Part B - Compulsory Question Question 2 You are the AML Compliance Officer of Age Bank...

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Part B - Compulsory Question Question 2 You are the AML Compliance Officer of Age Bank in Malaysia. A Freezing Order pursuant to S44(1) of Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) had been served on a corporate customer, Kaya Saya Sdn. Bhd. (KS) by the Police Diraja Malaysia on 2 February 2021. You have immediately communicated the Freezing Order to the affected branches for action. Arising from this triggering event, you performed an Enhance Due Diligence (ECDD) on all entities related to KS which have banking relationship with Age Bank. Below is the profile of KS: Incorporated in year 1993, KS is principally engaged in the exporting of various chemicals and batteries. The factory is in Muar, Johor. The sales breakdown between chemicals and batteries are 70% and 30% respectively. The group has successfully established a stable operating track record since incorporation. 90% of its products are catered for the export market, whereby the transactions are denominated in USD. Currently, their export markets include North America, Saudi Arab, Russia, Ukraine and Pakistan. Its clientele base comprised of medical suppliers, healthcare services and distribution companies, vehicle manufacturers. The shareholders are Mr Andrew Ng and Mr Afizi (business partner relationship) who hold 16% and 84% of the shareholding respectively. The sole decision maker is Mr Afizi who has been in this industry for the past 20 years. Sales based on financial year (FY) 2020 was RM245 million, comprising of export (85%) and local (15%). Net profit based on FY 2020 was RM10,000. Purchases based on FY 2020 amounted to RM60 million. The purchases of raw materials comprised 10% of imports and remaining 90% comprised local purchases of chemical and packaging materials. Currently the exposures to KS group entities are as below: Name Kaya Saya Sdn. Bhd. Kaya Nima Sdn. Bhd. (100% owned subsidiary of KS) Facilities Ringgit current account USD foreign currency account 10-year term loan Trade financing line Ringgit current account Revolving loan Balance/Outstanding Balance as at 2 February 2021 RM1,520,300.25 USD98,098.00 RM5,768,990.00 RM769,990.00 RM54,908.00 RM2,345,900.00 Based on the on-boarding and on-going customer due diligence process of the Age Bank, the following had already been conducted on KS and its subsidiary: Verified identification documents of KS, its shareholders, directors and authorised signatories. Sighted Board resolution. Screened names of KS, its shareholders, directors and authorised signatories. Sighted other supporting documents i.e. bank statements issued by other banks in Malaysia. On daily basis, the transaction patterns of the customer will be screened via surveillance system to ensure transaction patterns match the profile of the customer. So far, no suspicious transactions were noted. KS group entities are rated as low risk on the basis that the companies are all incorporated locally, no adverse news reported on these companies, no involvement of Politically Exposed Persons (PEPs) and the nature of business is exporter. For ECDD, you had requested your team to perform additional reviews as below: Internal research on KS and related parties. Review past 5 years' annual financial reports of KS and its subsidiary. Interview Mr Andrew and Mr Afizi. The outcomes of the ECDD discovered that: there are informal reports on the internet that KS group entities have been actively dealing with entities related to North Korea and Iran. the annual revenue and pricing of KS group appeared to be very much lower than companies involved in similar activities. CAMCO DECEMBER 2021 4 of 6 The findings had alerted you that KS group may be involved in proliferation financing activities. a) Based on the definition of proliferation financing, elaborate the attributes of KS group entities that matches the potential proliferation financing activities. (10 marks) b) Discuss four (4) main areas for improvement in the AML programme of Age Bank and what are your proposed controls to close the gaps. c) (10 marks) Highlight two (2) laws/regulations/guidelines related to combating proliferation financing for which Age Bank in Malaysia is required to comply with, and elaborate on the role of the Competent Authority that manages the financial intelligence received on proliferation financing related activities. d) (5 marks) Quote one (1) case each relating to terrorist financing and proliferation