It was Al Capone, the notorious Chicago gangster from the 1920s and father of modern illegal proceeds, who first coined the term "money laundering".
He bought laundromats since they were a cash-only business. He then used them to hide money by claiming that their operations provided his income and assets, which were actually obtained from illegal sources including drug smuggling, prostitution and tax evasion.
He was sentenced to 11 years in prison for tax evasion and fined US$80,000. Forensic accounting found the evidence needed to shut down his illegal operations.
Interestingly, the first prosecution for money laundering in Malaysia involved a woman.
Dr Hamimah Idruss — a former director of Syarikat Safire Pharmaceuticals Sdn Bhd — was charged in 2005 with laundering a total of RM41.337 million and abetting in forgery in the issuance of promissory notes to secure funding from Siemens Financial Services Ltd for her company.
After 15 years of the trial, including appeals, Hamimah (now 72) was sentenced to 38 years in prison and fined RM6.39 million.
The modus operandi — setting up front companies (with zero or little business) to funnel illegal money — is still being used here.
In Malaysia, prosecution for criminal acts is not time-barred.
There are several ways to recover assets using the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLATFPUAA), including criminal prosecution, civil forfeiture, compound fines, return
of assets to bona fide owners and asset recovery from absconded persons.
The Malaysian Anti-Corruption Commission's Anti-Money Laundering Division director, Datuk Mohamad Zamri Zainul Abidin, said if the authorities charged a person under the Penal Code, it would take years to prove his guilt beyond reasonable doubt. The offender may also get off due to technicalities and the lengthy appeal process.
He may also be jailed for just a few years, and be able to access laundered money via proxies when he gets out, Zamri said.
In the case of a compound, the law takes the preponderance of evidence rather than having to prove an act beyond reasonable doubt. In that way, the goal of asset recovery is achieved.
Monies will be returned to the public through the Federal Consolidated Fund. A compound is a punitive action, and paying it is an admission of guilt.
One way of making dirty money legitimate is money laundering. The money is cleansed in the following ways.
PLACEMENT: Dirty cash transfers that enter the financial system, such as change of currency, denominations and cash deposits and transactions using shell companies.
LAYERING: The money is separated and moved around to disguise its original illegal source.
INTEGRATION: Finally, laundered money re-enters the financial system and is integrated in the economy through legal and clean investments, like the purchase of luxury assets and financial and industry investments.
Criminals are getting smarter in the use of digital currencies to launder money. The recovery of laundered money has also become increasingly challenging due to criminals operating through registered companies.
These ill-gotten gains are often used for legal or illegal purposes to generate more income.
In Malaysia, this is an offence under Section 4(1) of AMLATFPUAA. If convicted, the person may face imprisonment not exceeding 15 years and a fine not less than five times the value of the proceeds, or RM5 million, whichever is higher.
With the current economic uncertainty, it is important that all taxpayers' monies remain in Malaysia and are not funnelled out to tax havens. Be patriotic — Malaysians for Malaysians.
The writer, who holds the professorial chair and is a director at Institute of Crime and Criminology, HELP University, is former president of Transparency International Malaysia