presentation by : commissioner police dato’ mohamad … · presentation by : commissioner police...

SPECIAL TASK FORCE ROYAL MALAYSIA POLICE

INFORMAL FUND TRANSFER

SYSTEMS (HAWALA)

PRESENTATION BY :

COMMISSIONER POLICE

DATO’ MOHAMAD FUZI B. HARUN

DIRECTOR , SPECIAL TASK FORCE

(OPERATION AND COUNTER TERRORISM)

ROYAL MALAYSIA POLICE

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SCOPE

What Are Hawala System And How it operates

Sample of Hawala

Why People Use Hawala

Are Hawala Defying The Anti Money Laundering/Counter Terrorist

Finance (AML/CTF) Regulations

Malaysia’s Experience

How Deep is The Problem

Should There Be A Regulatory Framework For Hawala

Moving Forward

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WHAT are hawala system and how it operates ?

An alternative remittance channel that exists outside traditional

banking systems.

One definition from Interpol is that hawala is “money transfer

without money movement”. Remittance via a network of hawala

brokers (hawaladers).

Transactions between hawaladers are done without promissory

notes (monetary value) because the system is heavily based on

trust.

The unique feature of the system is that no promissory instruments

are exchanged between the hawaladers.

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WHAT are hawala system and how it operates ?

The transaction takes place entirely base on trust and honour

system.

System does not depend on the legal enforceability of claims and

operate even in the absence of a legal and juridical environment.

Informal records are produced of individual transactions, and a

running tally amount owed by one broker to another is kept.

Settlements of debts between hawaladers can take a variety of

forms and need not take the form of direct cash transactions, any

kinds of property (gold), instruments (banking product) and

electronic transfer (internet banking).

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HAWALADERS IN MALAYSIA

HAWALADERS IN INDONESIA

ILLEGAL WORKER IN MALAYSIA

FAMILY IN INDONESIA

1. CASH GIVEN 7. CASH

GIVEN

2.Call/Fax/Email

3.Remittance Code

4. Remittance

Code

6. Remittance

Code

5. Remittance Code

Sample of Hawala


Why PEOPLE use hawala ?

Paperless & Convenient

- No need to fill in standard remittance application form required by

the normal Financial Institutions.

- Thus this can facilitate illegal workers/foreigners, criminals

or even terrorist to be able to send their money abroad.

Without their identification and avoid detection by the authorities.

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Why PEOPLE use hawala ?

Fast & efficient.

- In typical hawala system, as contrast to certain normal mainstream

remittance facility, the duration for the flow of fund from remitting

customer in Malaysia to beneficiary abroad range from minimum

few hours to maximum duration of 1 to 2 days.

- Thus it can compete with the normal remittance facility offered by

the banks or remittance service provider.

Cheaper.

- To some illegal foreign workers this medium is the cheapest medium

compared to normal mainstream remittance charges.

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Are hawala system DEFYING the AML/CTF Regulations ?

Yes;

Paperless

- In another word there is no requirement to fill in the standard

remittance application form as normally required by the normal

Financial Institution

Thus this can facilitate criminal, illegal workers/foreigners or even

terrorist to be able to send their money abroad without the need to

provide their identification and avoid detection by the authorities.

Since it paperless, No Customer Due Diligence (CDD) or Know Your

Customer (KYC) conducted as per requirement by AMLATFA 2001 or

the Sectoral Guideline on the Money Changers.

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Are hawala system DEFYING the AML/CTF Regulations ?

Audit Trails

- There is no audit trails to tie up the flow of funds with the remitting

customer or even the beneficiary (abroad). This is the great avenue

for the criminal or even terrorist financiers.

This can amplify the massive flow of illegal fund or money-

laundering proceeds or terrorism funds from one country to another

without being caught under the radar of the authorities .

