by Nur Rafiuddin Maswari
Published March 15, 2019
Proceeds from unlawful activities - such as from gratification/corruption, drug trafficking and the like - cannot be viably used or banked until those proceeds are integrated back into the economy.
Money laundering then is the process of ‘cleaning’ that dirty money, mainly by disguising the illegal origins of those proceeds.
Thus, and for obvious reasons, money laundering is illegal in many jurisdictions around the world, including Malaysia.
Here, it is regulated by the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613) ( “AMLATFPUAA” ).
Section 4 (1) of that statute defines the offence of money laundering, among others, as:
… an act which any person engages, directly or indirectly, in a transaction that involves proceeds of an unlawful activity or instrumentalities of an offence …
Money laundering has become increasingly sophisticated, given the risks involved. In Malaysia, the many recent scandals, both appalling and unprecedented, show that money launderers have resorted to a myriad of intricate techniques to falsify financial records and conceal questionable activities.
Traditionally, it is the financial industry that is most susceptible to money launderers. Alarmingly however, it has also been reported that lawyers in Malaysia have become their conduits, whether wilfully or otherwise.
It is likely that the ongoing strengthening of regulatory frameworks have caused money launderers to shift to other professional industries, including the legal profession, to carry out their work.
Further, this change in paradigm may be due to the nature of services offered by lawyers to clients, and the specialised skills that lawyers possess which help them prepare or carry out certain money laundering transactions more efficiently. (A simple example: the setting up and management of companies, which are vessels often used to launder money.)
For this reason, the law treats lawyers as ‘reporting institutions’ when it comes to combating money laundering.
Section 3 (1) of the AMLATFPUAA, read together with the First Schedule of the same Act, defines ‘reporting institution’ (“RI”) widely.
This definition includes the legal profession:
… “reporting institution” means any person, including branches and subsidiaries outside Malaysia of that person, who carries on any activity listed in the First Schedule …
… 10. Activities carried out by an advocate and solicitor as defined in the Legal Profession Act 1976 [Act 166].
11. Activities carried out by a person admitted as an advocate pursuant to the Advocate Ordinance Sabah 1953 [Sabah Cap. 2].
12. Activities carried out by a person admitted as an advocate pursuant to the Advocate Ordinance Sarawak 1953 [Sarawak Cap. 110].
The law obliges lawyers to conduct due diligence. It is they who must verify the legitimacy or authenticity of transactions and/or the source of proceeds.
For instance, Part IV of the AMLATFPUAA obliges lawyers to keep records of their transactions (Section 13) and to report suspicious transactions to the relevant authorities, whether or not these transactions have been carried out (Section 14).
A lawyer’s ‘wilful blindness’ may amount to criminal intent. It is noteworthy that Section 4 (2) imputes mens rea (or criminal intent) on lawyers who fail, either wilfully or negligently, to take reasonable precaution to ascertain the lawfulness of transactions or their proceeds.
To that effect, the Court of Appeal in Azmi bin Osman v Public Prosecutor and another appeal  3 MLJ 98 has also stated:
… The doctrine of wilful blindness imputes knowledge to an accused person who has his suspicion aroused to the point where he sees the need to inquire further, but he deliberately chooses not to make those inquiries. Professor Glanville Williams has succinctly described such a situation as follows: ‘He suspected the fact; he realised its probability; but he refrained from obtaining the final confirmation because he wanted in the event to be able to deny knowledge. This, and this alone is wilful blindness’ (Glanville Williams, Criminal Law (2nd Ed, 1961) at p 157). Indeed, in the context of anti-money laundering regime, feigning blindness, deliberate ignorance or wilful ignorance is no longer bliss. It is no longer a viable option. It manifests criminal intent.
Where a client’s background, financial income or nature of business becomes suspect enough to give rise to reasonable suspicion, lawyers are obliged by law to report the fact.
This sort of reporting obligation appears to impair upon solicitor-client privilege between lawyers and their client. Which, effectively, is the case. Section 20 of the AMLATFPUAA in fact negates confidentiality privileges:
Secrecy obligations overridden
*20. The provisions of this Part shall have effect notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed by any written law or otherwise.
Therefore, to safeguard lawyers (as reporting institutions), Section 24 of the AMLATFPUAA exonerates them from civil, criminal or disciplinary proceedings for disclosures made in discharge of their reporting obligations, unless such disclosure was done in bad faith.
All this makes sense. The legal profession must be made impervious to abuse, especially from money launderers.