Financial Crimes

Overlap Between the Mental States Under Section 4(2)

Q. Can the mental states under section 4(2) overlap?

Answer

Yes.

The mental states under section 4(2) are alternative methods of proving the mens rea of money laundering. They are not separate offences and are not mutually exclusive.

In practice, the prosecution frequently relies on the same facts to establish more than one mental state. The court is not required to determine that only one mental state exists. Instead, it may find that the evidence establishes several mental states simultaneously.

For example:

• facts giving rise to reasonable grounds to suspect may also amount to reason to believe if the circumstances are sufficiently compelling;
• a person who deliberately ignores obvious warning signs may both have reason to believe and without reasonable excuse fail to take reasonable steps to ascertain the source of the property; and
• where there is direct evidence that the accused knew the property was criminal proceeds, the facts will naturally also support reason to believe and reasonable grounds to suspect.

Ultimately, the prosecution only needs to establish one of the mental states under section 4(2), although the evidence may prove more than one.

Illustration

Mr A receives RM20 million into his bank account from an unknown overseas company.

He notices that:

• there is no commercial agreement;
• no invoice has been issued;
• the sender refuses to identify the beneficial owner;
• the money is transferred through several shell companies; and
• he is instructed not to ask any questions.

Mr A nevertheless transfers the money to another account.

Scenario 1 – Knowledge

Before transferring the money, Mr A is told:

“The RM20 million comes from corruption.”

Application

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

Scenario 2 – Reason to Believe

Mr A is not expressly told the source of the money.

However, he knows that:

• the sender has no legitimate business;
• fake consultancy agreements have been prepared;
• shell companies are involved; and
• the money is moved immediately after receipt.

Application

Although there is no admission, the surrounding circumstances would cause a reasonable person to conclude that the money is probably criminal proceeds.

Mr A therefore has reason to believe.

Scenario 3 – Reasonable Grounds to Suspect

Mr A is asked to collect several bags of cash from a deserted warehouse at midnight.

He is told not to ask questions.

Application

The circumstances are sufficiently suspicious to cause a reasonable person to suspect that the money is connected with unlawful activities.

Mr A therefore has reasonable grounds to suspect.

Scenario 4 – Failure to Take Reasonable Steps

Mr A notices numerous warning signs but deliberately avoids making any enquiries because he “does not want to know.”

He immediately transfers the money.

Application

Mr A has without reasonable excuse failed to take reasonable steps to ascertain whether the money constitutes proceeds of unlawful activities.

Scenario 5 – Objective Factual Circumstances

At trial, Mr A denies knowing that the money was criminal proceeds.

However, the prosecution proves that:

• fake invoices were created;
• shell companies were used;
• there was no legitimate commercial purpose;
• the money passed through several bank accounts within a short period; and
• the beneficial owner was deliberately concealed.

Application

The court may infer Mr A’s mental state from these objective factual circumstances.

Even without direct evidence or an admission, the surrounding facts may establish one or more of the mental states under section 4(2).

How Do the Mental States Relate to Each Other?

The four mental states generally reflect different degrees of culpability, although the AMLATFPUAA does not expressly rank them.

• Knowledge represents the highest level of culpability because the accused actually knows that the property constitutes proceeds of unlawful activities or instrumentalities of an offence.
• Reason to believe is a slightly lower threshold. The accused may not have actual knowledge, but the surrounding circumstances are so compelling that a reasonable person would conclude that the property is probably criminal proceeds.
• Reasonable grounds to suspect is a lower threshold still. The circumstances may not justify a firm belief, but they are sufficiently suspicious that a reasonable person would suspect the property is connected with unlawful activities.
• Failure to take reasonable steps focuses on the accused’s conduct rather than what he actually knew or believed. Liability arises because the accused deliberately ignored obvious warning signs and failed to make reasonable enquiries without a reasonable excuse. This reflects the principle that a person cannot avoid criminal liability through wilful blindness or deliberate ignorance.

These mental states are not separate or isolated categories. They frequently overlap.

For example:

• A person who has knowledge will almost certainly also have reason to believe and reasonable grounds to suspect.
• A person who has reason to believe will usually also have reasonable grounds to suspect.
• A person who fails to take reasonable steps may simultaneously have reasonable grounds to suspect or even reason to believe, depending on the surrounding facts.

The court is therefore not required to choose only one mental state. The same evidence may establish several mental states at the same time.

Exam Note

When analysing the mens rea under section 4(2), remember:

• The prosecution only needs to prove one of the four mental states.
• The mental states are alternative methods of proving mens rea and are not mutually exclusive.
• The same facts may establish knowledge, reason to believe, reasonable grounds to suspect, and failure to take reasonable steps simultaneously.
• Objective factual circumstances are not a separate mental state. They are the evidential basis from which the court may infer one or more of the four mental states.
• The stronger the surrounding circumstances, the easier it is for the court to infer the requisite mens rea, even in the absence of direct evidence such as an admission or confession.

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.

Financial Crimes

Mens Rea of Money Laundering

Q. Is money laundering under section 4(1) a strict liability offence?

Answer

No.

Money laundering under section 4(1) is not a strict liability offence.

Besides proving the prohibited conduct under section 4(1)(a), (b), (c) or (d) and that the property constitutes proceeds of unlawful activities or instrumentalities of an offence, the prosecution must also establish the mental element (mens rea).

The mens rea is found in section 4(2) of the AMLATFPUAA.

Q. What is the mens rea under section 4(2)?

Answer

Section 4(2) provides that the mental element may be inferred from objective factual circumstances.

