Skip to main content
SpringerLink
Log in

Governing Non-profit Organisations Against Terrorist Financing: The Malaysian Legal and Regulatory Modalities

  • Chapter
  • First Online:
The Palgrave Handbook of Criminal and Terrorism Financing Law

Abstract

Given the varied nature of non-profit organisations (NPOs) in Malaysia, the inherent risks connected to fundraising and charitable activities—the abuse of such sector for terrorists and money laundering purposes—may occur in many forms. Such risks may be exacerbated by weak governance structure and financial controls of NPOs and lack of supervision by regulators. This chapter argues that, despite the AML/CTF law—the legislations regulating NPOs and Best Practices—the governance of NPOs including zakat institutions in Malaysia remains a vexed issue, given the diversity of the laws affecting them and the changing legal, social, and political scenarios within the country. A much tougher political will and drastic measures to empower the regulators and NPOs to curb terrorist financing risk would be needed.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 299.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 379.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 379.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Margaret Beare, Critical Reflections On Transnational Organized Crime, Money Laundering And Corruption (University of Toronto Press 2003).

  2. 2.

    Paul Cochrane ‘Charities and Terrorism Financing Compliance—Approaches and Challenges in 2014’ (2014) <https://risk.thomsonreuters.com/sites/default/files/GRC01499.pdf> accessed 20 June 2016.

  3. 3.

    Financial Action Task Force, ‘Financial Action Task Force IX Special Recommendations October 2001’ (2010) <www.fatf-gafi.org/media/fatf/documents/reports/FATF%20Standards%20-%20IX%20Special%2 0Rec ommendations%20and%20IN%20rc.pdf> accessed 20 June 2016.

  4. 4.

    Ibid., 54.

  5. 5.

    Financial Action Task Force, ‘Best Practices: Combating the Abuse of Non-profit Organisations’ (2013) <www.coe.int/t/dghl/monitoring/moneyval/Web_ressources/Combating_the_abuse_of_NPOs_Rec8(201 3).pdf> accessed 20 June 2016.

  6. 6.

    Financial Action Task Force, ‘Risk of Terrorist Abuse in Non-Profit Organizations’ (2014) <www.fatf-gafi.org/media/fatf/documents/reports/Risk-of-terrorist-abuse-in-non-profit-organisations.pdf> accessed 20 June 2016.

  7. 7.

    Samantha Bricknell and others, ‘Money Laundering and Terrorism Financing Risks to Australian Non-Profit Organisation’ (2012) AIC Reports Research and Public Policy Series 114 <www.aic.gov.au/publications/current%20series/rpp/100-120/rpp114.html> accessed 5 October 2014.

  8. 8.

    Oonagh Breen, ‘Through The Looking Glass: European Perspectives On Non-Profit Vulnerability, Legitimacy And Regulation’ (2010) 36(3) Brooklyn Journal of International Law 947.

  9. 9.

    Hooi Khoo Ying, ‘The NGO-Government Relations in Malaysia: Historical Context and Contemporary Discourse’ (2013) 1(1) Malaysian Journal of Democracy and Election Studies 76.

  10. 10.

    Roshayani Arshad and others, ‘Organizational Characteristics and Disclosure Practices of Non-Profit Organizations in Malaysia’ (2013) 9(1) Asian Social Science 209.

  11. 11.

    Aznorashiq Mohamed Zain, ‘Towards Better Governance of Non Profit Organizations (NPOs) in Malaysia’ Conference on New Development of Anti Money Laundering & Counter Financing of Terrorism (AML/CFT): Understanding the Roles of NPO (Kuala Lumpur 14 November 2013).

  12. 12.

    Arshad and others (n 10) 210.

  13. 13.

    Ibid.

  14. 14.

    Bruce Zagaris, ‘Merging of the Anti-Money Laundering and Counter-Terrorism Financial Enforcement Regimes after September 11’ (2004) 22(1) Berkeley Journal of International Law 123.

