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Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT)

Session Objectives :

1. Improve your understanding on Money Laundering2. Appreciate developments in Anti Money Laundering3. Work towards combating money laundering by helping to detect and prevent

possible money laundering activity

Why is Money Laundering important?

As per Anti-Money Laundering and Anti-Terrorism Financing Act 2001, Convicts are those whoare NOT ONLY MONEY LAUNDERERS, BUT also those ABETTING money launderingThus, it is important to understand and to comply with the ruling and also our own AIG AntiMoney Policy.

What is Money Laundering?

Process to convert cash/property derived from criminal activities to give it alegitimate appearance.

Process to clean dirty money to hide its criminal origin

A simple example of money laundering would be when a drug smuggler places a RM100,000cash deposit into a local bank, and subsequently withdrawing RM50,000 at a later date.

Why do criminals Launder Money?

To destroy money trail linking them to their activities/crime.

To prevent the dirty money from being discovered and seized by authorities.

A simple example will be to deposit dirty money into insurance company as premium paymentand walked off with a cheque issued by the insurance money that can be banked in as proceedsof insurance ( i.e clean money )

How is Money Laundered? There are three steps involved in money laundering : placement ,layering and integration.

Placement is the entry point of dirty money into the financial system. The purpose of thisactivity is to move funds away from direct association with the crime from which themoney is obtain.

Examples : pay premium for single premium investment-linked policy, life policy ,endowment policy

Layering is a series of financial transactions designed to conceal the origin of dirty moneywith the main aim to prevent detection.

Examples: loan against insurance policy, change of beneficiary on/before maturity ofpolicy.

Integration is the exit point of dirty money and entry point of the cleaned money into thefinancial system

Examples: purchase assets or investment in business

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Complex money laundering employs many layers of transaction using different financialinstitutions, which are designed to conceal the illegal money source.

Methods of Money Laundering

1. Through banking system2. Use of nominee and family members3. Setting up of front companies4. Usage of money changers5. Use of cash transactions to conceal money trail

Laundering Money is like washing clothes..

Where does Money Laundering occur?

Money Laundering happens WORLDWIDE as long as there is opportunity to clean dirty money.Some of the target countries are those with low risk of detection due to their weak or ineffectiveAnti Money Laundering systems.

How much money is laundered worldwide?

According to International Monetary Fund ( IMF), it is estimated that 2-5% of the global grossdomestic products are laundered worldwide. This equals to USD 300 billion to USD 2 trillion.

Why you need to know about Money Laundering and Terrorism Financing?

Because you are part of AIAs agency force, you are the Companys front line contact whendealing with the customer. Due to this contact relationship, you are in the BEST position toassess your customer profile, characterictics and AML/CFT risks. In this respect, the Companyneeds your cooperation to feedback and report any suspicious transactions for the purpose ofidentifying suspected money launders or terrorists.

Moreover, Malaysia is an attractive target as it is one of the largest financial markets in AsiaPacific.

Dirt Clothes

Washin Machine

Immersion

Soa in

S in Dr

Clean Clothes

Dirt Mone

Clean Mone

Inte ration

La erin

Placement

Insurance Com an

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Kindly note that you are also legally bound by the agency contract to observe the requirements ofBank Negara Malaysia on AML/CFT.

What is the due diligence required from you as an agent?

The Company expects you to exercise due diligence and proper verification procedures beforeyou perform an insurance sale to your customer. Verification procedure ranges from sighting ofNational Registration Identity Card for individual to sighting of incorporation documents for bodycorporates. Please consult the respective profit centres for further detailed requirements.

Kindly note that for insurance policies with premium exceeding RM50,000 and RM100,000 perannum in respect of individual and group policy, you are required to submit a copy of the verifieddocuments together with application form.

Insurance products risk matrix

High Risk

Permanent life policies with high cash surrender value

Single premium investment-linked policies

Endowment policies

Annuities

Medium Risk

Term life policies with stored value where no loan is allowed against policy

Low Risk

Group life insurance

Credit life policies (e.g. MRTA)

General insurance (e.g. property or casualty insurance)

What are the General Red Flags that you can look out for?

Customers Behaviour

Evasive Unwilling to provide information

Nature of transaction

Not consistent with customers profile.

Unusual transaction pattern.

Does not make any economic sense.

Fall under serious offences in Second Schedule of AMLA & CFT 2001 or foreignserious offences. Example of offences under the Second Schedule are

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corruption, illegal betting, illegal gaming, dangerous drugs, kidnapping, explosivepossession and many others.

