Opening a 2-day Anti-Money Laundering Act 2001 seminar in Kuala Lumpur yesterday, Minister in the Prime Minister's Department, Datuk Seri Dr Rais Yatim, said: "This is Malaysia's statutory testimony in its fight against corruption and matters linked with it, particularly money laundering. For bankers, in particular, this may be a far reaching statutory power and penalty, but so far the provision has not created the panicky attitude some quarters expected before the coming into force of the instrument."

The Anti-Money Laundering Act was passed by the Dewan Rakyat on May 10 and puts Malaysia's legislation against money laundering on par with international standards. One such standard involves the 40 recommendations spelt out by the Financial Action Task Force, a grouping set up within the OECD by the G7 countries in 1999 to combat money laundering.

The Act criminalises money laundering, imposes obligations for customer identification, record keeping and reporting of suspicious transactions by financial institutions. It also allows for the seizing, freezing and forfeiture of properties that are proceeds of money-laundering activities. Sanctions also include fines up to RM5 million fine or five year imprisonment, or both.

Section 20 of the Act states that the provisions "shall have effect notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed by any written law or otherwise". Thus, the authorities are empowered to look into what are deemed to be illegimate transactions.

Reporting institutions are divided into bank and non-bank financial institutions. The former includes banks, merchant banks, Islamic banks and Labuan offshore banks. The non-bank financial institutions include finance companies, discount houses, money brokers, insurers, Takaful companies, securities dealers, money changers and future brokers.

Bankers say that implementing the Act will require an interesting balacing act between the need for supervision and the privacy of bank customers. "Usually, money laundering and banking secrecy are two ends of a stick. Pick one up, the other is also affected," said one banker.

Bankers in Labuan, Malaysia's offshore financial centre, hope that the Act won't damage their thriving business. The 60-odd offshore banks and other institutions operating out of the Labuan International Offshore Financial Centre put up a strong performance in 2000, doubling their collective pre-tax profit to US$118.8 million (US$1 = RM3.80).