes, including: AMLATFA 2001 ss55/56 money laundering offences Criminal Procedure Code, section 407 general crimes Anti Corruption Act 1997, s36 corruption Customs Act 1967, s127 (1) customs offences Excise Act 1976 tax offences Dangerous Drugs Act 1952 confiscation of dangerous drugs, syringes, pipes, etc Dangerous Drugs (Forfeiture of Property) Act 1988 - Drug Trafficking proceeds As a general rule property may be subject to forfeiture in respect of money laundering offences under AMLATFA, s 55/56 (i) Wherever there is a prosecution for a money laundering offence and the property is proved to be the subject matter of the offence or used in commission of the offence/ In determining whether the property is the subject matter of an offence or had been used in the commission of the money laundering offence, the courts may use the civil law test of on the balance of probabilities. This makes it easier to establish a linkage between the property and the criminal activity. It should be remembered, however, that the criminal test of liability for the actual offences of money laundering and terrorist financing will nevertheless remain the criminal law test of beyond reasonable doubt (s55 AMLATFA). 258
Module 11: Financial Intelligence, Investigation and Enforcement (ii) Where there has been no prosecution or conviction the Public Prosecutor may nevertheless, within 12 months of the freezing or seizure apply to the court for a forfeiture provided he is satisfied that the illicit property had been obtained as a result or in connection with the offence and the court is satisfied as to this fact and also that the holder of the property had not provided value for that property (purchased in good faith for valuable consideration) [s56 AMLATFA]. Consequently, forfeiture can take place irrespective of whether or not there has been a conviction for the offence. This enables illicit property to be recovered even though the money launderer cannot be convicted of the main offence and as such is a useful tool for the Enforcement Agency. 8. International Co-operation and Mutual Assistance Malaysia places strong emphasis on International Co-operation and Collaboration. To this end Malaysia has signed a range of UN and International Conventions and is a party to a range of MOUs and instruments under the auspices of the Association of South East Asian Nations (ASEAN). Malaysia is committed to providing and receiving international assistance in criminal matters and to this end has structured a mechanism to achieve this under the Mutual Legal Assistance in Criminal Matters Act 2002 (MACMA). The provisions of MACMA are designed to work in tandem with the provisions of AMLATFA. The purposes of MACMA are to provide and obtain international assistance in criminal matters, including: a. providing and obtaining evidence and things b. the making of arrangements for persons to give evidence, or to assist in criminal investigations c. the recovery, forfeiture or confiscation of property in respect of a serious offence or a foreign serious offence d. the restraining of dealings in property, or the freezing of property, that may be recovered in respect of a serious offence or a foreign serious offence e. the execution of requests for search and seizure f. the location and identification of witnesses and suspects g. the service of process h. the identification or tracing of proceeds of crime and property and instrumentalities derived from or used in the commission of a serious offence or a foreign serious offence i. the recovery of pecuniary penalties in respect of a serious offence or a foreign serious offence; and j. the examination of things and premises MACMA is divided into distinct sections: Requests from Malaysia to a foreign jurisdiction Requests to Malaysia (i) Requests from Malaysia Such requests normally emanate from the office of the Attorney General and may cover: Collection of evidence Search and seizure (e.g. photographs/copies of documents) Request for a person to be sent to Malaysia to give evidence or assistance 259
Advanced Certification in Anti Money Laundering and Counter Financing of Terrorism Enforcement of forfeiture orders Assistance in locating and/or identifying a person Assistance in serving process. The operation of the provisions of MACMA was discussed at length in Tan Sri Eric Chia v Attorney General (1) 109 and Public Prosecutor v Tan Sri Eric Chia Eng Hock (2) 110. (ii) Requests to Malaysia The range of assistance required to an extent mirrors where assistance is requested under AMLATFA (investigation, freezing, seizure and forfeiture) and covers: Taking of evidence Production orders (e.g. production of documents) Request for attendance of persons Enforcement of foreign forfeiture orders Search and seizure Malaysia extends mutual legal assistance to a foreign state: Where there is a treaty or agreement in place to provide mutual legal assistance between Malaysia and the requesting state In the event that no treaty or agreement exists the minister may direct that the provisions of MACMA shall apply to the foreign jurisdiction (requesting state). Under S20 of MACMA Malaysia may refuse a request for assistance wherever: The appropriate authority of the foreign state has failed to comply with the mutual legal assistance treaty The request relates to the investigation, prosecution or punishment of a person for an offence that is an offence of a political nature; There are substantial