The prosecution may establish mens rea by proving that 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 suspicion 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. 

Thus, actual knowledge is not the only way to prove the mental element.

Q. What does “knowledge” mean?

Answer

Knowledge exists where the accused actually knows that the property represents criminal proceeds.

Case Example

Mr A is told by his accomplice that RM5 million came from drug trafficking.

He 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 is established.

Q. What does “reason to believe” mean?

Answer

A person has reason to believe where the surrounding circumstances would cause a reasonable person to conclude that the property is probably criminal proceeds.

The accused cannot deliberately ignore obvious warning signs.

Case Example

Mr B receives RM8 million from a stranger without any commercial explanation.

The money is immediately transferred through several offshore accounts.

Mr B makes no enquiries.

Application

Although Mr B denies actual knowledge, the surrounding circumstances give him reason to believe that the money represents criminal proceeds.

Q. What is “reasonable suspicion”?

Answer

Reasonable suspicion is a lower threshold than actual knowledge.

It exists where the surrounding facts would cause a reasonable person to suspect that the property originated from unlawful activities.

Case Example

Mr C agrees to receive RM2 million in cash inside a shopping mall car park from a person he has never met.

He is instructed to transfer the money overseas the same day.

Application

Even if Mr C cannot say exactly which offence generated the money, the circumstances create a reasonable suspicion that the money represents criminal proceeds.

Q. What does “failure to take reasonable steps” mean?

Answer

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

This addresses situations involving wilful blindness or deliberate ignorance.

A person cannot avoid liability simply by choosing not to ask questions.

Case Example

Mr D receives RM15 million into his personal account from an unknown overseas company.

Despite knowing that he has no legitimate business relationship with the company, he never asks where the money came from.

Application

Mr D has failed to take reasonable steps to ascertain the source of the money.

His deliberate ignorance is capable of satisfying the mens rea under section 4(2).

Q. Can the court infer mens rea from the surrounding circumstances?

Answer

Yes.

Section 4(2) expressly provides that knowledge or suspicion may be inferred from objective factual circumstances.

Accordingly, the prosecution does not need direct evidence, such as an admission by the accused.

The court may infer the necessary mental element from facts such as:

• unusually large cash transactions;
• the use of nominee companies;
• multiple transfers through different accounts;
• false invoices;
• secretive behaviour;
• absence of any legitimate commercial explanation; or
• deliberate avoidance of enquiries.

Case Authority

Q. How have the courts interpreted the mens rea requirement?

Answer

In Dato’ Sri Mohd Najib Hj Abd Razak v PP, the Court explained that the culpability of an accused under section 4(1) is based on being knowingly concerned with the illegal proceeds of an unlawful activity.

The Court held that the mental element is established where the accused:

• knew;
• had reason to believe;
• had reasonable suspicion; or
• without reasonable excuse failed to take reasonable steps to ascertain,

whether the property constituted proceeds of unlawful activities. The Court also emphasised that section 4(2) allows this mental element to be inferred from objective factual circumstances. 

The Court further observed, relying on earlier authority, that wilful blindness or deliberate ignorance is not a defence; choosing not to inquire into suspicious circumstances may itself demonstrate the requisite criminal intent. 

Exam Note

To prove a money laundering offence under section 4(1), the prosecution generally establishes three elements:

1. The prohibited conduct (actus reus) under section 4(1)(a), (b), (c) or (d).
2. The property is proceeds of unlawful activities or instrumentalities of an offence.
3. The mens rea under section 4(2).

The mental element may be established by proving that the accused:

• knew;
• had reason to believe;
• had reasonable suspicion; or
• without reasonable excuse failed to take reasonable steps to ascertain

that the property represented proceeds of unlawful activities or instrumentalities of an offence.

Remember: Under the AMLATFPUAA, wilful blindness is not a defence. A person cannot escape criminal liability by deliberately avoiding enquiries where the surrounding circumstances clearly call for them.

Financial Crimes

Proof of the Predicate Offence Under Section 4(4) of the AMLATFPUAA

Q. Must the prosecution obtain a conviction for the predicate offence before a person can be convicted of money laundering?

Answer

No.

Section 4(4) of the AMLATFPUAA provides that:

A person may be convicted of a money laundering offence under section 4(1) irrespective of whether:

• there is a conviction for the serious offence or foreign serious offence; or
• a prosecution has even been initiated for the serious offence or foreign serious offence.

This means that a conviction for the predicate offence is not a legal prerequisite to a conviction for money laundering.

However, this does not mean that the prosecution is relieved from proving the existence of an unlawful activity.

The prosecution must still prove that the property involved constitutes proceeds of unlawful activities or instrumentalities of an offence. What section 4(4) removes is the requirement for a separate prosecution or prior conviction for the predicate offence.

Accordingly, a person may be convicted of money laundering even though:

• the predicate offender has never been charged;
• the predicate offender has been acquitted for procedural reasons;
• the predicate offence occurred overseas and cannot be prosecuted in Malaysia; or
• the predicate offence cannot be prosecuted for practical reasons.

The court need only be satisfied, based on the evidence, that the property originated from an unlawful activity.

Q. Why did Parliament enact section 4(4)?

Answer

Section 4(4) reflects one of the principal objectives of the AMLATFPUAA, namely to deprive criminals of the proceeds of crime and facilitate asset recovery.

Money laundering often occurs long after the predicate offence has been committed. In many cases, it is impossible or impractical to prosecute the predicate offence because:

• the offender has absconded;
• the offender has died;
• witnesses are unavailable;
• the predicate offence occurred overseas;
• evidence relating to the predicate offence has been destroyed; or
• investigators are only able to prove the laundering activity.