  15. 15.

    Aishat Abdul-Qadir Zubair, Umar Aimhanosi Oseni and Norhashimah Mohammed Yasin, ‘Anti-Terrorism Financing Laws in Malaysia: Current Trends and Developments’ (2015) 23(1) IIUM Law Journal 153.

  16. 16.

    Patrick Hardouin, ‘Banks Governance and Public-Private Partnership in Preventing and Confronting Organized Crime, Corruption and Terrorism Financing’ (2009) 16(3) Journal of Financial Crime 199.

  17. 17.

    World Bank, ‘Money Laundering and Terrorist Financing: Definitions and Explanations’ (2003) <www.worldbank.org/finance/assets/images/01-chap01-f.qxd.pdf> accessed 20 June 2016.

  18. 18.

    International Monetary Fund, ‘Anti-Money Laundering Combating the Financing of Terrorism’ (2014) <www.imf.org/external/np/pp/eng/2014/022014a.pdf> accessed 19 February 2016.

  19. 19.

    John McDowell and Gary Novis, ‘The Consequences of Money Laundering and Financial Crime’ (2001) 6(2) Economic Perspectives 6.

  20. 20.

    Colin King and Clive Walker, ‘Counter Terrorism Financing: A Redundant Fragmentation?’ (2015) 6(3) New Journal of European Criminal Law 374.

  21. 21.

    UNGA, International Convention for the Suppression of the Financing of Terrorism (adopted 9 December 1999, opened for signature 10 January 2000) (2000) 39 ILM 270.

  22. 22.

    UN, ‘United Nations Treaty Collection’ <http://treaties.un.org> accessed 20 June 2016.

  23. 23.

    International Convention for the Suppression of the Financing of Terrorism (n 21) art 2.

  24. 24.

    UNSC, Res 1373 (28 September 2001) UN Doc S/RES/1373.

  25. 25.

    UNSC, Res 2178 (24 September 2014) UN Doc S/RES/2178.

  26. 26.

    UNSC, Res 2129 (17 December 2013) UN Doc S/RES/2129.

  27. 27.

    UNSC, Res 2253 (17 December 2015) UN Doc S/RES/2253.

  28. 28.

    Jonathan Winer and Trifin Roule, ‘Fighting Terrorist Finance’ (2002) 44(3) Survival: Global Politics and Strategy 87.

  29. 29.

    Valsamis Mitsilegas and Bill Gilmore, ‘The EU Legislative Framework against Money Laundering and Terrorist Finance: A Critical Analysis in the Light of Evolving Global Standards’ (2007) 56(1) International and Comparative Law Quarterly 119, 123.

  30. 30.

    In June 2016, there was a revision of R 8 and the Interpretive Note to R 8, which clarifies that not all NPO activities are high risk <www.fatf-gafi.org/publications/fatfgeneral/documents/plenary-outcomes-june-2016.html#npo> accessed 4 March 2017.

  31. 31.

    Bricknell and others (n 7).

  32. 32.

    Sandra Garcia, ‘Terrorism Financing (TF) the Silent Threat’ International Conference on Financial Crime and Terrorism Financing 2014: The Evolution of Compliance, Are We Ready? (Kuala Lumpur 8–9 October 2014).

  33. 33.

    FATF (n 3).

  34. 34.

    Emile Van Der Does De Willebois, Non-Profit Organizations and the Combating of Terrorism Financing: A Proportionate Response (World Bank Publications 2010) 208.

  35. 35.

    Financial Action Task Force, ‘International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation’ (2012) <www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF_Rec ommendations.pdf> accessed 20 June 2016.

  36. 36.

    Bricknell and others (n 7).

  37. 37.

    Mufid Abdulqader v United States Of America (2015) No 14-3058 (7th Cir).

  38. 38.

    FAFT (n 6).

  39. 39.

