Financial Crimes

Mens Rea of Money Laundering Under the AMLATFPUAA

Q. Is money laundering under the AMLATFPUAA a strict liability offence?

Answer

No.

Money laundering under the AMLATFPUAA is not a strict liability offence.

To secure a conviction, the prosecution must prove not only the actus reus under section 4(1), but also the mens rea prescribed under section 4(2).

Accordingly, the prosecution must establish that the accused possessed the necessary mental element when dealing with the proceeds of unlawful activities or instrumentalities of an offence.

Importantly, the prosecution does not have to prove actual knowledge in every case. Section 4(2) provides several alternative states of mind that are sufficient to establish criminal liability.

The Mens Rea Under Section 4(2)

Q. What are the mental elements under section 4(2)?

Answer

Section 4(2) provides that the mental element of money laundering may be established if the accused:

• knew that the property was proceeds of unlawful activities or instrumentalities of an offence;
• had reason to believe that the property was proceeds of unlawful activities or instrumentalities of an offence;
• had reasonable grounds to suspect that the property was proceeds of unlawful activities or instrumentalities of an offence; or
• without reasonable excuse, failed to take reasonable steps to ascertain whether the property was proceeds of unlawful activities or instrumentalities of an offence.

The section further provides that these mental states may be inferred from objective factual circumstances.

Accordingly, the prosecution is not required to produce direct evidence, such as a confession by the accused. The court may infer the accused’s state of mind from the surrounding facts and circumstances.

Q. What is meant by “knowledge”?

Answer

Knowledge is the highest level of culpability.

It exists where the accused actually knows that the property represents proceeds of unlawful activities or instrumentalities of an offence.

Case Example

Mr A receives RM3 million from his accomplice.

The accomplice tells him:

“This money comes from corruption. Please keep it for me.”

Mr A nevertheless deposits the money into several bank accounts.

Application

Mr A has actual knowledge that the money constitutes proceeds of unlawful activities.

The mens rea under section 4(2) is clearly established.

Q. What is meant by “reason to believe”?

Answer

A person has reason to believe where the surrounding circumstances would cause a reasonable person to conclude that the property is probably derived from unlawful activities.

Although the accused may deny actual knowledge, the available facts strongly indicate that the property is criminal in origin.

Case Example

Mr B, an unemployed person, receives RM20 million from an unknown foreign company.

He is instructed to transfer the money through several shell companies.

No legitimate explanation is provided.

Application

Although Mr B claims he did not know the source of the money, the surrounding circumstances clearly give him reason to believe that the money represents proceeds of unlawful activities.

Q. What is meant by “reasonable grounds to suspect”?

Answer

Reasonable suspicion is a lower threshold than reason to believe.

It arises where the circumstances would cause a reasonable person to suspect that the property may be connected with unlawful activities, even if there is insufficient information to conclude that it probably is.

Case Example

Mr C is paid RM50,000 to collect a suitcase from a stranger at midnight in a deserted car park and immediately deliver it to another person.

He is told not to ask any questions.

Application

Mr C may not know what is inside the suitcase.

Nevertheless, the surrounding circumstances provide reasonable grounds to suspect that the suitcase contains proceeds of unlawful activities.

Q. What is meant by “failure to take reasonable steps”?

Answer

Section 4(2) also imposes liability where a person without reasonable excuse fails to make reasonable enquiries despite suspicious circumstances.

This provision addresses wilful blindness or deliberate ignorance.

A person cannot escape criminal liability simply by choosing not to ask obvious questions.

Case Example

Mr D receives RM10 million into his personal bank account from an unknown overseas company.

He has no business relationship with the company.

Despite this, he makes no enquiries and immediately transfers the money to several other accounts.

Application

Mr D deliberately ignored obvious warning signs.

His failure to make reasonable enquiries may satisfy the mens rea under section 4(2).

Objective Factual Circumstances

Q. What are “objective factual circumstances”?

Answer

Section 4(2) provides that the court may infer the accused’s knowledge, belief or suspicion from objective factual circumstances.