If Parliament required a prior conviction for every predicate offence, many money laundering prosecutions would fail despite overwhelming evidence that the property represents criminal proceeds.

Section 4(4) therefore ensures that criminals cannot escape liability merely because the predicate offence cannot be separately prosecuted or has not yet resulted in a conviction.

Q. How did the Court interpret section 4(4)?

Answer

In Aisyah Mohd Rose & Anor v PP, Tengku Maimun Tuan Mat JCA (as Her Ladyship then was) explained that a conviction for money laundering can be sustained even without a conviction for the predicate offence.

The Court held that what is essential is that the prosecution proves the existence of the unlawful activity giving rise to the criminal proceeds.

The decision confirms that:

• proof of the unlawful activity is required; but
• a conviction for the predicate offence is not.

Illustrations

Example 1 – Predicate Offender Dies Before Trial

Facts

Mr A receives RM8 million in bribes.

Before he can be prosecuted for corruption, he dies.

Investigators subsequently discover that his wife knowingly used the RM8 million to purchase several luxury apartments.

Application

Although no corruption conviction can ever be obtained against Mr A, the prosecution may still charge the wife with money laundering, provided it proves that the RM8 million constituted proceeds of corruption.

Section 4(4) allows the money laundering prosecution to proceed.

Example 2 – Predicate Offence Occurred Overseas

Facts

A foreign public official receives kickbacks in Country X.

He transfers the money into Malaysia and purchases commercial properties.

Country X does not prosecute him.

Application

Malaysia may still prosecute the money laundering offence if the prosecution proves that the money represents proceeds of a foreign serious offence.

A conviction in Country X is not required.

Example 3 – Predicate Offender Absconds

Facts

Mr A commits criminal breach of trust involving RM15 million before fleeing Malaysia.

His business partner later transfers and invests the stolen money in Malaysia.

Application

Although Mr A cannot presently be prosecuted because he has absconded, his business partner may still be prosecuted for money laundering, provided the prosecution proves that the RM15 million originated from criminal breach of trust.

Example 4 – Insufficient Evidence to Charge the Predicate Offence

Facts

Police discover RM6 million hidden inside a warehouse together with drugs, drug ledgers and money-counting machines.

The evidence is insufficient to prosecute anyone for a specific drug trafficking offence.

However, investigators establish that the money represents proceeds of drug trafficking.

Application

Although no person is prosecuted for the predicate drug offence, a money laundering prosecution may still proceed against any person who subsequently dealt with the RM6 million as proceeds of unlawful activities.

Example 5 – Different Person Commits the Money Laundering

Facts

Mr A commits corruption and gives RM4 million in bribe money to his brother, Mr B.

Knowing that the money is illicit, Mr B purchases several luxury vehicles and registers them under different companies.

Mr A is never prosecuted for corruption.

Application

Mr B may nevertheless be convicted of money laundering if the prosecution proves that the RM4 million constituted proceeds of corruption.

Section 4(4) makes it unnecessary for Mr A to be prosecuted or convicted before Mr B can be convicted of money laundering.

Exam Note

When applying section 4(4), remember these important principles:

• A conviction for the predicate offence is not a prerequisite to a conviction for money laundering.
• A prosecution for the predicate offence need not even have been commenced.
• The prosecution must nevertheless prove that the property represents proceeds of unlawful activities or instrumentalities of an offence.
• Section 4(4) prevents criminals from escaping liability merely because the predicate offence cannot be prosecuted or has not resulted in a conviction.
• The provision supports the fundamental objective of the AMLATFPUAA, namely to deprive criminals of the proceeds of crime and facilitate asset recovery.

Remember the distinction:

• Need to prove the unlawful activity? → Yes.
• Need a prosecution for the predicate offence? → No.
• Need a conviction for the predicate offence? → No.

This distinction is central to understanding section 4(4) and is frequently tested in examinations.

Financial Crimes

Unlawful Activity and Serious Offence Under the AMLATFPUAA

Q. What is meant by “unlawful activity” under the AMLATFPUAA?

Answer

The AMLATFPUAA requires that the proceeds of unlawful activities must originate from an unlawful activity.

An unlawful activity is defined broadly to include:

1. Any activity which constitutes a serious offence or a foreign serious offence; or
2. Any activity which is of such a nature, or occurs in such circumstances, that it results in or leads to the commission of a serious offence or foreign serious offence, regardless of whether the activity takes place wholly or partly within or outside Malaysia.

The second limb significantly widens the scope of the definition. It recognises that criminal activities often involve preparatory or facilitating conduct which eventually leads to the commission of the predicate offence.

Q. What is an example of an unlawful activity under paragraph (a)?

Answer

Paragraph (a) covers conduct that itself constitutes a serious offence or foreign serious offence.

Case Example

Mr A accepts RM2 million in gratification in return for approving a government project.

Application

The acceptance of the gratification constitutes the offence of corruption, which is a serious offence under the Second Schedule.

Accordingly, the corruption itself is an unlawful activity under paragraph (a).

Q. What is an example of an unlawful activity under paragraph (b)?

Answer

Paragraph (b) covers activities which lead to or result in the commission of a serious offence or foreign serious offence.

The activity itself need not constitute the predicate offence.

Case Example

Mr A establishes several shell companies and opens multiple bank accounts to facilitate the receipt of corruption proceeds from government contracts.

Application

The establishment of the shell companies is not, by itself, the predicate offence of corruption.

However, the activity facilitates and leads to the commission of the corruption offence.

