Challenges to Anti-Money Laundering Legislation and Burden of Proof for Money Laundering Offences under The Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001

Challenges to Anti-Money Laundering Legislation and Burden of Proof for Money Laundering Offences under The Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001

Introduction

The Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001[1] (“Act”) is Malaysia’s main law for fighting money laundering, terrorism financing, and handling illegal proceeds. It gives law enforcement and the public prosecutor powers to freeze, seize, and forfeit any property linked to these labyrinths of illegal transactions.[2] The Act helps disrupt illegal financial activities and recover unlawful funds by targeting both the mastermind and their assets. It also ensures that Malaysia meets international standards in preventing money laundering, terrorism financing, and the use of proceeds from unlawful activities.

Despite its crucial purpose, the Act has been subject to numerous challenges concerning its constitutional compatibility, particularly with respect to property rights, the right to remain silent, extra-territorial application, and retrospective enforcement. In this article, we will discuss some of the major legal and operational challenges faced in enforcing the Act.

Challenges to the Act

1. Rights to Property under Article 13 of FC

One of the primary challenges posed by the Act is its potential infringement on property rights, which are safeguarded under Article 13 of the Federal Constitution (“FC”). Under section 55 of the Act, it provides for criminal forfeiture and section 56 provides for civil forfeiture where there is no prosecution involved. In the notable Sarawak water scandal case, Teo Chee Kong v. Public Prosecutor,[3] the appellant’s rights were allegedly violated as his assets were frozen and confiscated without first being charged. The defence argued that the Act’s provisions being section 55 and 56 contradicted among others, Articles 5, 7, 8, and 13 of the FC, claiming that the confiscation of property under the Act deprived individuals of their right to property without proper legal safeguards.

This poses a constitutional challenge, as the government’s power to seize or freeze assets based on suspicions of money laundering might infringe on personal property rights. It is often argued that the Act allows authorities to act pre-emptively by freezing assets during investigations without adequate legal protection for property owners. This creates a tension between safeguarding public interests and ensuring individuals’ rights to property are respected.

2. Rights to remain silent under Article 5 of the FC

Another significant challenge involves the accused’s right to remain silent and the protection against self-incrimination. In Adam Rosly Abdullah v Public Prosecutor,[4] the defence argued that certain sections of the Act, namely Section 32, conflict with Article 5 of the FC, which is the constitutional right to life and personal liberty. According to the defence, Section 32 compels the accused to provide documents and information that could potentially incriminate themselves, undermining the presumption of innocence.

This challenge raises concerns about whether the Act forces accused persons to violate their constitutional right not to incriminate themselves, which is a fundamental aspect of the right to a fair trial. The court’s rejection of this argument stated that Article 5 of the FC does not expressly provide the right to remain silent. This, however, have demonstrated the difficulty of reconciling the Act’s requirements with constitutional guarantees of fair treatment in legal proceedings.

3. Extra-territorial application

A further challenge stems from the Act’s extra-territorial application, as provided for in Section 2(2) of the Act, which extends its reach to property located outside Malaysia. While this provision allows Malaysia to pursue money laundering cases involving assets held abroad, it poses significant enforcement difficulties.

Prosecutors must often rely on Mutual Legal Assistance Treaties (“MLATs”) to gather evidence from foreign jurisdictions, which can be a slow and bureaucratic process. For example, countries with stringent banking secrecy laws or privacy protections may be reluctant to cooperate, making it difficult to access crucial evidence.[5] Even in cases where MLATs exist, delays in obtaining necessary documents or testimony can hinder the investigation and prosecution of money laundering offences. The challenge, therefore, lies in obtaining clear and reliable evidence from overseas to prove that assets are linked to unlawful activities, especially when foreign legal systems may prioritise the protection of individual privacy over cross-border criminal investigations.

4. Retrospective effect

Another controversial issue is Act’s retrospective effect, which allows the Act to apply to offences committed before its commencement date. This provision conflicts with Article 7(2) of the FC, which stipulates that a person cannot be tried again for the same offence if they have already been acquitted or convicted unless a higher court has overturned the original verdict and ordered a retrial.

In Datuk Haji Wasli bin Mohd Said v Public Prosecutor,[6] the court held that this retrospective application did not violate the constitutional prohibition on double jeopardy because the accused had not yet been acquitted or convicted when the charges were brought. Nevertheless, the retrospective effect remains a significant challenge, as it allows for legal actions and punishments based on laws that were not in force at the time of the alleged offence. This creates uncertainty for defendants, who may find themselves prosecuted for actions that were not illegal when committed, thereby undermining the principle in the FC.