grounds for believing that the request was made for the purpose of investigating, prosecuting, or otherwise causing prejudice to a person on account of the person s race, religion, sex, ethnic origin, nationality or political opinions; The request relates to the investigation, prosecution or punishment of a person in respect of an act or omission that, if it had occurred in Malaysia would not have constituted an offence against the laws of Malaysia; and The thing requested is of insufficient importance to the investigation or could reasonably be obtained by other means It is of note that the request has to be considered under the principle of dual criminality which may prevent assistance occurring. Malaysia is party to the Treaty on Mutual Legal Assistance in Criminal Matters signed by ten of the ASEAN member countries which facilitates co-operation in the region and also has MOUs with a range of countries on mutual assistance in criminal matters. In addition the Financial Intelligence Unit (FIUs) of countries share intelligence and information based on agreements and memoranda exchanged between them. Under the auspices of the Egmont Group of FIUs substantial and effective intelligence is exchanged in this way. 260 109. [2005] 5 CLJ 450 110. [2005] 6 CLJ 355
Module 11: Financial Intelligence, Investigation and Enforcement 9. International Perspective Most jurisdictions have a range of powers and orders that can be used to obtain information. Some examples include the following types of orders: 9.1 Production Orders Following receipt of SARs, law enforcement agencies undertake a variety of different steps, which can sometimes result in the instigation of investigations that require additional information to be obtained from either the reporting organisation or other organisations, both within and outside a particular jurisdiction. Where additional information is required from a reporting organisation, the MLRO should act as the principal point of contact in all communications between the organisation and law enforcement during the course of any investigations. The objective is to ensure that the MLRO controls the provision of additional information. The delegation to a particular individual of responsibility for compliance with production orders is also consistent with the recently developed practice, in some jurisdictions, 111 of serving Production Orders, not upon organisations, but upon individuals within them. This practice developed as a consequence of the apparent refusal by individuals within organisations to take ownership of the responsibility to comply with Production Orders, leading to inordinate delays. This tended to occur either because individuals felt that this was too much responsibility for their role or possibly that they would put themselves at risk of retribution from the criminals if it was found out that they had provided the information. The reason why MLROs must carefully ensure that information is disclosed properly is that disclosure of information by an organisation without the protection of an appropriate Production Order can lead to the organisation exposing itself to the risk of being sued for breach of client confidentiality. An important aspect of the role of an MLRO is to ensure that no excess information is disclosed unnecessarily. Production Orders are generally instruments issued by the courts, upon applications made by law enforcement, which have the effect of compelling the recipient person or organisation to produce information or material set out in the Production Order to individuals identified within the Order. Production Orders always oblige the recipient to comply within a set period of time, beyond which the recipient will be in danger of committing an offence or being in contempt of court. It is the MLRO s role to ensure the timescales are adhered to. Generally, law enforcement agencies are reasonable and, if an organisation keeps them advised of progress in collating information, dates can possibly be extended. In Singapore, for example, the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Chapter 65A)( CDSA ) allows for information to be obtained by way of, either the service of a production order or the execution of a warrant to search premises. There are two types of production orders under the CDSA: i) production order (Section 20); i.e., general production order that shall not apply to any material in the possession of a financial institution; ii) production orders against financial institution to produce material relating to drag trafficking or criminal conduct (Section 31), i.e., specific production order. In order to receive the production orders with respect to any material relevant to the enquiry and allegedly in possession of a financial institution, an authorized Officer, will have to submit an application either to a court, or to the High Court, depending on the type of production order required in the particular case. Singapore may provide mutual 111. For example, the UK and Jersey. 261