Accordingly, it constitutes an unlawful activity under paragraph (b).

Another Example

A syndicate rents a warehouse, purchases sophisticated drug-manufacturing equipment and stores precursor chemicals before commencing the production of methamphetamine.

Application

These preparatory activities may constitute unlawful activities because they lead to the commission of the serious offence of drug trafficking.

Serious Offence

Q. What is meant by a “serious offence”?

Answer

A serious offence refers to any predicate offence listed in the Second Schedule to the AMLATFPUAA.

The definition also includes:

• attempting to commit a listed offence; and
• abetting the commission of a listed offence.

Accordingly, criminal liability is not confined to the principal offender but also extends to persons who attempt or assist in committing the predicate offence.

Q. What are examples of serious offences?

Answer

The Second Schedule contains a wide range of predicate offences, including:

• corruption;
• criminal breach of trust;
• fraud;
• drug trafficking;
• kidnapping;
• theft;
• cheating;
• forgery;
• organised crime; and
• terrorism financing-related offences.

Case Example

Mr A dishonestly misappropriates RM8 million entrusted to him by his employer.

Application

The offence constitutes criminal breach of trust, which is a serious offence under the Second Schedule.

If Mr A subsequently launders the RM8 million, he may also be liable for money laundering.

Proof of the Predicate Offence

Q. Must there be a conviction for the predicate offence before a person can be convicted of money laundering?

Answer

No.

Section 4(4) of the AMLATFPUAA expressly provides that a person may be convicted of money laundering even if:

• no prosecution has been initiated for the predicate offence; or
• no conviction has been obtained for the predicate offence.

However, this does not mean that the prosecution is relieved of proving the existence of an unlawful activity.

The prosecution must still establish, on the evidence, that the proceeds originated from an unlawful activity or serious offence.

What is unnecessary is a separate prosecution or prior conviction for that predicate offence.

Q. Why did Parliament enact section 4(4)?

Answer

Section 4(4) reflects the primary objective of anti-money laundering legislation, namely:

• depriving criminals of the benefits of crime; and
• facilitating the recovery of criminal proceeds.

If a prior conviction for the predicate offence were always required, many money laundering prosecutions would fail because:

• the predicate offender may have died;
• the predicate offence may have occurred overseas;
• witnesses may no longer be available;
• evidence relating to the predicate offence may be insufficient; or
• only the laundering activity can be proved.

Section 4(4) avoids these difficulties while still requiring proof that the property originated from unlawful activities.

Case Authority

Q. How did the Court explain section 4(4) in Aisyah Mohd Rose & Anor v PP?

Answer

In Aisyah Mohd Rose & Anor v PP, Tengku Maimun Tuan Mat JCA (as Her Ladyship then was) explained that a conviction for money laundering may be sustained even without a conviction for the predicate offence.

The Court emphasised that what matters is whether the evidence establishes the unlawful activity giving rise to the criminal proceeds.

The decision confirms that proof of the unlawful activity is required, but a separate conviction for the predicate offence is not.

Illustration

Mr A is suspected of corruption and receives RM10 million in gratification.

Before the corruption charge can be prosecuted, Mr A absconds overseas.

Investigators nevertheless establish that the RM10 million represents corruption proceeds and that Mr A subsequently purchased luxury properties using those funds.

Application

Although Mr A has not been convicted of corruption, he may still be prosecuted for money laundering if the prosecution proves that the RM10 million constituted proceeds of an unlawful activity.

Liability of Companies

Q. Can a company commit a money laundering offence?

Answer

Yes.

The offence of money laundering applies to both:

• natural persons; and
• legal persons, including companies and other bodies corporate.

The Interpretation Acts 1948 and 1967 define a “person” to include both incorporated and unincorporated bodies.

Q. Are directors or managers personally liable for offences committed by a company?

Answer

Yes.

Section 87(1) of the AMLATFPUAA provides that where a body corporate or association commits an offence, every person who was:

• a director;
• controller;
• officer;
• partner; or
• involved in the management of the entity,

is deemed to have committed the offence.

However, such person may avoid liability by proving that:

• the offence was committed without his or her consent; and
• the offence occurred without his or her involvement, subject to the statutory requirements.

Case Example

ABC Sdn Bhd launders RM30 million through fictitious invoices.

The managing director personally approves the transactions.

Application

Both the company and the managing director may be prosecuted under the AMLATFPUAA.

Structuring (Smurfing)

Q. What is the offence of structuring under section 4A?

Answer

Section 4A creates the offence of structuring transactions to evade the reporting requirements imposed under the AMLATFPUAA.

Structuring is commonly known as “smurfing.”

It is a common money laundering technique whereby a large transaction is deliberately broken into numerous smaller transactions to avoid triggering reporting obligations imposed on financial institutions.

Q. Why do criminals engage in structuring?

Answer

The purpose of structuring is to avoid detection by reporting institutions and law enforcement agencies.

Rather than depositing a large sum at once, the offender divides the money into smaller amounts so that each transaction appears ordinary and attracts less scrutiny.

Case Example

Mr A possesses RM5 million obtained from drug trafficking.

Instead of depositing the money in one transaction, he recruits ten associates to deposit RM500,000 each into different bank accounts over several days.

Application

Mr A has deliberately structured the transactions to evade reporting requirements.

This conduct constitutes structuring (smurfing) under section 4A.

Exam Note

When analysing the money laundering offence, distinguish these concepts carefully:

Unlawful Activity

• Includes:
• activities that constitute a serious offence or foreign serious offence; and
• activities that lead to or result in the commission of those offences.
• May occur wholly or partly within or outside Malaysia.