    Paul Palmer and Gerald Vinten, ‘Accounting, Auditing and Regulating Charities-Towards a Theoretical Underpinning’ (1998) 13(6) Managerial Auditing Journal 346.

  40. 40.

    Bricknell and others (n 7).

  41. 41.

    FATF (n 6).

  42. 42.

    Ibid., para 22.

  43. 43.

    Bala Shanmugam and Haemala Thanasegaran, ‘Combating Money Laundering in Malaysia’ (2008) 11(4) Journal of Money Laundering Control 331.

  44. 44.

    Norhashimah Mohd Yasin, Legal Aspects of Money Laundering in Malaysia from the Common Law Perspective (Lexis Nexis 2007).

  45. 45.

    Ibid., 107.

  46. 46.

    Zubair, Oseni, and Yasin (n 15).

  47. 47.

    Public Prosecutor v Syarikat OL Multi Trading & Anor [2015] 3 AMR 508.

  48. 48.

    Ibid. [5].

  49. 49.

    Public Prosecutor v Hazlan bin Abdul Hamid [2012] MLJU 499.

  50. 50.

    Azmi Osman v Public Prosecutor [2015] 9 CLJ 845.

  51. 51.

    By 4(1): ‘Any person who (a) engages, directly or indirectly, in a transaction that involves proceeds of an unlawful activity or instrumentalities of an offence; (b) acquires, receives, possesses, disguises, transfers, converts, exchanges, carries, disposes of or uses proceeds of an unlawful activity or instrumentalities of an offence; (c) removes from or brings into Malaysia, proceeds of an unlawful activity or instrumentalities of an offence; or (d) conceals, disguises or impedes the establishment of the true nature, origin, location, movement, disposition, title of, rights with respect to, or ownership of, proceeds of an unlawful activity or instrumentalities of an offence, commits a money laundering offence and shall on conviction be liable to imprisonment for a term not exceeding fifteen years and shall also be liable to a fine of not less than five times the sum or value of the proceeds of an unlawful activity or instrumentalities of an offence at the time the offence was committed or five million ringgit, whichever is the higher’.

  52. 52.

    Bank Negara Malaysia, ‘Standard Guidelines on Anti-Money Laundering and Counter Financing of Terrorism’ (Financial Intelligence Unit, BNM/RH/GL000-2) 2 <www.bnm.gov.my/guidelines/03_dfi/02_anti_ money/02_standard_guidelines_amla.pdf> accessed 4 March 2017.

  53. 53.

    Zubair, Oseni, and Yasin (n 15).

  54. 54.

    Penal Code (Malaysia), s 130N.

  55. 55.

    Terrorism Act 2000, s 15.

  56. 56.

    Penal Code (n 54).

  57. 57.

    Financial Action Task Force, ‘Terrorist Financing and Financing of Proliferation’ in Anti-Money Laundering and Counter-Terrorist Financing Measures-Malaysia (2015), 75 para 3 <www.fatf-gafi.org/documents/documents/mer-malaysia-2015.html> accessed 20 June 2016.

  58. 58.

    Ibid., 74.

  59. 59.

    Saroja Dhanapal and Johan Shamsuddin Sabaruddin, ‘Rule of Law: An Initial Analysis of Security Offences (Special Measures) Act (SOSMA) 2012’ (2015) 23(1) IIUM Law Journal 1.

  60. 60.

    The Star, ‘Cooperation Needed to Combat IS on Social Media’ The Star (Kuala Lumpur, 6 March 2015) <www.thestar.com.my/news/nation/2015/03/06/cooperation-needed-to-combat-is-on-social-media/> accessed 20 June 2016.

  61. 61.

    Public Prosecutor v Rohaimi Abdul Rahim & Anor [2007] SGHC 177.

  62. 62.

    The Sun Daily, ‘Appeals Court Increases Jail Term of Two Men Convicted of Terrorism-Related Offences’ The Sun Daily (Putrajaya, 21 June 2016) <www.thesundaily.my/news/1845524> accessed 21 December 2016.