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MALAYSIA’s Experience

Cash Courier

- Abu Sayyaf Group (Financial Support)

Internet Banking ( Infak)

- Agus Salim

Money Changer

- Bank Negara ( Ops Cuci)

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How DEEP is the problem ?

Under Control

Most of the domestic foreign workers or illegal immigrants use this

channel to send money back to their home country or anywhere.

Majority of criminals resorted to this channel to move their fund

abroad (Forex, Money Changer, Cash Courier, Malaysian Gambler,

Illegal Money Lender, Junket)

Cases reported by the investigation on money-changers from the

Special Task Force .

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LAWS OF MALAYSIA Act 577

Money-Changing Act 1998

Measure to deal with hawala

As incorporated in Section 30(1) of Money Changing Act 1998.

(i.e. before the coming of new Act: Money Service Business Bills 2011 )

No remittance or transfer

of funds 30. (1) no licensee, in Malaysia, shall –

a) Remit or transfer funds outside Malaysia; or

b) Do any act that involves, is associated with, or is preparatory to,

remitting or transferring funds outside Malaysia, whether on its

own behalf or on behalf of a third party.

(2) Any licensee who contravenes subsection (1) shall be guilty of

an offence and shall on conviction be liable to a fine not

exceeding one hundred thousand ringgit.

(3) Notwithstanding subsection (1), a licensee, on its own behalf,

may remit or transfer funds outside Malaysia through an

authorised dealer.

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Should there be a regulatory framework for hawala ?

Yes. Latest initiatives is the passing of the following law:-

MONEY SERVICES BUSINESS BILL 2011

This Bill (“the proposed Act”) seeks to govern the activities of money-changing

business, remittance business and wholesale currency business, which is being

modernised and consolidated into a single industry known as the “money

services business” industry. The proposed Act covers the licensing, regulation

and supervision of licensees and their agent to ensure that the industry shall

comprise of dynamic, competent and professional players. Apart from seeking to

impose governance, operational and control requirements for the sound conduct

of their business, the proposed Act also seeks to strengthen the prudential and

supervisory framework in the money services business industry to curb illegal

activities, money laundering and terrorism financial. This is pertinent for the

maintenance of the integrity of the Malaysian financial system.

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NOW: What is REMITTANCE – in light of Section 2 of the newly

passed Money Service Business Bills 2011

“Remittance Business” means the business of transferring funds or

facilitating the transfer of funds, whether in any form or by any means

or whether there is any movement of funds or not, on behalf of an

originator person in or outside Malaysia, with a view to making the

funds available to a beneficiary person in or outside Malaysia and the

originator person and the beneficiary person may be the same person,

but excludes such other businesses, activities, system or arrangements

as the Bank may prescribe;

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Prohibition from carrying on money services business

4. (1) No person shall carry on money services business without a

licence issued under this Act.

(2) Subsection (1) shall not apply to a money services business

agent.

(3) The Bank may prescribe different classes, categories or

description of licence in respect of money services business.

(4) Any person who contravenes subsection (1) commits an offence

and shall, on conviction, be liable to a fine not exceeding five

million ringgit or to imprisonment for a term not exceeding ten

years or to both.

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Moving Forward

How Royal Malaysia Police can assist ?

RMP to combat hawala via the intelligence/networking by the

other law enforcement agency (LEA).

- RMP cannot work silos.

- Domestic/foreign counterpart.

Joint investigation

- Especially when hawala involved flow of fund from predicate

offences under the RMP’s jurisdiction (i.e. drug money, ransom

from kidnapping or extortion, human trafficking activity, terrorist

financing etc.) and also related to BNM’s licensee (i.e. Money

Changers ) .

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Moving Forward

Exchange of information between RMP and other LEA from time to

time on the flow of fund involving hawala technique.

Ongoing collaboration between RMP and other LEA in information to

monitor the latest modus operandi for hawala in Malaysia.

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THANK YOU

Q & A SESSION

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presentation by : commissioner police dato’ mohamad … · presentation by : commissioner police...

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