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Financial Crimes
Proceeds of Unlawful Activities
Q. What is meant by “proceeds of unlawful activities” under the AMLATFPUAA?
Answer
The term “proceeds of unlawful activities” is defined very broadly under the AMLATFPUAA.
It refers to any property, or any economic advantage or economic gain derived from that property, whether the property is situated within or outside Malaysia.
The definition is intentionally expansive to ensure that criminals cannot avoid liability simply because the criminal property has:
- changed its form;
- been transferred to another person;
- been converted into another asset;
- generated further profits; or
- been moved outside Malaysia.
The definition consists of two broad limbs:
- Property derived from an unlawful activity [paragraph (a)]; and
- Property reasonably believed to be derived from an unlawful activity [paragraph (b)].
Property Derived from an Unlawful Activity [Paragraph (a)]
Q. What property falls within paragraph (a) of the definition?
Answer
Paragraph (a) covers property that is wholly or partly connected to an unlawful activity.
Importantly, the definition is not limited to the original criminal proceeds. It also extends to property obtained through subsequent dealings with those proceeds and property purchased using those proceeds.
Paragraph (a) is divided into three categories.
Q. What is meant by property “derived or obtained, directly or indirectly, from any unlawful activity”? [Paragraph (a)(i)]
Answer
This refers to the original proceeds generated from the unlawful activity.
The property may be obtained directly from the crime or indirectly through another person or intermediary.
The phrase “wholly or partly” also means that even if only part of the property originates from unlawful activities, it may still constitute proceeds of unlawful activities.
Case Example
Mr A receives RM5 million in bribes in return for awarding government contracts.
Application
The RM5 million constitutes proceeds of unlawful activities because it is directly obtained from the unlawful activity.
Another Example
Mr A instructs his associate to collect the RM5 million on his behalf before passing it to him.
Application
Although Mr A did not receive the money personally, the money was indirectly obtained from the unlawful activity and therefore remains proceeds of unlawful activities.
Q. What is meant by property “derived or obtained from a disposal or other dealings” with the original criminal property? [Paragraph (a)(ii)]
Answer
Paragraph (a)(ii) extends the definition to property obtained from dealing with the original criminal proceeds.
In other words, if the original proceeds are:
- sold;
- transferred;
- exchanged;
- invested; or
- otherwise dealt with,
the new property or benefit obtained from those dealings also becomes proceeds of unlawful activities.
The law therefore follows the value of the criminal property even after it changes form.
Case Example
Mr A uses RM5 million in bribe money to purchase gold bullion.
He later sells the gold bullion for RM5.5 million.
Application
The RM5.5 million received from selling the gold bullion constitutes proceeds of unlawful activities because it was derived from dealings with the original criminal proceeds.
Another Example
Mr A purchases shares using criminal proceeds and later sells the shares for a profit.
Application
Both the sale proceeds and the profit remain proceeds of unlawful activities because they were derived from dealings with the original criminal property.
Q. What is meant by property “acquired using” the original criminal property or property obtained through subsequent dealings? [Paragraph (a)(iii)]
Answer
Paragraph (a)(iii) extends the definition even further.
It covers new property purchased using criminal proceeds, whether the money used came directly from the unlawful activity or from later dealings with the criminal property.
This ensures that offenders cannot escape liability simply by converting cash into other assets.
Case Example
Mr A receives RM5 million in bribes.
He uses the money to purchase a bungalow.
Application
The bungalow constitutes proceeds of unlawful activities because it was acquired using the criminal proceeds.
Another Example
Mr A:
- receives RM5 million in bribes;
- purchases gold bullion;
- sells the gold bullion; and
- uses the sale proceeds to purchase a luxury yacht.
Application
The luxury yacht also constitutes proceeds of unlawful activities because it was acquired using property obtained from dealings with the original criminal proceeds.
The criminal character of the property continues despite the change in form.
Q. Why is paragraph (a) drafted so broadly?
Answer
Paragraph (a) ensures that the law follows the economic value of criminal proceeds rather than merely the original property.
Otherwise, offenders could easily avoid liability by repeatedly converting criminal proceeds into different assets.
For example:
Bribe Money
↓
Gold Bullion
↓
Shares
↓
Luxury Condominium
↓
Rental Income
↓
Another Property
Each asset remains connected to the original unlawful activity.