  63. 63.

    Public Prosecutor Yazid Sufaat & Ors [2014] 2 CLJ 672.

  64. 64.

    People’s Union For Civil Liberties & Anor v Union of India AIR [2004] SC456.

  65. 65.

    Public Prosecutor v Muhammad Fadhil Bin Ibrahim [2016] 2 CLJ 848.

  66. 66.

    Yusmarin Samsuddin v Public Prosecutor [1999] 4 CLJ 391.

  67. 67.

    Public Prosecutor v Ummi Kalsom Bahak [2015] 7 CLJ 503.

  68. 68.

    Zain (n 11) 3.

  69. 69.

    Societies Act 1966, s 14.

  70. 70.

    Bank Negara Malaysia, ‘National Risk Assessment on Money Laundering and Terrorism Financing’ (2014) <http://amlcft.bnm.gov.my/AMLCFT03.html> accessed 20 June 2016.

  71. 71.

    Saunah Zainon and others, ‘Annual Reports of Non-Profits Organisation (NPOs): An Analysis’ (2013) 9(2) Journal of Accounting & Auditing 183.

  72. 72.

    Ibid., 184.

  73. 73.

    Arshad and others (n 10).

  74. 74.

    Bank Negara Malaysia (n 70).

  75. 75.

    Ibid.

  76. 76.

    Zaiton Hamin and others, ‘Reporting Obligation of Lawyers under the AML/ATF Law in Malaysia’ (2015) 170 Procedia-Social and Behavioral Sciences 409.

  77. 77.

    Asia/Pacific Group Plenary, ‘Asia/Pacific Group Mutual Evaluation Report on Malaysia against the FATF 40 Recommendations (2003) and 9 Special Recommendations’ (2007) <www.apgml.org/documents> accessed 20 June 2016.

  78. 78.

    Ibid., 188.

  79. 79.

    Ibid., 181.

  80. 80.

    Ibid., 184.

  81. 81.

    FATF (n 57).

  82. 82.

    Ibid., 18.

  83. 83.

    Ibid., 161.

  84. 84.

    Ibid., 38.

  85. 85.

    Arshad and others (n 10) 481.

  86. 86.

    Ibid., 481.

  87. 87.

    Zain (n 11) 5.

  88. 88.

    Asia/Pacific Group Plenary (n 77).

  89. 89.

    Ibid., 184.

  90. 90.

    Ibid.

  91. 91.

    Ibid., 39.

  92. 92.

    Zaiton Hamin, ‘Regulating Non-Profit Organizations (NPOs) Against Terrorist Financing & Its Impacts: The Malaysian Perspectives’ Asset Stripping: Responses to the Financing of Terrorism and Crime Conference 2015 (London 14–15 May 2015).

  93. 93.

    Ibid.

  94. 94.

    Bank Negara Malaysia (n 70).

  95. 95.

    FATF (n 57).

  96. 96.

    Bank Negara Malaysia (n 70) 5.

  97. 97.

    Ibid., 5.

  98. 98.

    Zainon and others (n 71).

  99. 99.

    Arshad and others (n 10) 483.

  100. 100.

    Ibid., 7.

  101. 101.

    Ibid.

  102. 102.

    Hamin (n 92).

  103. 103.

    AML/CFT, ‘Malaysia Anti-Money Laundering & Counter Financing of Terrorism Regime’ <http://amlcft.bnm.gov.my/AMLCFT02biv.html> accessed 4 March 2017.

  104. 104.

    Clinton Bennett, ‘Alms for Jihad: Charity and Terrorism in the Islamic World’ (2006) 48(3) Journal of Church and State 686.

  105. 105.

    Ahmad Nadzri and others, ‘Zakat and Poverty Alleviation: Roles of Zakat Institutions in Malaysia’ (2012) 1(7) International Journal of Arts and Commerce 61.

