Money laundering is the process of cleaning ‘dirty’ money to disguise its criminal origin[1].  It is a serious crime – a boon towards terrorism and corruption.  
Lawyers are extremely vulnerable because their services are required by money launderers to complete certain transactions to clean ‘dirty’ money.  Using lawyers would also provide a facade of genuineness and legitimacy to the launderer’s activity, not to mention having access to the lawyer’s client account – which makes the profession attractive to them.
This vulnerability is probably why lawyers were included as one of the ‘reporting institutions’[2] under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (“the Act”).  Since September 2004, lawyers can no longer act discreetly and be disinterested in the affairs of their client. Lawyers are now official informants – ie, ‘reporting institutions’ for the authorities.  Lawyers have a duty to scrutinize a specified range of transactions coming their way and report anything suspicious promptly.  Failure to report is an offence, which reporting institutions may be punished with hefty sentences!

The Penalty for Not Reporting a Suspicious Transaction Fine up to RM1 million or 3 years imprisonment or both.  An added RM3,000 for each day it continues to be committed.[3]

 
PROTECT YOURSELVES FROM BEING ABUSED BY MONEY LAUNDERERS
Here’s the lowdown on what you need to know and do to protect yourself against money launderers and avoid non-compliance punishments under the Act[4]:
 
Know your client!
The identity of parties involved is the first aspect which may give rise to a reason for suspecting that a transaction might involve illegal proceeds.  Therefore, it is crucial for every law firm to conduct Customer Due Diligence (“CDD”) on their clients to obtain (and maintain records of) a profile on the identity and background of the client.
CDD should include information and documents such as:

1. names and aliases;
2. identification documents such as identification cards and passport;
3. place of residence;
4. details of employment;
5. occupation and business activities;
6. country of origin and residence;
7. company registration number; and
8. tax and revenue references.

 
If basic information on the identity or the background of the client is being withheld or where it appears that the client is acting on directions from undisclosed persons, consider declining the brief.
Remember, proper identification of clients and their background will provide a strong foundation for compliance with the Act!
 
Know the other parties!
Whilst it may not always be convenient or appropriate to demand information of the other parties involved in a transaction to the same extent as your client, you should still try to gather as much information along the same lines.
 
Be careful with these transactions!
The Act[5] categorises the following range of transactions as high risk:

1. buying and selling of immovable properties;
2. management of client money, securities or assets;
3. management of client account, including savings and securities account;
4. organising of contributions for the creation, operation or management of companies; and
5. the creation, operation or management of legal entities or the buying and selling of legal entities.

Be extra careful and do not cut corners even when you’re bogged down with heavy workloads.  Continue to monitor as the transaction progresses.  Your nose for any suspicion may be your saviour in the days to come.
 
If it’s suspicious, report!
A suspicious transaction refers to any transaction (regardless of the amount) that:

1. appears unusual or unnecessarily complex;
2. has no clear economic purpose or where the purpose of the transactions is not entirely consistent with its effect;
3. appears illegal;
4. does not commensurate with client’s profile or business activities;
5. involves proceeds from an unlawful activity; or
6. indicates the client is involved in money laundering or terrorism financing activities.

The duty to report suspicious transactions apply to attempted or proposed transactions!  Even if the transaction did not proceed, or where you had declined the brief, the duty to report persists.
 
WHAT ARE THE REPORTING PROCEDURES?
The Act requires the reporting institution to report suspicious transactions immediately.  Reports are made via the Suspicious Transaction Report (“STR”) form[6] and submitted to the Financial Intelligence and Enforcement Department of Bank Negara Malaysia.
The person responsible in making the report would usually be the lawyer responsible over the transaction.  In medium or bigger sized firms, a particular partner may be designated to submit the STR for the entire firm or for a particular department.
 
LEGAL PROFESSIONAL PRIVILEGE?
Section 20 of the Act overrides all other secrecy obligations, including that between a lawyer and the client.  Legal professional privilege is no excuse for not submitting a STR!
Do not fret - in submitting a STR, your identity and information shared will be held in secret.  The Act protects you from all civil, criminal and disciplinary proceedings, unless the report was made in bad faith.
 
TO ERR ON THE SIDE OF CAUTION
Transactions handled by lawyers almost always involve other reporting institutions (ie banks, insurance companies and other professionals).  A reason for suspicion may be apparent to one of these parties more than the others.  A report by another reporting institution can also cast a bad light on you if you do not report a suspicion.  It is therefore recommended that you err on the side of caution when determining whether to submit a STR.