These are facts which can be independently established by evidence rather than by the accused’s own explanation.

The court examines whether a reasonable person, faced with the same circumstances, would have realised that the property was probably connected with unlawful activities.

Examples include:

• unusually large cash transactions;
• payments with no legitimate commercial purpose;
• the use of shell companies or nominees;
• multiple transfers through different bank accounts;
• false invoices or fabricated agreements;
• attempts to conceal ownership;
• cash delivered secretly or at unusual locations; and
• the absence of any reasonable explanation for the transaction.

One Scenario: Understanding the Different Mental States

Illustration

Mr X is approached by his friend, Mr Y, who asks him to help handle RM8 million.

The money is eventually deposited into Mr X’s account before being transferred overseas.

The following variations illustrate the different mental states under section 4(2.

Scenario 1 – Knowledge

Mr Y tells Mr X:

“This RM8 million is money I received from corruption. Please help me transfer it.”

Mr X agrees.

Application

Mr X has actual knowledge that the money constitutes proceeds of unlawful activities.

Scenario 2 – Reason to Believe

Mr Y does not admit the money comes from corruption.

However:

• Mr Y has no legitimate business;
• RM8 million arrives from several offshore companies;
• fake consultancy agreements are prepared; and
• Mr Y instructs Mr X to move the money immediately through shell companies.

Application

Even without an admission, these facts would cause a reasonable person to conclude that the money is probably criminal proceeds.

Mr X has reason to believe.

Scenario 3 – Reasonable Grounds to Suspect

Mr Y asks Mr X to receive RM8 million in cash at midnight in a warehouse.

Mr Y refuses to explain where the money came from.

Mr X notices the cash is packed in unmarked bags.

Application

The circumstances may not prove that the money is criminal, but they clearly give rise to reasonable grounds to suspect that it is connected with unlawful activities.

Scenario 4 – Failure to Take Reasonable Steps

Mr X receives RM8 million from an unknown overseas company.

He notices:

• there is no invoice;
• there is no contract;
• he has never dealt with the sender before.

Instead of making enquiries, he immediately transfers the money overseas because he “does not want to know.”

Application

Mr X has without reasonable excuse failed to take reasonable steps to ascertain the source of the money.

His deliberate ignorance satisfies section 4(2).

Scenario 5 – Objective Factual Circumstances

At trial, Mr X claims:

“I honestly thought everything was legitimate.”

However, the evidence shows that:

• the money was delivered in cash;
• fake invoices were created;
• shell companies were used;
• the funds passed through six bank accounts within two days;
• the transfers had no commercial purpose; and
• the beneficial owner was concealed.

Application

The court is entitled to infer Mr X’s mental state from these objective factual circumstances.

Even without a confession, the surrounding facts may establish that Mr X knew, had reason to believe, had reasonable grounds to suspect, or deliberately avoided making reasonable enquiries.

Exam Note

To establish the mens rea under section 4(2), the prosecution may prove any one of the following:

• Knowledge – The accused actually knew the property was criminal proceeds.
• Reason to Believe – The circumstances would cause a reasonable person to conclude that the property was probably criminal proceeds.
• Reasonable Grounds to Suspect – The circumstances would cause a reasonable person to suspect that the property might be criminal proceeds.
• Failure to Take Reasonable Steps – Despite obvious warning signs, the accused deliberately failed to make reasonable enquiries without a reasonable excuse.

The court may infer any of these mental states from objective factual circumstances. Direct evidence of the accused’s state of mind is not essential.

Remember the hierarchy of culpability:

• Knowledge → “I know it is criminal.”
• Reason to Believe → “The facts strongly indicate it is criminal.”
• Reasonable Grounds to Suspect → “The circumstances are suspicious enough that I should suspect it.”
• Failure to Take Reasonable Steps → “I chose not to ask questions when a reasonable person would have done so.”

Objective factual circumstances are not a separate mental element. They are the evidential basis from which the court may infer one or more of the above states of mind.