The criminal character does not disappear simply because the proceeds have changed form.
Property Reasonably Believed to Be Derived from an Unlawful Activity [Paragraph (b)]
Q. What is meant by property that can “reasonably be believed” to be derived from an unlawful activity?
Answer
Paragraph (b) recognises the practical difficulties faced by investigators in tracing criminal proceeds.
Accordingly, property may constitute proceeds of unlawful activities even where the exact criminal source cannot be conclusively identified.
It is sufficient if, based on the surrounding circumstances, the property can reasonably be believed to fall within paragraph (a).
Relevant circumstances include:
- the nature of the property;
- its value;
- where it was found;
- when it was acquired;
- how it was acquired;
- from whom it was acquired; and
- its proximity to other criminal property.
Case Example
Police raid the premises of a drug trafficking syndicate.
They discover:
- RM10 million in cash;
- large quantities of methamphetamine;
- drug ledgers; and
- money-counting machines.
Although investigators cannot identify which specific drug transactions generated the RM10 million, all the surrounding circumstances indicate that the money originated from drug trafficking.
Application
The RM10 million may reasonably be believed to constitute proceeds of unlawful activities, even though the precise source of every ringgit cannot be established.
Q. Must the prosecution prove the specific predicate offence that generated the proceeds?
Answer
No.
In PP v Dato’ Sri Mohd Najib Hj Abd Razak, Mohd Nazlan Ghazali J held that an unlawful activity is not confined to the predicate offence itself.
Instead, it may also include an activity that results in the commission of the predicate offence.
Accordingly, although the prosecution must establish the existence of an unlawful activity, it is not always necessary to prove that a particular predicate offence under the Second Schedule was committed.
It is sufficient to establish an unlawful activity that gave rise to or led to the commission of the predicate offence.
Q. Why is this interpretation important?
Answer
This interpretation reflects the practical realities of money laundering investigations.
Professional criminals rarely keep the proceeds of different crimes separate. Instead, they commonly:
- combine proceeds from multiple criminal activities;
- mix illicit funds with legitimate income;
- transfer funds through numerous bank accounts;
- convert cash into different assets; or
- repeatedly move the proceeds through complex financial transactions.
As a result, investigators may be unable to determine which specific predicate offence generated a particular asset.
If the prosecution were required to identify the precise predicate offence responsible for every asset, many money laundering prosecutions would become virtually impossible.
The interpretation adopted in PP v Dato’ Sri Mohd Najib Hj Abd Razak avoids this difficulty by recognising that proof of an unlawful activity is sufficient, even where the precise predicate offence cannot be identified.
Illustration
Mr A operates an organised criminal syndicate involved in:
- corruption;
- drug trafficking; and
- illegal gambling.
All proceeds are deposited into a single bank account before being used to purchase several luxury properties.
Investigators establish that the money originated from unlawful activities but cannot determine whether a particular bungalow was purchased using proceeds from corruption, drug trafficking or illegal gambling.
Application
The prosecution is not required to prove which specific predicate offence funded the bungalow.
It is sufficient to establish that the bungalow represents proceeds of unlawful activities, consistent with the approach adopted in PP v Dato’ Sri Mohd Najib Hj Abd Razak.
Exam Note
When analysing proceeds of unlawful activities, remember the progression under paragraph (a):
- Paragraph (a)(i) → Original criminal proceeds.
- Example: RM5 million received as a bribe.
- Paragraph (a)(ii) → Property or gains obtained from dealing with the original criminal proceeds.
- Example: Selling gold purchased with bribe money and receiving RM5.5 million.
- Paragraph (a)(iii) → New property acquired using the original proceeds or property derived from subsequent dealings.
- Example: Purchasing a bungalow or yacht using the proceeds from the sale of the gold.
The law follows the economic value of the unlawful activity from the original proceeds to every substitute asset acquired thereafter.
In addition, paragraph (b) extends the definition to property that can reasonably be believed to be derived from unlawful activities based on the surrounding circumstances, even where the exact criminal source cannot be conclusively established. This broad definition prevents offenders from escaping liability merely because the proceeds have been converted, transferred or mixed with other property.