Serious Offence

• Refers to any predicate offence listed in the Second Schedule.
• Includes attempts and abetment.

Proof of the Predicate Offence

• The prosecution must prove that the property originated from an unlawful activity.
• However, section 4(4) makes it clear that a conviction or even a prosecution for the predicate offence is not a prerequisite to a conviction for money laundering.

Corporate Liability

• Both companies and individuals may be prosecuted.
• Directors, controllers and managers may be personally liable under section 87(1) unless they establish the statutory defence.

Structuring (Section 4A)

• Also known as smurfing.
• Involves breaking a large transaction into multiple smaller transactions to evade reporting requirements.
• It is a recognised money laundering technique and constitutes a separate offence under the AMLATFPUAA.

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:

1. Property derived from an unlawful activity [paragraph (a)]; and
2. 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.

Financial Crimes

Scope of the Money Laundering Offence Under Section 4(1)

Q. Why is the money laundering offence under section 4(1) considered to be broadly drafted?

Answer

Section 4(1) of the AMLATFPUAA is drafted in very broad terms, thereby giving the provision a wide scope of application.

Rather than criminalising only a single form of money laundering, the section captures a broad range of conduct involving criminal property. A person may commit a money laundering offence by engaging in any one of the acts set out in sections 4(1)(a), (b), (c) or (d).

Accordingly, the prosecution is not required to prove that all four paragraphs have been committed. Proof of any one of the prohibited acts is sufficient to establish the actus reus of a money laundering offence, provided the other elements of the offence are also satisfied.

The comprehensive drafting of section 4(1) ensures that money laundering is not confined to traditional laundering methods but extends to virtually every significant way in which criminal property may be dealt with, moved or concealed.

Q. Can any of the conduct listed in sections 4(1)(a) to (d) constitute a money laundering offence?

Answer

Yes.

Each paragraph under section 4(1) creates an independent basis upon which a person may be liable for money laundering.

A person may commit a money laundering offence by:

• engaging in a transaction involving criminal property under section 4(1)(a);
• acquiring, receiving, possessing, disguising, transferring, converting, exchanging, carrying, disposing of or using criminal property under section 4(1)(b);
• removing criminal property from, or bringing it into, Malaysia under section 4(1)(c); or
• concealing, disguising or impeding the establishment of the true nature, origin, location, movement, disposition, title, rights with respect to or ownership of criminal property under section 4(1)(d).

Each of these acts, standing alone, may constitute a money laundering offence.

Q. What is the common prerequisite for all offences under section 4(1)?

Answer

Although sections 4(1)(a), (b), (c) and (d) criminalise different forms of conduct, they all share a common prerequisite.

In every case, the conduct must involve:

• proceeds of unlawful activities; or
• instrumentalities of an offence.

Without proceeds of unlawful activities or instrumentalities of an offence, none of the four paragraphs can be invoked.

Accordingly, the existence of criminal property is the essential foundation upon which every offence under section 4(1) is built.

Illustration

Mr A lawfully earns RM2 million through his legitimate business.

He:

• deposits the money into several bank accounts;
• transfers it overseas;
• brings part of the money back into Malaysia; and
• purchases property through a nominee company.

Application

Although Mr A’s conduct resembles several acts described in sections 4(1)(a) to (d), no money laundering offence is committed because the money does not constitute proceeds of unlawful activities or instrumentalities of an offence.

Conversely, if the RM2 million were derived from bribery, drug trafficking or another serious offence, the same conduct could potentially constitute money laundering under one or more paragraphs of section 4(1).

Exam Note

When analysing section 4(1), remember the following principles:

• Section 4(1) is intentionally drafted in broad terms to capture a wide range of money laundering activities.
• Each paragraph—sections 4(1)(a), (b), (c) and (d)—creates an independent mode of committing the offence.
• The prosecution need only establish one of the prohibited acts under section 4(1), not all four.
• The indispensable prerequisite for every paragraph is that the property involved must be proceeds of unlawful activities or instrumentalities of an offence. Without criminal property, there can be no money laundering offence under section 4(1).

Financial Crimes

Relationship Between Sections 4(1)(b) and 4(1)(d) of the AMLATFPUAA

Q. Both sections 4(1)(b) and 4(1)(d) use the word “disguises”. What is the difference between the two provisions?

Answer

The word “disguises” appears in both section 4(1)(b) and section 4(1)(d). Although the same word is used, it serves a different function in each provision.

At first glance, the two provisions appear to overlap. However, when read in context, each paragraph focuses on a different aspect of money laundering.

Section 4(1)(b) is primarily concerned with dealing with criminal property, whereas section 4(1)(d) is concerned with concealing or obstructing the discovery of the true characteristics of criminal property, such as its origin, ownership or location.

Accordingly, the distinction lies not in the word “disguises” itself, but in what is being disguised.

Q. How does “disguises” operate under section 4(1)(b)?

Answer

Section 4(1)(b) focuses on how the accused deals with proceeds of unlawful activities or instrumentalities of an offence.

The provision lists a series of prohibited acts, including:

• acquiring;
• receiving;
• possessing;
• disguising;
• transferring;
• converting;
• exchanging;
• carrying;
• disposing of; and
• using,

proceeds of unlawful activities or instrumentalities of an offence.

When read together, these acts describe different methods of handling or dealing with criminal property.

Accordingly, the word “disguises” in section 4(1)(b) refers to disguising the property itself as part of dealing with it.

In practice, this may involve changing the appearance, form or presentation of the criminal property so that it becomes more difficult to recognise as proceeds of unlawful activities.

