Let us return to the document titled "2009 International Narcotics Control Strategy Report: Major money laundering countries" released by the US Department of State and let us take a closer look and see how the United States positioned Malaysia in this report. In this report, the United States has included Malaysia as a country under its "Jurisdictions of Concern category. By definition, although this category of countries or region's financial institutions have no significant involvement in money laundering activities or that their capital flow of money does not indicate crime source, nevertheless these countries have other factors of concern to the United States.
Among the concerned factors for countries to be listed in this category as observation list include the following: First, the country's legal framework in dealing with money laundering. Second, the role of terrorism financing a country plays. Third, the level cooperation of this country with international community's fight against money laundering and terrorism finances activities.
Basically, Malaysia has well-established legal and regulatory mechanisms and framework to deal with money laundering and terrorism financing activities. At the same time, Malaysia also works with cooperation partners at bilateral, multilateral, and international levels to combat financial crime. Malaysia also allows foreign countries to audit their respective banks that have branches in Malaysia for domestic operations.
In addition, Bank Negara (Central Bank of Malaysia)'s Financial Intelligence Unit), has also signed Memorandum of Understanding (MoU) with other countries and region's financial intelligence unit for mutual exchange of financial information. These countries include Australia, Indonesia, Thailand and the Philippines and others. At the same time, Malaysia's amended Anti-Money Laundering Act has also expanded and included the authority of the Act to combat terrorism; including allowing the Act to freeze assets of the terrorists and to prosecute the people who support terrorists.
What is the Role?
Therefore, after we exclude and confirm Malaysia's established legal framework and the existing level of cooperation with the international level to combat terrorism financing, our next focus is to see if Malaysia has a role to play in money laundering and terrorism financing activities. Does Malaysia really play a role in terrorism financing? If we do, then what is that role of Malaysia in terrorism financing?
On 4 May 2009, Bank Negara released a short public statement titled "Malaysia's Financial System Not Linked To Terrorist Financing." This short public statement was issued to deny a local English newspaper's media report released on the same day about terrorism financing activities in Malaysia.
This local report said someone who was suspected of having connection with Al-Qaida terrorist network has transferred fund from Malaysia to Al-Qaida terrorist network. As such, Bank Negara has to issue such a statement to seriously deny such illegal fund transaction. Bank Negara stressed that "there is no evidence to suggest that there are people transferring fund to terrorist organizations through Malaysia's banking system." "Malaysia's banking system has monitored the situation closely and has not discovered such illegal fund transfer activities."
However, can we really claim that Malaysia has no connection at all with global terrorism? When a Malaysian by the name of Noordin Mohammed Top who was Indonesia's No. 1 wanted criminal cum mastermind behind the Jemaah Islamiyah (JI) terrorist group was shot dead by the Indonesian police last year, the existence of terrorist organization in Malaysia, as well the fact that Malaysia was used as one of the terrorist training bases were totally exposed to public eyes. Noordin Mohammed Top was the mastermind behind a number of terrorist attacks and bombings in Indonesia.
Terrorist Network in Early 1990's
In fact, many regional and international terrorism experts and academic studies have shown that in the early 1990s, Malaysia did have connection with Al-Qaida terrorist network.
According Carlyle A. Thayer, a political scientist and a professor with the School of Humanities and Social Science, University of New South Wales, pointed out in his article entitled: The New Terrorism in Southeast Asia, that during the early part of 1990's, Al-Qaida terrorist network has begun to reoriented its position to provide financial support and assistance to Islamic faith fighters in Malaysia and Indonesia. It was during this period that the influence of Al-Qaida terrorist network was expanded and felt in Malaysia, Indonesia and Singapore. Al-Qaida terrorist network provided the Islamic militants especially the JI terrorist network with financial support and military training.
In his article Carlyle A. Thayer also gathered international and regional terrorism experts' opinions and pointed out that the relationship between Al-Qaida network with the Southeast Asian region has resulted in some of the Islamic militant groups such as the Abu Sayyaf Group and the Jemaah Islamiyah group gradually incorporated into Al-Qaida's global terrorism network. Between 1990 and 2001, Al-Qaida terrorist network has even made use of the Philippines and Malaysia as its "safe haven" to make plan and launch massive terrorist attacks on the United States.
In addition, in Thayer's article, the writer also revealed that the Jemaah Islamiyah network in Southeast Asia has even set up a five-country Regional Advisory Committee called "Shura" (consultative council) and gave "Shura" the responsibility to supervise the operations of the active JI branches in Malaysia, Singapore, the Philippines, Indonesia and other countries within the Southeast Asian region. Meanwhile, in 1999, the JI network has also set up a regional alliance called "Rabitatul Mujahidin." It was learned that between 1999 and 2000, this regional JI alliance has held three meetings in Malaysia.
On the other hand, the United Nations itself has also identified the operations of three terrorist organizations in Southeast Asia. These are Al-Qaida terrorist network, the Abu Sayyaf Group, and the Jemaah Islamiyah network. In addition, in April 2006, the Counterterrorism Office of the US Department of State has released a list of global terrorist organizations. The Abu Sayyaf Group (active in the Philippines and Malaysia) and the Jemaah Islamiyah (active in Southeast Asia, including having branches in Malaysia) are also included in this global terrorist organization list.
Assistance to Militants
From the existing terrorist organizations including the Abu Sayyaf Group and the Jemmah Islamiyah network in Malaysia, and from the evidence that Al-Qaida terrorist network has since the early 1990's began to provide financial support, military training and other form of assistance to the militants and to the JI network in Southeast Asia including Malaysia, it seems unbelievable if we say Malaysia is not involved in any terrorism financing activities.
If Malaysia does not involve in terrorism financing activities, then there would not be any need for Bank Negara to take such a massive move to suspend the operation license of as many as 41 money changers in the country in 2009. This is because the United Nations has identified the "hawala" money changer system within the global money changer market has become a pipeline that supports the transfer of money to support global terrorism and other crimes. Moreover, if Malaysia is not involved in terrorism financing activities, then there is no need for Bank Negara and the Customs and Excise Department to actively start a new currency reporting mechanism (beginning this year). This new currency report rule requires all travelers coming to Malaysia or going out from Malaysia to declare to the Customs and Excise Department if they have carried more that cash equals to $10,000 with them. This is an action taken by Bank Negara to curb global money laundering and terrorism financing operations.
After the G20 meeting held in London, the G20 has come out with a resolution to take action against on those countries that termed as "tax heaven." Later on OECD (Organization for Economic Cooperation and Development) published a report and provided a list of countries that have provided cooperation and compliance to follow this international taxation law. However the OECD report mentioned four countries, namely Malaysia, the Philippines, Uruguay and Costa Rica as countries that have not signed the relevant agreement and that these four countries refused to participate in the international taxation reporting standard. The reason given by Malaysia was on the ground that "Malaysia should not be included in the list of 'tax heaven.'" Malaysia also claimed it has followed the OECD rule.
Evasion and Corruption
Basically, in addition to organized crimes such as narcotics trafficking and other kinds of illegal trafficking, fraud, prostitution, and underground gambling, the source and operation of money laundering and terrorist financing activities also include tax evasion and corruption. If Malaysia itself is not involved in "criminal activity," why should Malaysia from the very beginning refuse to sign the relevant tax reporting standards?
Coming back to the key issue of discussion: What is the role plays by Malaysia in terrorism financing? Officially, from the home affairs ministry and police's tight surveillance measures, and from Bank Negara's stringent supervision of the formal financial system's point of view, the possibility of terrorist organizations trying to engage in active operation in Malaysia is not high.
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