Opening Address by Datuk Ahmad Hizzad Baharuddin Director General, Labuan FSA on Combating Financial Fraud Conference: Fifty Shades of Crime
Fifty Shades of Crime



7 OCTOBER 2015

Assalamualaikum Warahmatullah Hiwabarakatuh and a very good morning.
Y. Bhg. Datuk Chin Chee Kee
Chairman, Association of Labuan Trust Companies

Encik Khairudin Abdul Rahman
Chairman of the Association of Labuan Banks
Mr. Tay Kay Luan
Chief Executive, Asian Institute of Chartered Bankers
Distinguished Speakers,

Ladies and Gentlemen,
Well, let me first wish all of you a warm welcome to this conference and to those of you who are from outside Labuan, welcome to the beautiful island of Labuan. I would like to thank the Asian Institute of Chartered Bankers and the supporting partners for organizing this event in collaboration with Labuan FSA. Now in its third year, the combating financial fraud conference has become an annual event, bringing together law enforcement officers and experts to speak on topical issues important to international financial centers such as the LIBFC. This conference underscores the commitment of the Labuan FSA in combating AML/CFT and financial fraud in the changing global financial landscape. I should also extend my thanks to the speakers for their willingness to share knowledge and views on the topic for the benefit of the participants here.
I was informed that today’s participants comprise representatives from Labuan trust companies, domestic financial institutions and the law enforcement agencies involve in combating AML/CFT. I am delighted with the participation as gaining the critical knowledge in combating all types of financial crimes is very important and that the friendship and networking fostered here in the haze free island of Labuan could cement a strong spirit of inter-agency and industry cooperation in our concerted approach to counter financial fraud. As anti-money laundering specialists, compliance experts and clients relation officers of the various institutions represented here, you are well positioned in the front lines to counter financial fraud. Your gain out of this conference to detect and evaluate vulnerabilities in AML/CFT compliance is critically important in creating a safe business environment for our financial system, and your institution specifically.

Ladies and Gentlemen,
As ‘Fifty Shades of Crimes’ becomes the theme for this year’s conference, we can infer that the nature of the fraud modus operandi is constantly changing and dynamic, and multiply in its scale and complexity. In particular, money-laundering and financing terrorism have become highlights of the financial crime in recent times. In an increasingly inter-connected world and with the expansion of electronic financial infrastructure, money laundering and financing terrorism activities have become increasingly sophisticated and more challenging. The United Nations Office on Drugs and Crime estimated that the amount of money being laundered every year range between USD800 billion – USD2 trillion a year, that translate to 2% to 5% of the entire global GPD. The magnitude of illicit funds and money laundering has the potential of stagnating the productivity of economies.
In concealing the criminal proceeds realised from illegal activities, entities generate financial flows that divert the resources away from economically- and socially-productive uses, that can have negative impacts on the financial sector and stability of economies. It is with this view that the IMF concluded that money laundering has a corrosive, corrupting effect on society and the economic system as a whole.
While the advancement of technology today allows us to combat these crimes more effectively, the technological sophistication also offered avenues for perpetrators of fraud to re-invent their methods and look for the cyber space and new geographical routes to launder money. As the world market move towards becoming a ‘global village’, the world is experiencing not only the best that other competitive nations can offer but also the worst and ills of cross border crime as financial crimes are so disconnected in distance globally but are very closely linked to one other, leveraging on company structures and veil of secrecy.
Recognising this threat, many of us are aware that significant efforts have been undertaken to fight financial frauds. However, the increasing sophistication to disguise the illegal activities and crimes warrants for a continued and concerted global actions by a united international community to detect and tackle these crimes. As threats and techniques evolve, policy makers and law enforcement authorities must always be agile to confront them and likewise, legal entities, bodies and societies are required to enhance their risk governance framework, allow better allocation of resources and to upgrade the management information system to facilitate effective monitoring and mitigation of potential risks. Recognising this importance, Labuan FSA have put in place the AML/CFT guidelines, embedding the requirements of the FATF 40 recommendations to safeguard the integrity and soundness of the Labuan IBFC and Malaysia’s financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. Continuous outreach programmes have also been conducted by Labuan FSA with the aim to instill greater awareness on AML/CFT risk and to ensure effective AML/CFT implementation by the reporting institutions. Traning and conferences like this are also well supported, within the greater aim to invest in the competency and capabilities development of the staff working in the Labuan IBFC. As the regulatory authority for the LIBFC, we will also, undoubtedly undertake regular reviews to strengthen the regulatory and supervisory regime and to ensure Labuan entities comply with AML/CFT laws and guidelines, and any non-compliances would not be tolerated.
In the global fight against money laundering and terrorism-funding, Labuan FSA has also established effective channels to facilitate international co-operation and exchange of information. The MoUs signed with various international regulators, including the most recent with Jersey Financial Services Commission, Gibraltar and Cayman Island Monetary Authority are a testimony of our commitment towards supervising the financial industry and fighting international crimes. We hope to sign more MoUs to further strengthen our cross-border supervisory network in the future.
As you may be aware, the Mutual Evaluation Report of Malaysia on AML/CFT was endorsed by the FATF Plenary in Brisbane in June and later adopted by the APG in its annual meeting in Auckland in July 2015. For your information, the report has been published at the FATF website in September. While we acknowledged that Malaysia has achieved some of the immediate outcomes to a large extent including having a robust policy framework for AML/CFT, sound legal framework for supervision and a well-functioning financial intelligence, there are areas that need to be further strengthened including in international cooperation. Moving forward, the agencies involved are working together to address all the recommendations with a comprehensive action plan but our efforts would be rendered ineffective if the private sector industries do not undertake the same effort and undertakings. It is therefore my fervent hope that the industry players take the necessary steps to address any shortcomings and strengthen the objective of Labuan IBFC as a well-regulated centre and that no criminal activities are tolerated. The good reputation of the centre is of paramount importance for the Labuan IBFC to continue gaining positive traction and endorsement by the international authorities, supra national bodies and the risk management departments of international financial institutions, and should not be tainted by any lapses and failure to pre-emptively detect and address financial crimes.

Ladies and Gentlemen,
On that note, I wish to end my speech and would like to reiterate that the shared goal to combat threats to the integrity of financial system against financial crime will continue to be dependent on the cooperation among the regulators, law enforcement agencies and the industry. I am sure this conference will shed a better understanding on the current trends in financial fraud and enlighten us on measures to address the issue more effectively and to address the challenges ahead. I wish all of you a successful conference.
Thank you.
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