Case Example

A fraudster receives RM2 million obtained through fraud. He converts the cash into cryptocurrency and routes it through several digital wallets before converting it back into cash.

Application

The accused has dealt with the proceeds by converting and transferring them through multiple digital wallets, thereby disguising the criminal property as part of handling it. This conduct falls within section 4(1)(b).

Q. How does “disguises” operate under section 4(1)(d)?

Answer

Section 4(1)(d) serves a different purpose.

Rather than focusing on how the accused deals with the property, it focuses on whether the accused has concealed, disguised or impeded the establishment of the true nature, origin, location, movement, disposition, title, rights with respect to, or ownership of the criminal property.

The object of the disguise is therefore the truth about the property, rather than the property itself.

The emphasis is on preventing investigators or authorities from discovering the real source, ownership or identity of the criminal property.

Case Example

A corrupt public officer purchases a luxury villa using bribe money but registers the property under his brother’s name.

Application

The villa itself has not been altered. However, the accused has disguised the true ownership of the property. This conduct falls squarely within section 4(1)(d).

Q. Can the same conduct fall within both sections 4(1)(b) and 4(1)(d)?

Answer

Yes.

The same conduct may simultaneously satisfy both provisions because each paragraph criminalises a different aspect of the money laundering process.

Case Example

Mr A receives RM10 million in bribes.

He transfers the money to a shell company and records the payments in the company’s accounts as “consultancy fees.”

Application

Under section 4(1)(b), Mr A has dealt with the criminal property by transferring it through a shell company and disguising the proceeds as part of handling the property.

At the same time, section 4(1)(d) also applies because Mr A has disguised the true origin of the money and the true nature of the payments by falsely representing them as legitimate consultancy fees.

Accordingly, the same conduct may constitute offences under both provisions.

Q. What is the relationship between sections 4(1)(b) and 4(1)(d)?

Answer

There is a significant degree of overlap between sections 4(1)(b) and 4(1)(d).

The repetition of the word “disguises” appears to be deliberate rather than accidental. While both provisions may apply to the same facts, they address different legal concerns.

Section 4(1)(b) criminalises dealing with criminal property, one method of which is disguising the property.

Section 4(1)(d) criminalises concealing or disguising the true characteristics of criminal property, including its origin, ownership, location, movement and other identifying attributes.

The overlap enables prosecutors to frame charges that accurately reflect both the accused’s handling of the criminal property and the efforts made to conceal its true identity or provenance.

Exam Note

When distinguishing between sections 4(1)(b) and 4(1)(d), identify what is being disguised.

• Section 4(1)(b) focuses on dealing with the criminal property itself. The accused disguises the property as part of handling, transferring, converting or otherwise dealing with it.
• Section 4(1)(d) focuses on concealing the truth about the criminal property. The accused disguises its true nature, origin, location, movement, disposition, title, rights with respect to or ownership.

Although the same conduct may satisfy both provisions, each paragraph addresses a distinct aspect of money laundering. For this reason, prosecutors may rely on both sections 4(1)(b) and 4(1)(d) where the facts demonstrate both the handling of criminal property and the concealment of its true identity or provenance.

Financial Crimes

Section 4(1)(d) of the AMLATFPUAA

Q. What does section 4(1)(d) of the AMLATFPUAA provide?

Answer

Section 4(1)(d) provides that a person commits a money laundering offence if he or she:

“conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of an unlawful activity or instrumentalities of an offence.”

This provision targets the concealment aspect of money laundering.

Unlike the earlier paragraphs, which focus on transactions, dealings, or cross-border movement, section 4(1)(d) criminalises acts that hide or obstruct the discovery of the true identity or characteristics of criminal property.

Its purpose is to prevent offenders from disguising criminal property so that law enforcement agencies cannot trace its criminal origin or identify its true owner.

Q. What are the essential elements of section 4(1)(d)?

Answer

To establish an offence under section 4(1)(d), the prosecution must prove that the accused:

1. concealed;
2. disguised; or
3. impeded the establishment of

the:

• true nature;
• origin;
• location;
• movement;
• disposition;
• title;
• rights with respect to; or
• ownership,

of:

• proceeds of unlawful activities; or
• instrumentalities of an offence.

Unlike section 4(1)(a), no transaction is required.

Unlike section 4(1)(c), cross-border movement is irrelevant.

The emphasis is on concealing or obstructing the traceability of criminal property.

Q. What is meant by “conceals”?

Answer

To conceal means to hide criminal property or information relating to it so that it cannot easily be discovered or identified.

Concealment may involve hiding:

• the existence of the property;
• its source;
• its owner; or
• its location.

Case Example

A fraudster hides RM2 million in cash inside a secret room in his warehouse.

Application

The fraudster has concealed proceeds of unlawful activities.

Q. What is meant by “disguises”?

Answer

To disguise means to make criminal property appear legitimate or to give it a false identity.

The property itself is not hidden; instead, its true nature or origin is deliberately misrepresented.

Case Example

A corrupt public officer purchases several luxury apartments through nominee companies to conceal his ownership.

Application

The nominee companies disguise the true ownership of the proceeds of unlawful activities.

Q. What does “impedes the establishment” mean?

Answer

To impede the establishment means to obstruct, hinder or make it difficult for authorities to determine the true characteristics of criminal property.

The accused need not successfully conceal the property. It is sufficient that his conduct makes it more difficult for investigators to establish the truth.

Case Example

A suspect destroys accounting records and creates false invoices to prevent investigators from tracing illicit funds.