financing. Discuss briefly the lessons learned from the cases quoted. (5 marks) Part B - Compulsory Question Question 2 You are the AML Compliance Officer of Age Bank in Malaysia. A Freezing Order pursuant to S44(1) of Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) had been served on a corporate customer, Kaya Saya Sdn. Bhd. (KS) by the Police Diraja Malaysia on 2 February 2021. You have immediately communicated the Freezing Order to the affected branches for action. Arising from this triggering event, you performed an Enhance Due Diligence (ECDD) on all entities related to KS which have banking relationship with Age Bank. Below is the profile of KS: Incorporated in year 1993, KS is principally engaged in the exporting of various chemicals and batteries. The factory is in Muar, Johor. The sales breakdown between chemicals and batteries are 70% and 30% respectively. The group has successfully established a stable operating track record since incorporation. 90% of its products are catered for the export market, whereby the transactions are denominated in USD. Currently, their export markets include North America, Saudi Arab, Russia, Ukraine and Pakistan. Its clientele base comprised of medical suppliers, healthcare services and distribution companies, vehicle manufacturers. The shareholders are Mr Andrew Ng and Mr Afizi (business partner relationship) who hold 16% and 84% of the shareholding respectively. The sole decision maker is Mr Afizi who has been in this industry for the past 20 years. Sales based on financial year (FY) 2020 was RM245 million, comprising of export (85%) and local (15%). Net profit based on FY 2020 was RM10,000. Purchases based on FY 2020 amounted to RM60 million. The purchases of raw materials comprised 10% of imports and remaining 90% comprised local purchases of chemical and packaging materials. Currently the exposures to KS group entities are as below: Name Kaya Saya Sdn. Bhd. Kaya Nima Sdn. Bhd. (100% owned subsidiary of KS) Facilities Ringgit current account USD foreign currency account 10-year term loan Trade financing line Ringgit current account Revolving loan Balance/Outstanding Balance as at 2 February 2021 RM1,520,300.25 USD98,098.00 RM5,768,990.00 RM769,990.00 RM54,908.00 RM2,345,900.00 Based on the on-boarding and on-going customer due diligence process of the Age Bank, the following had already been conducted on KS and its subsidiary: Verified identification documents of KS, its shareholders, directors and authorised signatories. Sighted Board resolution. Screened names of KS, its shareholders, directors and authorised signatories. Sighted other supporting documents i.e. bank statements issued by other banks in Malaysia. On daily basis, the transaction patterns of the customer will be screened via surveillance system to ensure transaction patterns match the profile of the customer. So far, no suspicious transactions were noted. KS group entities are rated as low risk on the basis that the companies are all incorporated locally, no adverse news reported on these companies, no involvement of Politically Exposed Persons (PEPs) and the nature of business is exporter. For ECDD, you had requested your team to perform additional reviews as below: Internal research on KS and related parties. Review past 5 years' annual financial reports of KS and its subsidiary. Interview Mr Andrew and Mr Afizi. The outcomes of the ECDD discovered that: there are informal reports on the internet that KS group entities have been actively dealing with entities related to North Korea and Iran. the annual revenue and pricing of KS group appeared to be very much lower than companies involved in similar activities. CAMCO DECEMBER 2021 4 of 6 The findings had alerted you that KS group may be involved in proliferation financing activities. a) Based on the definition of proliferation financing, elaborate the attributes of KS group entities that matches the potential proliferation financing activities. (10 marks) b) Discuss four (4) main areas for improvement in the AML programme of Age Bank and what are your proposed controls to close the gaps. c) (10 marks) Highlight two (2) laws/regulations/guidelines related to combating proliferation financing for which Age Bank in Malaysia is required to comply with, and elaborate on the role of the Competent Authority that manages the financial intelligence received on proliferation financing related activities. d) (5 marks) Quote one (1) case each relating to terrorist financing and proliferation financing. Discuss briefly the lessons learned from the cases quoted. (5 marks)