Advanced Certification in Anti Money Laundering and Counter Financing of Terrorism legal assistance in executing foreign production orders under the Mutual Assistance in Criminal Matters Act (Cap. 190A) (MACMA), which came into force on 1 April 2000. In Dubai Article 73 of the AML Law 2004 provides the DFSA with powers to require firms by written notice to: a. give, or procure the giving of, such specified information; or b. produce, or procure the production of, such specified documents; to the DFSA as the DFSA considers necessary or desirable to meet the objectives of the DFSA. 2. Under Article 73, the DFSA may also enter the premises of any [firm] during normal business hours or at any other time as may be agreed for the purpose of inspecting and copying information or documents stored in any form on such premises, as it considers necessary or desirable to meet the objectives of the DFSA. 112 In the UK, the Proceeds of Crime Act 2002 (PoCA) provides law enforcement with a variety of investigative orders to assist them, when the investigation being carried out relates to money laundering, confiscation or civil recovery. All requests for additional information should be backed by one of the following: Production Order Search and Seizure Warrants Customer Information Order Account Monitoring Order Restraint Order. Investigative orders are in many ways intrusive and the Secretary of State has provided a Code of Practice 113 setting out guidance for financial investigators as to how investigative powers should be exercised. The Act does not restrict the orders to UK investigations and they may therefore be granted to assist in investigations and proceedings in other jurisdictions. 114 The Human Rights Act 1998 also requires a judge who is granting an Investigation Order to be mindful that he must not act in a way that is incompatible with a person s rights guaranteed by the European Convention on Human Rights. In particular, Article 8 of the Convention about the right to a private life must be taken into consideration. Whenever a nominated officer/mlro is served with any form of order he is generally well advised to consider seeking legal advice on how to respond. Many organisations have procedures in place requiring that this is done. Nevertheless, it is important that nominated officers/mlros are aware of all relevant issues and are kept fully informed throughout the course of an investigation and any subsequent prosecution and confiscation. There are a variety of different types of Production Order, although they do not all apply in every jurisdiction. Essentially, the effect of each Order is to compel the recipient organisation to disclose information or material pertaining to client relationships. The most innovative is the Account Monitoring Order. This is exactly what its name suggests and can last for up to 90 days. It is rare that a Production Order will name the specific material that a recipient is obliged to produce. Instead, Production Orders refer to particular types of material that pertain to particular aspects of particular relationships. The following is an example of wording that may be contained in a Production Order: 262 112. DFSA Rulebook. 113. The Proceeds of Crime Act (Investigations in England, Wales and Northern Ireland: Code of Practice) Order 2003. 114. R v Southwark Crown Court, ex p Customer and Excise Commissioners [1990] 1 QB 650, [1989] 3 All ER 673.
Module 11: Financial Intelligence, Investigation and Enforcement You are required to produce within 21 days true copies of certain documents covering the period 20 June XXXX to 4 July XXXX and to provide an explanation of these documents if so required in respect of the account numbered 45789354267 in the name of Y Ltd and any other account in the name of Y Ltd which is in the custody, possession or power of your bank. The documents required are: all bank statements debit advice notes paying-in slips account opening and closing forms credit advice notices paid cheques (copied back and front) records showing account signatories, and all correspondence and notes of telephone conversations between the bank and individuals relating to Y Ltd. The Order allows the recipient organisation, and its MLRO, a degree of interpretation as to which material falls within its scope. This discretion must not be abused. The penalties for non-disclosure (or even worse, for destroying, falsifying or concealing) incriminating material are severe and provide a further justification for the secure retention of documents. The MLRO must be certain when exercising discretion that he does not respond to a Production Order by disclosing information that falls outside the scope of the Order. It is common for busy MLROs to wrongly assume that a Production Order provides them with a green light to open a channel of communication with the authorities through which information can flow freely. Where additional information beyond the scope of an initial Production Order is required, the MLRO may rightfully insist upon being served with an additional Production Order, which covers the information sought. When a Production Order is served, the MLRO should create a separate Production Order document file containing copies of all the documents to be disclosed in connection with it. This file should be kept securely by the MLRO and not returned to the business unit. This will avoid the risk of disclosure of original documentation in circumstances where it is not specifically requested within the Order. In creating the separate file, the MLRO must ensure that any correspondence pertaining to or referring to the organisation s suspicion or STR to law enforcement is excluded. There have been situations in which such material has been wrongly disclosed to the authorities, who have then, under the rules of discovery, unwittingly disclosed the documentation to lawyers