Application

The suspect has impeded the establishment of the true origin and movement of the proceeds of unlawful activities.

Q. What information is protected under section 4(1)(d)?

Answer

Section 4(1)(d) protects the ability of authorities to establish the following:

1. True Nature

What the property actually is.

Example

Cash is falsely recorded as legitimate business income.

2. Origin

Where the property came from.

Example

Bribe money is falsely recorded as consultancy fees.

3. Location

Where the property is kept.

Example

Gold bars are hidden in an undisclosed warehouse.

4. Movement

How the property has been transferred or moved.

Example

Money is routed through several offshore accounts.

5. Disposition

What has happened to the property.

Example

The proceeds are sold, gifted or transferred to another person.

6. Title

Who legally owns the property.

Example

A house is registered under a nominee’s name.

7. Rights with Respect to the Property

Who has legal rights or control over the property.

Example

Shares are held by a trustee for the true owner.

8. Ownership

Who is the beneficial owner.

Example

A luxury yacht is purchased through a shell company to conceal the true owner’s identity.

Q. How does section 4(1)(d) differ from sections 4(1)(a), 4(1)(b) and 4(1)(c)?

Answer

Each paragraph criminalises a different stage or aspect of money laundering.

Section 4(1)(a)

Focuses on transactions involving criminal property.

Ask:

Did the accused engage in a transaction involving the property?

Section 4(1)(b)

Focuses on dealing with criminal property.

Ask:

What did the accused do with the property?

Section 4(1)(c)

Focuses on cross-border movement.

Ask:

Did the property enter or leave Malaysia?

Section 4(1)(d)

Focuses on concealment and obstruction.

Ask:

Did the accused hide or make it difficult to identify the true nature, origin, ownership or location of the property?

Illustration

A public officer receives RM15 million in bribes.

He:

• deposits the money into several bank accounts;
• transfers part of the money to Hong Kong;
• purchases luxury apartments through nominee companies;
• creates false consultancy agreements to justify the payments; and
• registers the apartments under his relatives’ names.

Application

Section 4(1)(a)

Applies because he engaged in transactions involving proceeds of unlawful activities.

Section 4(1)(b)

Applies because he received, possessed, transferred, converted and used the proceeds.

Section 4(1)(c)

Applies because part of the proceeds was removed from Malaysia.

Section 4(1)(d)

Applies because he:

• disguised the true origin of the money;
• concealed the true ownership of the apartments;
• impeded the establishment of the beneficial ownership through nominee companies and false documents.

Accordingly, all four paragraphs may apply to different aspects of the same money laundering scheme.

Q. What is the punishment for a money laundering offence under section 4(1)?

Answer

A person convicted of a money laundering offence under section 4(1) is liable to:

• imprisonment for a term not exceeding 15 years; and
• a fine of not less than:
• five times the sum or value of the proceeds of unlawful activities or instrumentalities of an offence at the time the offence was committed; or
• RM5 million,

whichever is the higher.

Illustration

If the proceeds of unlawful activities are worth RM3 million:

• Five times the value = RM15 million.
• Since RM15 million is higher than RM5 million, the minimum fine is RM15 million.

If the proceeds are worth RM500,000:

• Five times the value = RM2.5 million.
• Since RM5 million is higher, the minimum fine is RM5 million.

Exam Note

Remember the four paragraphs of section 4(1) by their primary focus:

• Section 4(1)(a) – Transaction
• Engaging directly or indirectly in a transaction involving proceeds of unlawful activities or instrumentalities of an offence.
• Section 4(1)(b) – Dealing with the Property
• Acquiring, receiving, possessing, disguising, transferring, converting, exchanging, carrying, disposing of or using the property.
• Section 4(1)(c) – Cross-Border Movement
• Removing criminal property from Malaysia or bringing it into Malaysia.
• Section 4(1)(d) – Concealment
• Concealing, disguising or impeding the establishment of the true nature, origin, location, movement, disposition, title, rights or ownership of criminal property.

Memory Aid

Think of the money laundering process as four stages:

1. Transaction → section 4(1)(a).
2. Handling the property → section 4(1)(b).
3. Moving it across borders → section 4(1)(c).
4. Hiding its true identity → section 4(1)(d).

Together, these provisions ensure that every significant method of dealing with, moving, or concealing proceeds of unlawful activities and instrumentalities of an offence is criminalised under the AMLATFPUAA.

Financial Crimes

Section 4(1)(c) of the AMLATFPUAA

Q. What does section 4(1)(c) of the AMLATFPUAA provide?

Answer

Section 4(1)(c) provides that a person commits a money laundering offence if he or she:

“removes from or brings into Malaysia, proceeds of an unlawful activity or instrumentalities of an offence.”

This provision specifically criminalises the cross-border movement of criminal property.

Unlike section 4(1)(a), which focuses on transactions, and section 4(1)(b), which focuses on dealing with criminal property, section 4(1)(c) targets the physical movement of proceeds of unlawful activities or instrumentalities of an offence into or out of Malaysia.

Its objective is to prevent criminals from exploiting international borders to conceal criminal proceeds or relocate the tools used to commit serious offences.

Q. What are the essential elements of section 4(1)(c)?

Answer

To establish an offence under section 4(1)(c), the prosecution must prove that:

1. the accused removed property from Malaysia or brought property into Malaysia; and
2. the property was:

• proceeds of unlawful activities; or
• instrumentalities of an offence.

Unlike section 4(1)(a), there is no requirement to prove that the movement occurred through a transaction.