5. Findings of the Court

Based on the various concerns above regarding the constitutionality of specific provisions of the Act, these issues primarily only focused on the potential infringement of constitutional rights. However, upon thorough examination and scrutiny by the court, there is no merit in the arguments presented. It was determined in several cases that the Act did not violate any constitutional principles and consequently, the court upheld the validity of the Act, affirming that these provisions remain constitutional. Under the current legal framework, the protection of the individual legal rights continues to be protected.

Standard and Burden of Proof

In Malaysia, the burden of proof for all criminal cases, including those under the Act, lies on the Public Prosecutor. This requires the prosecution to prove the accused’s guilt beyond a reasonable doubt, consistent with the general standard for criminal cases. This high threshold applies across all criminal offences under the Act, as well as other penal statutes.

In Public Prosecutor v Genneva Malaysia Sdn Bhd,[7] the accused was charged at the Sessions Court for the offence of illegal deposit taking and money laundering. The prosecution must prove that it can be inferred from the circumstances that the accused knew, or had reason to believe, that the funds were the proceeds of unlawful activity. The prosecution presented sufficient evidence, beyond reasonable doubt to establish that each accused received funds via multiple cash cheques. These funds originated from, and were traceable to two bank accounts belonging to Genneva Malaysia Sdn Bhd.

Under Section 70 of the Act any question of fact decided by the court in proceedings under the Act can be resolved based on the balance of probabilities. This lower standard of proof is specific to factual determinations in proceedings under the Act and serves to complement the otherwise stringent burden of proof required in criminal cases.

Another instance where standard of proof based on the balance of probability is applied to is when seeking the forfeiture order under section 55 and 56 of the Act. In Abdul Mudtalib bin Ismail v Public Prosecutor,[8] when determining the status of the property and deciding on forfeiture under section 56 of the Act, the standard of proof required is the balance of probabilities, which is the civil standard of proof.

In Public Prosecutor v Billion Nova Sdn Bhd & Ors,[9]  the case involved an application under section 50(1) and 56(1) of the Act. The prosecution sought an order for the forfeiture of monies in 24 accounts held by the respondents in various bank accounts in Labuan, seized under section 50(1) of the Act, and be forfeited under section 56(1) of the Act. The burden placed on the prosecution was to prove, on the balance of probabilities, that the sales in question were connected to the alleged illegal activity. Requiring proof of the predicate offence in this manner does not amount to raising the standard of proof to a criminal threshold but rather ensures that sufficient factual evidence is presented to substantiate the claim.

Furthermore, in Aisyah bt Mohd Rose & Anor v Public Prosecutor,[10] the court held that the prosecution could sustain a conviction for money laundering under Section 4(1) of the Act even if there is no prior conviction for the predicate offence, as long as there is enough evidence to prove that the funds came from an unlawful activity based on the balance of probabilities.

The application of this civil standard of proof in section 56 cases has posed challenges for the prosecution, primarily due to insufficient documentary evidence requirement.[11] Simply asserting facts without adequate documentary support is insufficient to meet the required standard of proof of on the balance of probability. To succeed, the prosecution must present substantial documentary evidence to substantiate its claims and demonstrate that it is more likely than not that the property is linked to illegal activity.

Conclusion

Given the broad powers it grants to law enforcement, such as freezing, seizing, and forfeiting assets, the defence will often question the constitutionality of the Act. As legal interpretations and public opinions shift over time, it is important to ensure that the enforcement of the Act continues upholding constitutional principles while also effectively tackling the issues related to financial crimes. While the Act is a powerful tool in Malaysia’s fight against money laundering and terrorism financing, its effectiveness, particularly in the realm of civil forfeiture, can be improved by strengthening procedural safeguards and evidentiary standards requirements. This approach will help fostering a fairer and more just application of the law.

Authors:

  1. Fakhrullah Fadzillah
  2. Afif Che Had
  3. Husna Shariff

References:

[1] Act 613

[2] AMLA: An extremely powerful legislation by Salleh Buang (26 July 2018) https://www.nst.com.my/opinion/columnists/2018/07/394517/amla-extremely-powerful-legislation

[3] [2021] 8 CLJ 29

[4] [2020] 1 LNS 2384

[5] International Cooperation: Mutual Legal Assistance and Extradition by Baizura Kamal (n.d.) https://www.unafei.or.jp/publications/pdf/GG6/05-4_Malaysia.pdf

[6] [2006] 6 CLJ 1

[7] [2021] 2 CLJ 536

[8] [2021] 1MLJ 252

[9] [2016] 2 CLJ 763

[10] [2016] 1 MLJ 840 (CA)

[11] Civil Forfeiture under Anti-Money Laundering Legislation in Malaysia from IIUM Law Journal Vol. 31(S1) 2023 https://journals.iium.edu.my/iiumlj/index.php/iiumlj/article/download/876/420# :~:text=No%20Prosecution%20(civil),be%20released%20to%20the%20person.