The Central Bank of Malaysia, Bank Negara Malaysia (“Bank”) has drafted new regulations to expand reporting requirements for digital currency exchanges under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA).
According to the Bank, the goal of this proposed legislation is to “ensure that effective measures are in place against money laundering/terrorism financing risks associated with the use of digital currencies and to increase the transparency of digital currencies activities in Malaysia.”
Rather than signing this into law immediately, the Bank has asked for public consultation on the draft. Under the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Digital Currencies (Sector 6) Exposure Draft, digital currency exchangers, including cryptocurrency exchangers, would be classified as reporting institutions, and would have a legal obligation to declare their details to the Bank. Under the First Schedule of the AMLA, digital currency exchangers would also have transparency obligations regarding any risks associated with the use of digital currencies. The Bank believes that these obligations will serve to prevent the use of digital currencies for criminal or unlawful activities, including terrorism and money-laundering.
If this draft is signed into law, then digital currency exchangers would be punished for non-compliance if they fail to declare their details under the AMLA. Enforcement and non-compliance actions may include termination or denial of use of financial services in Malaysia. The AMLA also gives the government of Malaysia the ability to “provide for the forfeiture of property involved in or derived from money-laundering and terrorism-financing offenses as well as terrorist property, proceeds of an unlawful activity and instrumentalities of an offense, and for matters incidental thereto and connected therewith.” If this bill is passed, it appears that companies that do business in Malaysia could have their assets seized, even if there is no evidence that they are participating in nefarious activities.
The AMLA also regulates “cross border movements of cash and bearer negotiable instruments” under Part IVa. In this section of the AMLA, this bill would also give the Malaysian government the “Power of arrest without warrant” (Part IVa, 28I). This may be considered similar to the bipartisan US Senate Bill S.1241 – Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017 which had its most recent hearing on November 28, 2017.
The Bank’s press release states that “Bank Negara Malaysia does not regulate digital currencies” and does not consider them to be legal tender, meaning that they are not covered by the same standards applied to financial institutions that are regulated by the Bank. With this warning, the Bank reiterates that digital currency losses and disputes are not protected under established financial regulations in the way that cash transactions would be covered, and advises the public to evaluate risks associated with digital currencies, including volatility, and vulnerability to cyber attacks.
The Bank has asked for written feedback on the requirements, with a submission deadline of January 14, 2018.
Daniel is an experienced and dynamic entrepreneur with a demonstrated history of launching and operating successful businesses. Skilled in Business Strategy, Technical Consulting, Coaching, Sales, Entrepreneurship, Team Building, and Public Speaking.
The views and opinions expressed here are for informational purposes only, and should not be confused with professional financial advice. These opinions are solely those of the author and do not necessarily reflect the views of CashTechNews.com. Every investment and trade involves risk. You should conduct your own research, and contact your professional financial advisor before making any investment.
Corrections, feedback, and ideas should be submitted through the website contact form.