B. KEY AMENDMENTS IN THE AMENDMENT ACT

1. Expanded Scope of the Principal Act

The Principal Act now bears an extended name reflecting its broadened purpose: “Anti-Money Laundering, Anti-Terrorism Financing, Anti-Restricted Activity Financing and Proceeds of Unlawful Activities Act.”

The revised long title explicitly incorporates restricted activity financing, namely the proliferation of WMDs, introducing a significant pivot from traditional AML/CTF law to address national and global security concerns.

2. New Scope & Terminologies

A central feature of the Amendment Act is the introduction of several key new definitions that significantly broaden the scope of the principal Act. One of the most significant additions is the definition of “restricted activity,” which mirrors the language found in the country’s Strategic Trade Act 2010. The term encompasses:

• (a) any activity that supports the development, production, handling, usage, maintenance, storage, inventory, or proliferation of weapons of mass destruction (WMDs) and their delivery systems; or

• (b) participation in transactions with individuals or entities engaged in such activities.

This definition sets the foundation for other critical terms introduced in the Amendment Act.

The concept of “proliferator property” is another substantial addition. It refers broadly to assets and resources linked to restricted activities. This includes:

• (a) the proceeds from the commission of any restricted activity;

• (b) property that has been, is being, or is likely to be used by a proliferator to commit any restricted activity;

• (c) property owned or controlled by or on behalf of a proliferator to commit any restricted activity, including funds derived or generated from such property; or

• (d) property collected with the intent of supporting a proliferator or funding restricted activities.

Closely tied to this is the newly defined term “proliferator,” which includes any person who commits, attempts to commit, participates in, or facilitates the commission of a restricted activity. It also encompasses individuals who have been formally designated as prohibited end-users under subsection 8(2) of the Strategic Trade Act 2010.

The definition of “transaction” has also been revised. Under the Principal Act, a transaction was defined as an arrangement to open an account involving two or more persons and any related dealings between them. The updated definition captures a broader range of financial movements, especially those that may be undertaken through informal or digital channels, which now include:

• (a) any arrangement to open an account involving two or more persons and any transaction related to the account; and

• (b) the transmission, transfer, or exchange of funds or currency by any person.

These expanded definitions reflect a clear legislative intent to enhance the detection and prevention of financial flows associated with high-risk activities, particularly in relation to WMD proliferation. They also underscore the need for financial institutions and other reporting entities to adapt their compliance frameworks accordingly, as the legal net is cast more widely over persons, properties, and transactions potentially linked to national and global security threats.

3. New Offences and Sentencing Regime

a. Proliferation Financing Offence – Section 66H (from the new Part VIB)

The proliferation of WMDs continues to pose a serious and evolving threat to global peace and security in the 21st century, a concern that has been underscored by various United Nations Security Council Resolutions (UNSCRs). In response, the Financial Action Task Force (FATF) has called upon all countries, along with their Designated Non-Financial Businesses and Professions (DNFBPs) and Non-Bank Financial Institutions (NBFIs), collectively referred to as Reporting Institutions (RIs), to actively identify, assess, and address the risks of proliferation financing.

Bank Negara Malaysia has introduced various updates covering Anti-Money Laundering, Countering the Financing of Terrorism, and Counter-Proliferation Financing (AML/CFT/CPF), as well as Targeted Financial Sanctions (TFS), applicable to Financial Institutions (FIs), DNFBPs, and NBFIs operating in Malaysia.

Complementing these policy developments, the newly introduced Section 66H of the Principal Act sets out the new offence of financing restricted activity. The provision stipulates that any person who, whether directly or indirectly, provides or makes available financial services or property may be liable under this offence in two specific circumstances.

Firstly, liability arises where the person intends that the financial services or property be used, or knows or has reasonable grounds to believe that such financial services or property will be used, whether in whole or in part, for the purpose of committing or facilitating the commission of a restricted activity, or for the purpose of benefiting any person who is committing or facilitating the commission of such a restricted activity.

Secondly, a person is also deemed to have committed the offence if the person knows or has reasonable grounds to believe that the financial services or property, in whole or in part, will be used by or will benefit any proliferator.

The penalties are steep: a person found guilty of this offence shall, upon conviction, be punished with imprisonment up to 15 years and a fine of not less than 5 times the sum or value of the proceeds of proliferator property at the time the offence was committed or RM5 million, whichever is the higher.

b. Mandatory Sentencing

The amendment to Section 4(1) of the Principal Act introduces mandatory penalties combining imprisonment and substantial fines for money laundering offences under the Principal Act. This marks a significant shift from the previous regime, where courts retained discretionary sentencing powers. The change underscores the seriousness with which such offences are now regarded, enhancing the deterrent effect of the law and aligning with international expectations for robust financial crime enforcement frameworks.

