VZCZCXRO2527
RR RUEHBC RUEHCHI RUEHDA RUEHDBU RUEHDE RUEHDT RUEHGI RUEHHM RUEHJS
RUEHKUK RUEHLH RUEHNH RUEHPW RUEHROV
DE RUEHKL #1609/01 3130805
ZNR UUUUU ZZH
R 090805Z NOV 07
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 0219
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 1522
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCNISL/ISLAMIC COLLECTIVE

UNCLAS SECTION 01 OF 02 KUALA LUMPUR 001609 
 
SIPDIS 
 
STATE PASS USTR - WEISEL AND JENSEN 
STATE PASS FEDERAL RESERVE AND EXIMBANK 
STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN 
SINGAPORE PASS TO SBAKER 
USDOC FOR 4430/MAC/EAP/J.BAKER 
TREASURY FOR FINCEN, OASIA AND IRS 
GENEVA FOR USTR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETTC KTFN KCRM PREL PTER MY
SUBJECT: TERRORIST FINANCE: MALAYSIA DINGED ON ILLICIT CASH COURIERS 
 
REF:  STATE 152088 
 
¶1. Summary: This cable responds to reftel requesting information on 
cash couriers in Malaysia.  The Financial Action Task Force Asia 
Pacific Group on Money Laundering (FATF/APG) conducted a Mutual 
Evaluation of Malaysia in February 2007.  "Cross Border Declaration 
and Disclosure" of cash was the one area deemed non-compliant with 
the FATF's 40+9 Recommendations.  The APG determined that, while 
Royal Malaysian Customs (RMC) has the authority to enforce existing 
laws on the import and export of cash and travelers' checks, in 
practice no effective enforcement mechanisms are in place. The 
Government of Malaysia recently established a task force to address 
the issue.  The U.S. is engaged and has provided several training 
courses on combating money laundering since last September, two of 
which were specifically for detecting and prosecuting bulk cash 
smuggling operations.  A third is planned for February 2008. End 
summary. 
 
 
Laws on the Books 
----------------- 
 
¶2.  Under the Customs Act (CA) and the Exchange Control Act (ECA) 
the Royal Malaysian Customs (RMC) is empowered to seize money from: 
 
 
-- a Malaysian resident carrying Ringgit and/or foreign currency 
notes, including traveler's checks, if the amount exceeds the 
permitted limit without approval by the central bank; and 
 
-- a non-resident carrying foreign currency notes, including 
traveler's checks, if the amount exceeds USD10,000 equivalent and 
failed to declare or falsely declared it. 
 
¶3.  Under the CA, any person who fails to declare or falsely 
declares currency above the permitted amount, can be arrested and 
prosecuted, and the currency can be subject to seizure. 
 
¶4.  The CA stipulates a penalty of imprisonment not exceeding five 
years and/or fine not exceeding RM500,000 (equivalent to approx. USD 
136,240) for making incorrect declarations and falsification of 
documents. Persons who are carrying out physical cross-border 
transportation of currency or bearer negotiable instruments that are 
related to money laundering or terrorism financing can be prosecuted 
and punished under the Anti-Money Laundering Act and/or Penal Code. 
 
 
 
Reporting Requirements 
---------------------- 
 
¶5.  The Exchange Control Notice of Malaysia 2006 was issued under 
the ECA, requiring resident travelers to obtain prior permission 
from the central bank to import or export Malaysian Ringgit notes 
exceeding RM1,000 (USD 303) and to export foreign currency notes, 
including  travelers' checks, exceeding the equivalent of USD 
10,000.  Non-resident travelers are required to declare amounts 
above these same levels. 
 
The Reality 
----------- 
 
¶6.  However, in practice currency declarations are made to 
Immigration, not Royal Malaysian Customs.  Upon arrival, Immigration 
returns the currency declaration card to the traveler without 
recording its data, then collects the card upon departure.  No 
system is in place for storing or retrieving the data or for 
forwarding it to RMC. The RMC may request copies of currency 
declaration forms from Immigration once travelers have departed 
Malaysia. 
 
¶7.  The RMC conducts random checks on travelers; however such checks 
typically are not conducted in response to information obtained via 
the currency declaration process. 
 
Investigations 
-------------- 
 
¶8.  The RMC does have powers to investigate and review 
non-declaration or false declaration of currency at the border 
 
KUALA LUMP 00001609  002 OF 002 
 
 
(including the authority to investigate whether the currency 
notes/traveler's checks seized are related to money laundering or 
terrorist finance) before making recommendations to the Controller 
of Foreign Exchange. However, in practice this would only occur if 
RMC were to detect currency by random or targeted checks, rather 
than via information from currency declarations. 
 
Prosecutions 
------------ 
 
¶9.  Between 1998 and early 2007, RMC prosecuted 22 cases relating to 
currency smuggling. Authorities indicate that the majority of such 
cases resulted in convictions. Despite these very low figures over 
10 years, there has been a marked increase in the last three years, 
with 18 cases of currency smuggling (out of the total 22 cases) 
having occurred since 2004. 
 
Efforts to Improve 
------------------ 
 
¶10.  The U.S. offers training both bilaterally and multilaterally. 
In September 2006 the U.S. and Australia offered a joint training 
session to 24 Malaysians from Customs, Immigration, the police, 
Attorney General's Chambers and Financial Intelligence Unit (FIU) in 
detecting and prosecuting illicit cash smuggling operations.  A 
regional follow-up course was offered in Manila in June 2007; ten 
representatives from Malaysia participated.  A third course on bulk 
cash smuggling is being planned for February 2008.  The Department 
of Justice offered a separate four-day anti-money laundering course 
in May 2007.  The embassy maintains close contact with the police, 
the FIU, and other Malaysian regulatory and enforcement entities. 
 
¶11.  In response to the FATF/APG Mutual Evaluation, Malaysia 
established a task force to formulate action plans to achieve full 
compliance with Special Recommendation IX on cash couriers.  The 
task force includes representatives of Royal Malaysian Customs, 
Immigration Department, Ministry of Internal Security, and the 
Central Bank.  A representative of the central bank's Financial 
Intelligence Unit told econoff that, so far, the task force only has 
had some preliminary meetings to try to determine how best to bring 
Malaysia into full compliance, but that she was confident that 
significant progress would be achieved within the next one year. 
 
KEITH