KUALA LUMPUR (Nov 22): Bank Negara Malaysia (BNM) governor Muhammad Ibrahim has put forward a three-pronged strategy to implement stronger defences within the financial system.
The strategies are namely the capitalisation on technology, promotion of clever partnership between the authorities and industry, as well as forging of closer international cooperation.
In his opening remarks at the third Joint Regional Counter-Terrorism Financing Summit 2017 today, Muhammad said the nature of terror and terrorism financing is much more complex as compared with ten years ago, as there are numerous new methods to raise, move and store funds. These are being conducted through small-scaled transfers via banks or money services businesses and physical transportation of cash.
These recent advancements in financial technology, provide new opportunities for anonymity as well as a leeway for terrorist financiers to benefit from anonymous transactions, he added.
“As change is a constant, collation of data points that this environment will continue to persist. Global internet users have increased from 397 million in the year 2000 to nearly 3.9 billion as of June 2017, an impressive growth of almost 1000%,” the governor said.
“Similarly, global investment activities in the fintech (financial technology) industry have increased from US$9 billion in 2010 to US$25 billion in 2016. If this trend is anything to go by, the financial industry will be hard pressed to mitigate, identify and prevent cases of abuse in the system,” he added.
Muhammad pointed out that the adoption of artificial intelligence, machine learning, and big data technology are tools that would likely be imperative, as suspicious transactions become more complex and harder to detect.
The use of artificial intelligence and big data will potentially increase efficiency and accuracy of assessments that is essential in a dynamic environment. As such, he said the banking sector needs to adopt the latest and most advanced technologies to improve its risk management framework.
“Beginning 2018, Bank Negara Malaysia will designate persons converting crypto currencies into fiat money currencies as reporting institutions, under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001,” he said.
“This is to prevent the abuse of the system for criminal and unlawful activities and ensuring the stability and integrity of the financial system.”
Meanwhile, Muhammad noted dynamic collaboration between the public and private sectors is imperative to create an environment conducive for the creation of innovative solutions.
BNM will continue its role in fostering cooperative platforms between the authorities and financial institutions, to enable “rapid responses” to terrorism financing threats, the governor said. He added that the central bank is currently finalising the details of a new requirement for the Banking and Money Services Business sector to report remittances in high risk areas.
The high risk areas will be determined based on the law enforcement agency’s intelligence on areas that they view may pose higher risks for funding of terrorism activities, he added.
“Another area to ensure an effective mitigating strategy requires closer regional and global cooperation, particularly in the sharing of intelligence and technical know-how. Terrorism and terrorism financing are global issues that demand global solutions. Sharing of intelligence and expertise across borders will go a long way towards enhancing the effectiveness of our risk management framework,” Muhammad said.
“There is no doubt that rapid technological developments have offered immense potential for economic growth. Unfortunately, they have also spawned new ways for terrorist organisations to acquire, move and manage their funds,” he added.
“In light of this development, the role of financial sector as a bulwark against terrorists financing becomes even more critical. The financial system must always be in a state of readiness to identify and effectively prevent any emerging risk of terrorism financing.”
The summit is hosted by BNM, along with its regional partners: the Australian Transaction Reports and Analysis Centre (AUSTRAC) and Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK) Indonesia.