4. Strengthened Compliance Measures & Extended Liability

a. Expanded Compliance Obligations

Under the provisions of the Principal Act, only reporting institutions were obligated to implement internal compliance programs. However, the Amendment Act has significantly expanded liability:

• Directors, officers, and employees of financial institutions can now be held personally accountable for compliance failures, facing liability not just for non-compliance but also for failing to adopt and implement internal programmes effectively.

• Non-cooperation with AML inspections now carries severe penalties, including fines of up to RM3 million and/or imprisonment up to five years.

• Stricter enforcement of customer due diligence (CDD) and record-keeping obligations for financial institutions.

• Enhanced oversight on politically exposed persons (PEPs) and transactions involving high-risk jurisdictions.

These reforms address growing concerns over regulatory evasion, particularly involving complex corporate structures, nominee directors/shareholders, and crypto-based transactions.

b. Record-Keeping and Customer Due Diligence (CDD)

Amendments to Sections 13–17 of the Principal Act further expand obligations around:

• Retention of records (now a minimum of six years from the date the account is closed or the business relationship, transaction or activity is completed or terminated, whichever is later);

• Centralization of customer and transaction data. This obligation is imposed on directors, officers and employees;

• Due diligence measures now explicitly extended to directors, officers or employees within reporting institutions.

5. Regulatory and Enforcement Powers

a. Delegation and Oversight (Section 7A)

The recent legislative change introduces greater flexibility and efficiency for supervisory and regulatory bodies in discharging their functions. A new Section 7A of the Principal Act permits the Minister of Finance, upon recommendation by the competent authority and in consultation with the Minister of Home Affairs, to appoint any person as a regulatory or supervisory authority.

Section 7A also allows such authorities to delegate their powers and functions to others, with appropriate oversight.

Previously, only the competent authority could authorise its officers or others to perform such roles.

b. Public Transparency (Section 83E)

Section 83E empowers authorities to publish information related to enforcement actions or their outcomes where deemed appropriate in the public interest. The Principal Act previously lacked such transparency provisions, limiting public awareness of anti-financial crime efforts.

c. Preventive Judicial Orders (Sections 83A–83D)

The revamped Section 48 substitutes the old Section 83, expanding the competent authority’s power to issue directives, guidelines, standards, and other instruments to reporting institutions and their personnel.

• Section 83A: Allows authorities to direct or agree with reporting institutions or entities under Part VIA and VIB to implement compliance action plans.

• Section 83B: Grants authority to take administrative action for contraventions of core provisions (Parts IV, VIA, and VIB), excluding certain subsections.

• Section 83C: Permits authorities to initiate civil proceedings for non-compliance regardless of criminal prosecution status.

• Section 83D: Introduces proactive judicial measures such as interim injunctive orders, barring directors or CEOs from office, without the usual requirement for undertaking damages. This improves the ability to preempt violations.

Non-compliance with these provisions may result in imprisonment and/or financial penalties under the amended Act.

d. Asset Seizures

Previously, seized assets could only be retained for up to 12 months. Section 33 of the Amendment Act now allows seizure periods up to 18 months and permits continuation if prosecution is initiated concerning the property, removing the previous requirement that prosecution be against the person.

Case Reference: Lim Hui Jin v CIMB Bank Bhd & Ors [2018] 6 MLJ 724

e. Freezing Orders

Amendments to Sections 24 and 25 update subsection 44(1) to include proliferator property, while Section 44A extends the basis for rejecting applications to vary or revoke freezing orders to include terrorism financing and restricted activity financing offences.

6. Final Commentary

The Amendment Act includes general amendments to broaden the scope of the Principal Act, including references to terrorism financing and restricted activity financing offences.

Section 34 amends Section 53 to allow for ex parte prohibition orders preventing dealings with property outside Malaysia. It also extends the order’s effective period from 12 to 18 months and, crucially, allows the order to remain valid based on prosecution of the property, not the person.

Forfeiture of Property Where There Is No Prosecution

A contentious issue remains Section 56 of the Principal Act, allowing for civil forfeiture without prosecution. Critics argue this may violate property rights under Article 13 of the Federal Constitution (FC).

• Teo Chee Kong v. Public Prosecutor [2021] 8 CLJ 29: Raised concerns over rights violations where assets were confiscated without charges.

• PP v Thong Kian Oon [2012] MLJU 637: Court upheld forfeiture provisions but emphasized strict adherence to legal safeguards due to the penal nature of the provisions.

The Amendment Act, rather than limiting such forfeiture provisions, extends the seizure period to 18 months, further strengthening enforcement at the potential cost of heightened constitutional scrutiny.