Examples of High Risk Customers

High net worth individuals; Non-resident customers; From locations known for their high rates of crime (e.g. drug producing, trafficking,

smuggling) Countries or jurisdictions with inadequate AML/CFT laws and regulations such as the

Non-Cooperative Countries and Territories (NCCT). Please refer to the Financial ActionTask Forces website[www.fatf-gafi.org] for the current list of NCCT;

Politically Exposed Persons; Legal arrangements that are complex (e.g. trust, nominee); Cash based businesses; Unregulated industries.

What is Financing of Terrorism?

It refers to carrying out transaction involving funds that may or may not be owned byterrorist, or that have been, or are intended to be, used to assist in the commission of

terrorism Financing of terrorism includes:

a. Providing or collecting property for carrying out an act of terrorism;b. Providing services for terrorism purposes;c. Arranging for retention or control of terrorist property; ord. Dealing with terrorist property.

i. In identifying financing of terrorism, you should pay attention to the USE OF FUND ofyour customers

ii. With regard regards to financing of terrorism, your role is to ensure that none of yourcustomers are on the United Nations Security Council (UNSC) terrorist sanction list or onthe specified entities list as declared by the Minister of Home Affairs from time to time.The UNSC list can be viewed at URL

www.un.org/sc/committees/1267/consolist.shtml while the specified entities list iscommunicated by Minister of Home Affairs in the Gazette. At the moment, there are nopersons on the Minister of Home Affairs specified entities list.

What do I do if I come across a suspicious client or transaction?

If you have reasonable grounds to suspect that the transaction involved proceedsfrom unlawful activity, money laundering offence or terrorism financing offence,you should report this suspicion. However, remember not to tip off to thesuspected party!

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How do I report a suspicious transaction?

The Company AML/CFT reporting hierarchy is as below:

If you come across any suspicious customers for money laundering or terrorism financing, youare responsible to report the matter to the Central Reporting Unit of AIA Malaysia. This CentralReporting Unit is AIAs Compliance Department located at Level 27 with the fax number of 03-20562773.

What does Central Reporting Unit do? Central reporting point for Malaysian branches and agency force to report all suspicious

money laundering activities. Identify, investigate and monitor such suspicious activities. Report Company suspicious activities to BNM Financial Intelligence Unit in prescribed

form.

Provide guidance and advice to all staff and agent on Anti- Money Laundering & CounterFinancing of Terrorism programmes.

What does Compliance Officer do?

Disseminate information to staffs and agents on Anti-Money Laundering, TerrorismFinancing and Know Your Customer (KYC) policy.

Advise & educate staffs and agents in collaboration with Training Department onprevention, recognition and detection of money laundering activities.

Monitor compliance of AML programs and KYC policy. Ensure good record retention. Carry out preliminary investigations into suspicious money laundering cases before

reporting to CRU.

Monitor suspicious money laundering activities after the cases have been reported to therespective regulatory authorities.

Compliance Officer

-Branch/Service Centre

Compliance Officer

-Policy Owner Service

Compliance Officer

-Underwriting Dept.

Agency Force

AIA Malaysia

Central Reporting Unit (CRU)

-Chief Compliance Officer

-Investigating Officer

Bank Negara Malaysia

Financial Intelligence Unit

Board of Directors

Senior Management

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What are the offences under Anti Money Laundering and Anti Terrorist Financing Act 2001?

Laundering money (RM5m max. &/or jail max. 5 years)

Not reporting suspicious transactions (RM250k max.)

Tipping off to money launderers (RM1m max. &/or jail max. 1 year)

Not comply with record retention requirements (RM1m max. &/orjail max. 1 year)

Not co-operating with regulators (RM1m max. &/or jail max. 1 year) Accepting business from a designated terrorist under the Act (RM1m max. &/or jail max.

1 year)

What are your roles as an agent?

Dos1. Prevent Money Laundering

Know your customer, i.e. exercise customer due diligence!Maintain a good compliance environment,e.g. good agent recruitment, training & record retention

2. Detect Money Laundering

Know the redflags!Know the individuals and entities listed on the UN Sanction List and the Minister ofHome Affairs specified entities list

3. Report Money Laundering- Know the reporting framework!

Donts1. Commit the offences as stated underAMLA & CFT 2001

Why are you as an agent so IMPORTANT ?

If you are unaware of what your clients are doing, then you could be UNWITTINGLY

become a party to Money Laundering or terrorism financing No one knows the client as well asYOU do That makesYOU a great resource in the war AGAINST money laundering and terrorism

financing YOU are in the IDEAL position to spot suspicious activity and help prevent terrorists and

other criminals from committing atrocious crimes like those of September 11, 2001 YOU can make the DIFFERENCE!!!!

For more updates and information regarding this, you may log on to Agency BestPractices website.1. Firstly log on to AIA Direct.

2. Enter into Agency Best Practice.

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3. Navigate within the Agency Best Practice Website.