acting on behalf of suspected clients, so revealing to the clients the fact that investigations have been initiated following STRs by service providers. Thankfully such occurrences are extremely rare; however, it is the MLRO s job to be aware of the risks so that they can be avoided. In anticipation of the service of a Production Order by law enforcement, the MLRO will avoid unnecessary delay for all parties concerned by ensuring that law enforcement is aware of the correct legal name of the individual and the organisation upon which the Production Order is to be served and the address to which the Order should be sent. This is particularly important for larger multi-site organisations with various branches, as unnecessary time can be wasted if an Order is misdirected. This will avoid the need for law enforcement to obtain amended Production Orders. 263
Advanced Certification in Anti Money Laundering and Counter Financing of Terrorism 9.2 Legal Professional Privilege (LPP) Certain documents are subject to what is known as Legal Professional Privilege (LPP). The concept of LPP is based upon the public interest in allowing persons to consult with their lawyers in absolute confidence, secure in the knowledge that the information or advice that they are given by their lawyers is protected. In effect, LPP is a confidentiality assurance mechanism. It extends to any information exchanged or created in the provision and receipt of legal advice or in contemplation of legal proceedings. For a document to be protected by LPP it must substantively fall into the category of a document that can attract such protection. In other words the protection is not extended to documents that simply have privileged or without prejudice stamped across them. The privilege applies to the provision of both in-house and external legal advice. As far as in-house advice is concerned, privilege may only be claimed in relation to documents pertaining to the provision of legal advice and not some other form of advice, for example on what strategy management should adopt in dealing with a particular issue. As a general rule LPP allows businesses to refuse to produce or share documents that are protected, even where they are requested. Laws generally explicitly state that documents subject to LPP are not required to be produced. MLROs should be aware of the fact that including matters which are not covered by LPP within correspondence, which does contain matters subject to LPP could remove the protection against disclosure. Consideration should be given to maintaining separate files for correspondence and documentation subject to LPP. 9.3 Fraud and International Cooperation notices You should be aware of these two types of notice because the chances are that as MLRO you will encounter one or other during the course of your career. The fraud notice is based on the notices that the Serious Fraud Office in England can issue under the Criminal Justice Act 1987. Many jurisdictions have similar legislation. 115 In summary, if the relevant law enforcement official (often the Attorney General) is conducting an investigation into serious and complex fraud he or she can issue a notice (without going to court) requiring any person either to produce documents or attend interview (or both). It is a criminal offence not to comply with these notices. If interviewed under such a notice, it is a criminal offence not to answer questions or to give misleading answers. However, in most (but not all) circumstances the answers given in such an interview cannot be used against the interviewee in a criminal trial (unless, of course, the charge is giving misleading answers in the interview) as the normal protections afforded to individuals not to answer questions has been removed. The International Cooperation notices 116 are often issued by the same person as fraud notices and are used to help foreign criminal investigations. A foreign government or court can request that another government provide evidence on particular matters. If the receiving government decides to assist, the usual way in many of the jurisdictions we have looked at is for the Attorney General to issue a notice and (for our purposes) the financial institution then has to go to a nominated domestic court to provide the documents or other information. The Attorney General will then send the information to the overseas government or court. In essence, the difference between fraud notices and 264 115. For example, Investigation of Fraud (Jersey) Law 1991 (as amended); Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law 1991 (as amended); and Proceeds of Crime Act 2008 (Isle of Man). 116. Criminal Justice (International Co-operation) (Jersey) Law 2001; Criminal Justice (International Co-operation) (Bailiwick of Guernsey) Law 2001 (as amended); Proceeds of Crime Act 2008 (Part 7) (Isle of Man). See also the Crime (International Cooperation) Act 2003 (UK); Bahamas: Criminal Justice (International Co-operation) Act 2000, Criminal Justice, International Co-operation Regulations 2000; Bermuda: Criminal Justice (International Co-operation) (Bermuda) Act 1994: Hong Kong Mutual Legal Assistance in Criminal Matters Ordinance (Cap 525); Singapore: Mutual Assistance in Criminal Matters Act (Cap. 190A), 2000 and the Singapore Enforcement of Foreign Confiscation Orders 2000; UAE: Federal Law 39/2006, known as the judicial cooperation law, governs mutual assistance in the UAE.
