AMLA MALAYSIA – The Policy On Cryptocurrency (Digital Currency)

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Due to the rapid development in the field of cryptocurrencies, increasing functionality of its use, growing adoption, and its global nature, governments around the world have (after factoring in recent rapid developments including the global nature of its usage and the diverse multiple functions it is being used for) adopted various approaches and regulatory measures to address risks associated with and posed by it.

This includes promoting greater transparency in its use to protect the integrity of the financial system and strengthening incentives to prevent its abuse stemming from illegal activities.

In comes Bank Negara Malaysia (BNM) and AMLA. To counter the concern mentioned above, BNM amended AMLA (which came into force on 2 January 2018) to ensure that any person offering services to exchange digital currencies either from or to fiat money, or from or to another digital currency is subject to obligations (including reporting) under AMLA like any other reporting institutions before it. Furthermore, a policy was issued on the 27 February 2018 to guide the reporting institution to ensure that effective measure and put in place to ensure the risks above is addressed.

Without further chit chat, let’s have a look at the policy.

PS: We have covered briefly what should a reporting institution do/ some of the good practices that a reporting institution should have in place in our previous article, hence, we will only cover what we have not mentioned earlier.

You may read it here – How To Report A Suspicious Transaction?

A Brief Outlook On The Policy

Who (reporting institution) must comply with the policy?Any person who provides any or any combination of the following services (whether in the course of carrying on a digital currency exchange business or otherwise):
1. Exchanging digital currency for money;
2. Exchanging money for digital currency; or
3. Exchanging one digital currency for another digital currency.
What happens if one wishes to implement a new cryptocurrency?1. Reporting institutions are required to identify and assess the money laundering/ terrorism financing (ML/TF) risks that may arise in relation to the development of new digital currencies, products, services and business practices, including new delivery mechanisms, and the use of new or developing technologies whether for new or existing solutions.
2. In this regard, the reporting institution is required to:
a. Undertake the risk assessment prior to the launch or adoption of such new digital currencies, products, services, business practices and technologies;
b. Take appropriate measures to manage and mitigate the risks; and
c. Document the risk assessment in writing.
When should a reporting institution submit a suspicious transaction report?Whenever the reporting institutions suspect or have reason to suspect that the transaction (including attempted or proposed transaction), regardless of the amount, appears:
1. Unusual;
2. Illegal;
3. To have no clear economic purpose;
4. To involve proceeds from unlawful activity and instrumentalities of an offence; or
5. To indicate that the customer could be involved in money laundering/ terrorism financing.
Examples of suspicious transactions:1. Transactions that appear inconsistent with a customer’s known profile or unusual deviations from normal transactions or relationships.
2. Transactions that require the use of complex and opaque legal entities and arrangements.
3. The transaction with an entity established in jurisdictions with weak or absent AML/CFT laws and/or secrecy laws.
4. A customer who is reluctant to provide evidence of his identity or where the customer is a corporate entity, evidence of its place of incorporation, and the identity of its major shareholders and its director(s) or relevant officer(s).
5. Any situation where the identity of the customer is difficult to determine.

Having said all the above, it must be noted that Bank Negara Malaysia has reiterated that cryptocurrencies are not recognized as legal tender in Malaysia. Members of the public are therefore advised to undertake the necessary due diligence and assessment of risks involved in dealing in digital currencies or with entities providing services associated with digital currencies.

Looking for a lawyer to consult regarding cryptocurrency and AMLA Malaysia?

Other related articles you may want to read:

  1. AMLA Malaysia – What Are The Rights Accorded To An Information Provider?
  2. Introduction to Politically Exposed Persons (PEPs) in Malaysia