Financial Crime

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Financial crisis is a situation where the value of financial institutions or assets drops rapidly.  It’s a result of institutions or assets being overvalued and intensified by the investor’s misbehaviour.  The 2007-2008 financial crises are the world’s major economy crisis since the Great Depression of the 1930s.  The crisis began in 2007 when the sky-high home prices in the United States (US) turned critically downward and it spread in light speed which first to the entire US financial sector and then to the financial markets overseas.

On the other hand, the global financial crisis disclosed significant financial fraud and financial misconduct that have been hidden in the market.  “You only find out who is swimming naked when the tide goes out” has been used to describe the phenomenon of the financial market.  It is one of the key variables that contributed to the 2007 financial crisis.  Financial crimes are one of the most difficult crimes to deal with as it has many flaws and is normally committed by someone that has power over the society as Sutherland defines it as a “crime committed by a person of respectability and high social status in the course of his occupation.” Moreover, the definition by Benson and Simpson mentions, “criminal behaviour by members of the privileged socioeconomic class as white collar crime”. It is noteworthy that financial crime has been concluded by many commentators that it has either triggered the financial crisis or was a significant contributory factor.

In Malaysia, financial crime is referred to the case of the cloning of four cheques, automatic teller machine and credit card fraud, “fly by night” scams, and internet frauds such as spoofing, love scams, parcel scams, email hacking and especially money laundering. Money is the main cause for people to engage in almost any type of criminal activity, and financial crime continues to increase throughout the years.

Investigations on money laundering are always difficult because as mentioned before, financial crime is often committed by a person who has high social status and fraudsters are often several steps ahead. For financial institutions, the first line of defense is the employees as they need to spot the suspicious activity and raise the red flag. The red flag activity should be lodged with the regulators for further investigations. This is one of the ways to track down a money laundering trail. In Malaysia, the Anti-Money Laundering and Anti-Terrorism Financing Act (Act 613) came into force in 2001. Among the several high-profile money laundering cases globally is the 1Malaysia Development Bhd (1MDB) scandal that came to light in 2015 where the money trail spread across several countries including Singapore and the US.

In year 2019, the National Anti-Financial Crime Centre (NAFCC) was formed and headed by Former Immigration Department Director-General Datuk Seri Mustafar Ali. NAFCC was set up by the newly-minted government to tackle money laundering activities and work closely with other law enforcement agencies and government bodies with joint raids and information sharing.

NAFCC mainly focus on high-profile and big cases and financial crimes committed on a grand scale by co-ordinating enforcement between government agencies and analysing big data. The big data is a central intelligence database which will compile existing data extracted from different agencies such as land ownership and vehicle matters from the land registry and the Road Transport Department, as well as financial information from the banking industry. By analysing the big data, NAFCC could identify the flow and illegal outflow of money, and to identify the modus operandi and perpetrators of financial crime.

The Malaysian Anti-Corruption Commission has announced that a special taskforce will be formed to recover assets related to 1MDB abroad, and the special taskforce will be led by the NAFCC. The team will conduct extensive investigations, legal matters and cooperation with foreign authorities in order to effectively combat the corrupt and incompetent official.

As at June 2019, the government has recovered assets related to 1MDB worth RM919mil.