Likewise, unlike section 4(1)(b), the focus is not on whether the accused acquired, possessed or used the property, but rather on the fact that the property crossed Malaysia’s borders.

Q. What is meant by “removes from Malaysia”?

Answer

“Removes from Malaysia” refers to taking or transporting proceeds of unlawful activities or instrumentalities of an offence out of Malaysia into another country.

The property may include:

• cash;
• precious metals;
• jewellery;
• vehicles;
• machinery;
• valuable goods; or
• any other criminal property.

The offence is complete once the criminal property is removed from Malaysia.

Case Example

A corrupt public officer secretly transports RM3 million in cash obtained from bribery from Kuala Lumpur to Singapore.

Application

The RM3 million constitutes proceeds of unlawful activities. By taking the money out of Malaysia, the public officer has removed proceeds of unlawful activities from Malaysia, thereby falling within section 4(1)(c).

Q. What is meant by “brings into Malaysia”?

Answer

“Brings into Malaysia” refers to bringing proceeds of unlawful activities or instrumentalities of an offence from another country into Malaysia.

The provision applies regardless of whether the underlying serious offence occurred in Malaysia or overseas.

Case Example

A drug trafficking syndicate transports RM2 million earned from overseas drug sales into Malaysia to invest in local businesses.

Application

The RM2 million constitutes proceeds of unlawful activities. Bringing the money into Malaysia falls within section 4(1)(c).

Q. Can section 4(1)(c) apply to instrumentalities of an offence?

Answer

Yes.

Section 4(1)(c) applies equally to instrumentalities of an offence.

If property used, or intended to be used, to commit or facilitate a serious offence is moved into or out of Malaysia, the provision may apply.

Case Example 1

A criminal syndicate imports specialised machines into Malaysia to manufacture counterfeit currency.

Application

The machines are instrumentalities of an offence because they are intended to facilitate counterfeiting. Bringing them into Malaysia falls within section 4(1)(c).

Case Example 2

A drug trafficking syndicate exports a speedboat previously used to smuggle drugs from Malaysia to Indonesia.

Application

The speedboat is an instrumentality of an offence. Removing it from Malaysia falls within section 4(1)(c).

Q. How does section 4(1)(c) differ from sections 4(1)(a) and 4(1)(b)?

Answer

Although all three provisions deal with criminal property, each criminalises a different type of conduct.

Section 4(1)(a) focuses on transactions involving proceeds of unlawful activities or instrumentalities of an offence.

Examples include:

• purchasing property;
• selling property;
• investing criminal proceeds;
• depositing money into a bank account; and
• transferring funds through the banking system.

The emphasis is on the transaction itself.

Section 4(1)(b) focuses on dealing with criminal property.

Examples include:

• acquiring;
• receiving;
• possessing;
• disguising;
• transferring;
• converting;
• exchanging;
• carrying;
• disposing of; and
• using,

proceeds of unlawful activities or instrumentalities of an offence.

The emphasis is on the accused’s conduct in handling the property.

Section 4(1)(c) focuses exclusively on the international movement of criminal property.

Examples include:

• taking illicit cash out of Malaysia;
• bringing criminal proceeds into Malaysia;
• exporting vehicles used for drug trafficking; or
• importing equipment intended for counterfeiting.

The emphasis is on cross-border movement rather than transactions or possession.

Illustration

A public officer receives RM8 million in bribes.

He:

• deposits the money into a Malaysian bank account;
• transfers RM5 million to an offshore account;
• physically carries RM1 million in cash to Singapore; and
• later brings RM500,000 back into Malaysia to purchase a commercial building.

Application

Section 4(1)(a) applies because the accused:

• deposited the money;
• transferred funds overseas; and
• purchased the commercial building.

These are transactions involving proceeds of unlawful activities.

Section 4(1)(b) applies because the accused:

• received;
• possessed;
• transferred;
• carried; and
• used,

the proceeds of unlawful activities.

Section 4(1)(c) applies because the accused:

• removed RM1 million from Malaysia; and
• subsequently brought RM500,000 back into Malaysia.

These acts involve the cross-border movement of proceeds of unlawful activities.

Accordingly, all three paragraphs may arise from the same course of conduct, with each paragraph addressing a different aspect of the accused’s conduct.

Exam Note

Section 4(1)(a) – Transaction-Based Offence

• Focuses on transactions involving proceeds of unlawful activities or instrumentalities of an offence.
• Ask:
• Did the accused engage, directly or indirectly, in a transaction involving the criminal property?
• Examples:
• depositing money;
• purchasing property;
• investing criminal proceeds;
• selling assets.

Section 4(1)(b) – Property-Based Offence

• Focuses on how the accused dealt with the criminal property.
• Ask:
• What did the accused do with the proceeds or instrumentality?
• Covers:
• acquiring;
• receiving;
• possessing;
• disguising;
• transferring;
• converting;
• exchanging;
• carrying;
• disposing of; and
• using.

Section 4(1)(c) – Cross-Border Movement Offence

• Focuses on the international movement of criminal property.
• Ask:
• Did the accused remove the criminal property from Malaysia or bring it into Malaysia?
• It is immaterial whether the property consists of:
• proceeds of unlawful activities; or
• instrumentalities of an offence.

Memory Aid

Think of the three provisions as addressing different aspects of the same criminal property:

• Section 4(1)(a) → Transaction.
• Section 4(1)(b) → Dealing with the property.
• Section 4(1)(c) → Cross-border movement.

Together, they ensure that the AMLATFPUAA captures transactions, possession and other dealings, and the international movement of both proceeds of unlawful activities and instrumentalities of an offence.