The Effect of Trade Based Money Laundering on the Risk Assessment of Banking Sector in Malaysia

by Zetty Yusnita Binti Abdul Jalil

June 2021

Abstract

This paper aims to explore in depth some of the effect of trade-based money laundering on the risk hazards of the banking institution in Malaysia. Banking institution is the frontline of defence responsible to undertake money laundering risk assessment. Due to the susceptibility of the banking sector and their vulnerability to money laundering, adequate money laundering risk assessment is an essential.

The frontline staff of the banking institution are the one liable to initiate the risk assessment of money laundering through banking activities such as personal or company’s accounts opening , deposits , remittances and withdrawal. Increased use to trade based money laundering means there’s large amount of cash acquired from the illegal activities .These proceeds then are being transform into legitimize available funds. Unlike other financial crime, trade based money laundering occurs outside of the banking system .

The financial sector only becomes involve after the activity has been done.This research tends to identify the risk assessments faced by the executives in the financial institution and recognize the loopholes in the available system used. The database were accumulate through surveys and also by interviewing the banking officers who are involved in the risk assessment of the trade base money laundering and in several financial institutions in Malaysia. Several interviews were done with the person in-charge of the risk assessment and also with the person who not only supervise the regulation but also examine the information gathered pertaining to the risk of money laundering in the Malaysian financial system.

Banking institution are under intense worried to handle client’s account effectively as there are regulations to do a comprehensive checks on the accounts transaction. Support by the compliance department is essential for the frontline officers and monitoring by the regulatory authority will enhance the intensity in the banking institutions.

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