Anti-money laundering compliance among trust and company service providers (TCSPS) in Malaysia: a qualitative study of duties, challenges and compliance behaviour

Money laundering poses a significant threat to the global financial system and non-financial system, which require robust regulatory frameworks and compliance measures to combat illicit financial activities. Both financial institution and non-financial institution are acting as reporting institution under The Anti-Money Laundering, Anti-Terrorist Financing and Proceeds of Unlawful Activities Act of 2001 (AMLA). Among the obligation of reporting institutions under AMLA includes customer due diligence (CDD), record keeping measures, reporting of suspicious transaction (STR) and compliance programs. The current trend of money laundering is through non-financial institutions such as Trust and Company Service Providers (TCSPs), secretarial firms and legal firms. The purpose of this study is to analyse on the compliance duties of TCSPs in Anti-Money Laundering (AML) laws and policy, the challenges faced by them in implementing the duties and the compliance behaviour among the TCSPs. By using a qualitative study, a total number of 15 informants were interviewed using in depth interview and the main informants of this study are company secretary from the secretarial firms, accounting firms and legal firms who have a practising certificates granted by Companies Commission of Malaysia (SSM) in Klang Valley area. The data obtained was triangulated with the information received from Central Bank of Malaysia, Companies Commission of Malaysia (SSM) and from the secondary data. Based on the data collected, the study revealed that most of the company secretaries from the secretarial firms, accounting firms and legal firms are still not complying with the AML duties such as customer due diligence whereby the firms are unable to conduct verification on the data received from clients due to lack of technology use. Besides that, in term of the duty of reporting suspicious transaction report (STR), all the informant had never submitted any report against their clients on the suspicious report to Bank Negara Malaysia although a red flag have been raised against their clients. This is due to lack of awareness of performing the duties of AML. Other than that, in term of record keeping duties, it is found that all the informants did not keep record on the changing clients and no specific training were provided to the staff for AML training. Furthermore, all the informants faced a challenges in implementing the AML duties such as lack of resources in implementing the technology, verification of data, dual roles practiced by the informants, and the cost of compliance. This study provides new insight into the compliance of AML duties by the TCSPs, challenges faced by them in complying with AML law and the compliance behaviour among TCSPs. Thus, it is recommended that future study to focus on the other reporting institutions compliance duties under AML law.