Module 11: Financial Intelligence, Investigation and Enforcement International Cooperation notices is that the latter relate solely to government or court requests and are conducted at the governmental or judicial level whereas fraud notices can be used either in domestic or international investigations. 9.4 Restraint Orders Restraint Orders are also instruments of the courts issued upon the application of law enforcement. They are designed to restrain the dissipation or handling of property that is the subject of an investigation, pending its outcome. The circumstances in which Restraint Orders (or whatever the local name for them is (in Jersey they are called Saisie Judiciaries)) can be made vary to some extent from jurisdiction to jurisdiction. In Jersey they can be made where proceedings have been or are to be initiated. 117 In the UK PoCA is much broader and extends the power of the courts to issue Restraint Orders earlier in the investigation stage. As with Production Orders, MLROs must carefully analyse the extent and nature of the property restrained. A common mistake is for MLROs to assume that a Restraint Order automatically restrains all the property within an arrangement. This may not be the case. One of the more common issues faced in dealing with Restraint Orders is that the property subject to restraint is often a live, active structure which requires management, including the on-going provision of trustees and directors. In such circumstances, it will be necessary for the MLRO, in conjunction with senior management, to enter into a dialogue with the authorities in order to establish a mutually agreeable mechanism for managing the property. In some circumstances it may be necessary to apply to the court for directions. Whatever the extent of the Restraint Order, the MLRO must be able to ensure that relevant action is taken to secure the restrained assets, despite pressure that may be applied by the suspected client and his advisers. You should also be aware that Restraint Orders can also be made to support overseas proceedings. 118 9.5 Confiscation Orders Upon the conviction of a defendant, the courts of many jurisdictions have the power (usually contained within primary AML statutes) to order the confiscation of the benefit of the criminal activity for which the defendant was prosecuted. In most jurisdictions separate assessments are made as to the benefit of the criminal activity and the realisable assets available for satisfaction of the confiscation order based on that benefit amount. As we saw in Module 2, one of the primary aims of national AML legislation is to take the profit out of crime. Confiscation Orders therefore represent the pinnacle of most national AML frameworks. In effect, Confiscation Orders are an additional form of punishment that usually accompany a court s sentencing of a defendant. Whereas the standard of proof that applies in the determination of the defendant s guilt is the criminal standard (i.e. beyond reasonable doubt), the standard of proof that is 117. Article 15 Proceeds of Crime (Jersey) Law 1999; Proceeds of Crime Act 2008 (Isle of Man) and Article 25 of Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999 (as amended). 118. Part II Proceeds of Crime (Jersey) Law 1999, Proceeds of Crime (Enforcement of Confiscation Orders) (Jersey) Regulations 2008; Part 1 Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) (Enforcement of Overseas Confiscation Orders) Ordinance 1999 and the 2002 amending Ordinance; Proceeds of Crime Act 2008 (Isle of Man); Proceeds of Criminal Conduct Law 2007 Revision (Cayman Islands); Proceeds of Crime (Designated Countries and Territories) Order 1998 (Bermuda); and s.50 Proceeds of Crime Act 2000 and Proceeds of Crime (Designated Countries and Territories) Regulations 2001 (Bahamas); Federal Law 39/2006, known as the judicial cooperation law, governs mutual assistance (UAE): Russia Code of Criminal Procedure (CCP) and Federal Law on Combating Legalisation (Laundering) of Criminally Gained Income and Financing of Terrorism No. 115, 2001 (as amended). 265