  106. 106.

    Ibid., 62.

  107. 107.

    US Department of State, ‘Chap. 2. Country Reports: East Asia and Pacific Overview’ (2014) <www.state.gov/j/ct/rls/crt/2014/239405.htm> accessed 20 June 2016.

  108. 108.

    Ibid.

  109. 109.

    Che Zuina Ismail, Nor Jana Salim, Nor Jawanees Ahmad Hanafiah, ‘Administration and Management of Waqf Land in Malaysia: Issues and Solutions’ (2015) 6(4) Mediterranean Journal of Social Sciences 613, 614.

  110. 110.

    Mohamed Izam Mohamed Yusof, ‘Zakat Management in Malaysia: Challenges & Prospects from LZS’s Perspective’ (2013) <www.mia.org.my/new/downloads/nbzs/2013/02-zakat-management-in-malaysia.pdf> accessed 20 June 2016.

  111. 111.

    Isahaque Ali and Zulkarnain Hatta, ‘Zakat as a Poverty Reduction Mechanism among the Muslim Community: Case Study of Bangladesh, Malaysia, and Indonesia’ (2014) 8(1) Asian Social Work and Policy Review 59.

  112. 112.

    Asia/Pacific Group Plenary (n 77).

  113. 113.

    Yusof (n 110).

  114. 114.

    Ibid.

  115. 115.

    Legal Affairs Division, Prime Ministers Department, Companies Commission of Malaysia (CCM), Registrar of Societies of Malaysia (ROS), Labuan Financial Services Authority (Labuan FSA) and Bank Negara Malaysia (BNM), ‘Best Practice Guides on Managing NPO’ (2014) <www.bheuu.gov.my/portal/pdf/Akta/141106_NPO%20Best%20Practices.pdf> accessed 20 June 2016.

  116. 116.

    Ibid., 9.

  117. 117.

    Ibid., 8.

  118. 118.

    Ibid., 9.

  119. 119.

    Ibid., 10.

  120. 120.

    Ibid.

  121. 121.

    Ibid., 11.

  122. 122.

    Ibid.

  123. 123.

    Ibid.

  124. 124.

    Ibid., 10.

  125. 125.

    Ibid., 11.

  126. 126.

    Ibid.

  127. 127.

    The political will of the Malaysian government to tackle financial mismanagement and corruption has been tested by the 1MDB scandal in which Malaysia’s Prime Minister, Najib Tun Razak, was accused in 2015 of diverting RM2.67 billion from 1MDB, a government strategic development company, into his personal bank accounts. See for US enforcement action, FBI, ‘International Corruption: U.S. Seeks to Recover $1 Billion in Largest Kleptocracy Case to Date’ FBI News (20 July 2016) <www.fbi.gov/news/stories/us-seeks-to-recover-1-billion-in-largest-kleptocracy-case-to-date> accessed 4 March 2017.

Author information

Authors and Affiliations

  1. Faculty of Law, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia

    Zaiton Hamin

Authors
  1. Zaiton Hamin
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. University of Sussex, Falmer, United Kingdom

    Colin King

  2. University of Leeds, Leeds, United Kingdom

    Clive Walker

  3. Notre Dame Law School, Notre Dame, IN, USA

    Jimmy Gurulé

Rights and permissions

Reprints and permissions

Copyright information

© 2018 The Author(s)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Hamin, Z. (2018). Governing Non-profit Organisations Against Terrorist Financing: The Malaysian Legal and Regulatory Modalities. In: King, C., Walker, C., Gurulé, J. (eds) The Palgrave Handbook of Criminal and Terrorism Financing Law. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-64498-1_45

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-64498-1_45

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-64497-4

  • Online ISBN: 978-3-319-64498-1

  • eBook Packages: Law and CriminologyLaw and Criminology (R0)

Publish with us

Policies and ethics

Search

Navigation