Bank Negara’s RM53.7 million penalty on AmBank commendable but insufficient

Bank Negara Malaysia (BNM) must be commended for finally being able to impose a hefty fine of RM53.7 million on the AmBank Group.

While the penalty may sound "punitive" enough in the Malaysian context, it pales in comparison to fines paid by JP Morgan to the tune of US$2 billion (RM8.45 billion) for Anti-Money Laundering (AML) violation. Similarly a sum of US$1.92 billion was imposed on HSBC for AML violation, too, in 2013. Incidentally, in both cases, many doubt its efficacy as a deterrent.

As the regulator of the financial and banking sector for the country, BNM must be relentless in going after wrong-doers. Not least, to turn around the fast-diminishing trust of both foreign and local investors in the transparency and financial governance of the local financial industry.

Following through the infamous revelation of the RM2.6 billion transferred to the personal accounts of Prime Minister Datuk Seri Najib Razak, who is also finance minister, back in July this year, one could not escape being oftentimes, angry for the many obvious "breaches" committed by the very-opaque 1Malaysia Development Berhad (1MDB).

Yet, BNM remained astonishingly muted then. AmBank had in July even bullishly denied that they were being investigated by BNM for alleged anti-money laundering activities.

The rakyat can now arguably breathe a sigh of relief. But is that really so? Not quite perhaps.

Beyond just exposition of "compliance breaches" (and now better elucidated as related to both Section 234 of the Financial Services Act (FSA) and Section 245 of the Islamic Financial Services Act, 2013), should the discerning public lay the issue to rest and be contented now that the culprits have been brought to book? 

While AmBank has agreed with Bank Negara to a 4-year remedial programme to achieve best practice in good corporate governance while setting aside RM25 million for investment in infrastructure and retraining of staff, tax payers should now demand that a more convincing explanation on the crimes must be disclosed.

Knowing exactly what had happened and for whatever reasons AmBank was prosecuted, would arguably impress on other industry players in the financial sector to take serious heed and that a repeat of such crimes would therefore warrant heavier punitive measures.

For a start, we want to know:

1. What exactly were the crimes committed by AmBank?

Rumour has it that multiple breaches of the Anti-Money Laundering Act and the Exchange Control Act were committed. Is it true and who were the individuals responsible for these offences and will action be taken against them?

Were they acting "under duress" from a higher order or were they "complicit in crime", that is, working in "collusion" to allow for such transfers and later get "rewarded" for taking such risks?

2. Is any action being taken against those responsible for abetting in such crimes or have they been given clemency for their alleged ignorance and/or being inadequately trained, hence the need for retraining?

Be that as it may, one wonders how could such practices easily escape the long arm and rigorous radar of BNM? Does it also mean that non-compliancy works both ways, i.e. for inflow and outflow of funds, as it operates or cuts both ways?

Would it be wrong to deduce then, why Malaysia ranks among the bottom five, that is among the worst nations impacted by the illicit outflow of funds, based on the recent ground-breaking expose' by the financial watchdog Global Financial Integrity (GFI).

Although the distinguished and respected BNM governor Tan Sri Zeti Akhtar Aziz has denied this accusation repeatedly, the rakyat must acknowledge the continuing fight by BNM to arrest further erosion of the trust in our financial system.

BNM almost stands alone in the fight to halt the systemic rot.

The executive branch of the government is ostensibly usurping the power of the legislative and the judiciary, with 1MDB being the epitome of the continuing "ruling with impunity".

Malaysia is fast becoming a "dysfunctional failing state" insofar as instituting the cardinal democratic principle of "check and balance" of a government is concerned.

We ignore it at our own peril. – December 2, 2015.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.