Advanced Certification in Anti Money Laundering and Counter Financing of Terrorism usually applied by the courts in determining whether a defendant s property resulted from crime is the civil standard (i.e. on the balance of probabilities). Whenever an MLRO is served with any form of order he is generally well advised to consider seeking legal advice on how to respond. Many organisations have procedures in place requiring that this is done. Nevertheless, it is important that MLROs are aware of all relevant issues and are kept fully informed throughout the course of an investigation and any subsequent prosecution and confiscation. 9.6 Civil asset recovery In recent years there has been a growing trend towards passing legislation aimed at removing assets from criminals without the need for the person to be convicted. The trend began in Ireland with the Proceeds of Crime Act 1996 and has begun to spread. The UK now has this kind of legislation in the PoCA, but few other jurisdictions do at present, although Jersey introduced, in December 2007, the Civil Asset Recovery (International Co-Operation) (Jersey) Law 2007. Put simply, this legislation allows the government to bring a civil case against an individual in order to confiscate the proceeds of crime. All the government has to do is prove to the lower, civil, standard of proof (the balance of probabilities), that the assets are the proceeds of crime. It can do this even if the individual has been acquitted of the relevant offence (i.e. the government cannot prove it beyond reasonable doubt). One of the key reasons for the pressure to introduce civil asset recovery regimes has been the inability of governments who have been the victim of wholesale theft by kleptocratic rulers to recover assets based on a criminal burden of proof. In such cases, it is common for the individual (or groups of individuals) concerned to have either, died, fled the country or been too powerful to prosecute. In short, a criminal conviction has not been possible and it has not been possible to recover the stolen funds. This type of legislation could have far-reaching effects and pressure will be placed on countries to have it. Recommendation 3 of the Financial Task Force (FATF) revised 40 Recommendations states that countries may consider adopting such measures. The United Nations Office on Drugs and Crime, in partnership with The World Bank launched an initiative in September 2007 called StAR (Stolen Assets Recovery) initiative. As part of StAR a Guide to Non Conviction Based (NCB) Asset Forfeiture was published in 2009. The guide was developed with the input of experts from all over the world, representing both common law and civil law systems. It is designed to serve as a practical tool to help states recover stolen assets and provides 36 key legal, operational and practical concepts for an NCB asset forfeiture system. The experiences of specific states are detailed and sample documents such as court forms are also provided. The guide reflects the growing trend towards NCB asset forfeiture systems and underscores the commitment made by states in 2005 under the United Nations Convention Against Corruption to, among other things, combat corruption and promote international cooperation in asset recovery. In February 2011 the G20 published their Agenda for Action on Combating Corruption, Promoting Market Integrity, and Supporting a Clean Business Environment. They resolved to strengthen international co-operation and asset recovery in the fight against corruption. 266
Module 11: Financial Intelligence, Investigation and Enforcement Tasks 1. Go to the website of the BNM FIU and research the structure, powers, responsibilities and relationships of the Unit. 2. Access the FINS STR submission process and complete a mock form based on an imaginary set of circumstances. 3. Identify the countries with whom the BNM FIU has entered into Memoranda of Understanding relating to the sharing of intelligence information. 4. Draft a chart comparing the orders/procedures that are used in Malaysia and internationally. 267
Advanced Certification in Anti Money Laundering and Counter Financing of Terrorism Self-assessment questions 1. What is the FINS on-line submission system? 2. List three Enforcement Agencies 3. List five jurisdictions that have entered into MOUs with Malaysia relating to the exchange of intelligence information 4. List three divisions of the Royal Malaysian Police that have anti money laundering units. 5. What is an agent provocateur? 6. When might a suspect in a money laundering case be required to give a declaration of assets? 7. Who might be appointed an investigating officer in a money laundering investigation? 8. What are the main powers of an investigating officer? 9. Define the offence of tipping off. 10. What is the maximum duration of a freezing order? 11. List three types of orders the court can issue to recover illicit assets. 12. What is meant by Legal Professional Privilege? 268
Module 11: Financial Intelligence, Investigation and Enforcement Module outcomes By the end of the module you should: be able to explain the role of the BNM FIU be familiar with the Malaysian investigation agencies understand how an investigation officer conducts an investigation in a money laundering case understand the range of orders and mechanisms that can be used to recover illicit assets be aware of international mechanisms for the recovery of illicit assets 269