Malaysia’s central bank, Bank Negara Malaysia (BNM), will designate persons converting cryptocurrencies into fiat money as reporting institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 from 2018.
BNM governor Muhammad Ibrahim said the move was aimed at preventing the abuse of the system for criminal and unlawful activities and ensuring the stability and integrity of financial system.
“We need to prepare ourselves, as according to many pundits, digital currencies will become the new norm,” he said in his welcoming remarks at the Third Counter-Terrorism Financing Summit 2017 in Kuala Lumpur on Wednesday (Nov 22).
“The advent of digital currencies as some have forecast, will mark the beginning of a new era in the financial sector. As authorities, we cannot be oblivious to these developments.”
Muhammad said the adoption of artificial intelligence, machine learning and big data technology were tools that would likely be imperative, as suspicious transaction become more complex and harder to detect.
“As we learned from the Innovation Forum at this Summit, the use of artificial intelligence and big data will have the potential to increase efficiency and accuracy of assessments that is essential in a dynamic environment,” said Muhammad.
Muhammad said that greater access to intelligence information for financial institutions and rising threat from the Islamic State had resulted in the upward trend of reporting of Suspicious Transaction Reports (STRs).
Between January and June this year, he said the Financial Intelligent Unit (FIU) received 346 terrorism financing-related STRs, which have led to 34 disclosures to law enforcement agencies, compared with 93 terrorism financing-related STRs with 14 disclosures in 2015.
The BNM governor said that the central bank is also in the midst of finalising the details of a new requirement for the Banking and Money Services Business sector to report in high-risk areas.
This, he said, was consistent with the Terrorism Financing Regional Risk Assessment findings at the second CTF Summit in Bali in 2016, where one of the priority actions identified was for FIUs to improve the visibility and insight into the nature of terrorism financing in the region.
Muhammad said the idea was intended to help FIUs gain better insights into the role of financial and transit hubs in regional and international terrorism financing network.
“There is no doubt that rapid technological developments have offered immense potential for economic growth,” he said. “Unfortunately, they have also spawned new ways for terrorist organisations to acquire, move and manage their funds.
The increase in the number of small terrorist cells, and lone wolf actors radicalised remotely over the internet also makes detecting and halting terrorism financing even more challenging, the governor said.
“In light of this development, the role of financial sector as a bulwark against terrorist financing become even more critical. The financial system must always be in a state of readiness to identify and effectively prevent any emerging risk of terrorism financing.”
Earlier, deputy prime minister Ahmad Zahid Hamidi revealed that over RM1 million (US$242,600) in terrorism-related funds have been frozen so far.
“If you kill one terrorist, another terrorist will be born, but if you cut off the funds, other economic resources, you can put an end to (the) entire operation,” he said.
20 ARRESTED FOR TERROR FINANCING
On the sidelines of the summit, Malaysia’s head of counter terrorism said that 20 Malaysians have been arrested since last year for their involvement in terrorist financing.
Ayob Khan Mydin Pitchay said most have been charged in court under terror offences.
“The amount collected from each donor was usually small, ranging from US$20 to US$200, but the volume was huge,” he said.
Mr Ayob also revealed the emergence of a “wolf pack” approach where a group of five to six people operate in isolation without any links to other terror cells. This is so that their activities would be hard to detect without good intelligence, he explained.
A 19-year-old boy, who was a member of a wolf pack, was arrested in October for planning an attack on a beer festival in Kuala Lumpur.
“He’s a smart boy. From the Internet, he could learn how make bombs; his drawings were detailed and meticulous,” Mr Ayob said.
The student was allowed to sit for his pre-university exams last week pending trial, he added.
The summit, jointly organised by Australian and Indonesian financial intelligence units, is the third to be held in Asia since 2015.
About 350 participants from 35 countries are taking part in the four-day forum.
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