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Navigating Professional Privilege in the Realm of Anti-Money Laundering: A Malaysian Odyssey



Once upon a time, in the heart of Malaysia, a delicate dance began between the guardians of law and the sentinels of financial regulation. The year was 2004, and the stage was set for a tale that intertwines legal professional privilege with the stringent demands of Anti-Money Laundering (AML) compliance.


In this narrative, our central authority, the revered Bank Negara Malaysia (BNM), turned its vigilant gaze towards AML and Counter-Financing of Terrorism (CFT) compliance, primarily focusing on financial institutions. However, a twist arose with the involvement of the Malaysian Bar, the esteemed council of legal practitioners, who, while initially acquiescing to BNM’s directives, harboured deep-seated concerns about the sanctity of professional privilege.


As international bodies like the Financial Action Task Force (FATF) heightened their scrutiny, particularly on Designated Non-Financial Businesses and Professions (DNFBPs), BNM’s approach towards these entities, including legal professionals, remained relatively lenient. A mere declaration of compliance attached to the application for a Practicing Certificate sufficed – until the Malaysian Bar digitalized its certificate issuance process, complicating this straightforward method.


This change marked a turning point, as BNM could no longer rely on minimal compliance checks. The impending 2025 mutual evaluation loomed over the horizon, spurring BNM to intensify its engagements with the Malaysian Bar from 2019 onwards. Rumours abounded of BNM’s clandestine audits on legal firms since 2015 – a revelation that took the Bar by surprise and spurred a flurry of inquiries.


Concerns peaked as the Bar Council feared these audits might overstep into “fishing expeditions,” threatening the hallowed grounds of legal professional privilege. This fear was not unfounded; BNM’s requests for information before their visits seemed to encroach upon secrets safeguarded by this privilege.

A constitutional crisis seemed imminent. The Malaysian Bar, standing firm on its principles, prepared for a legal showdown, challenging the perceived overreach of Section 20 of the AMLA, which they deemed unconstitutional. The council issued a clarion call to its members, alerting them to the looming threat to their professional sanctity.


Yet, in this tale, confrontation gave way to negotiation. The Bar Council, recognizing the gravity of money laundering and terrorism financing, sought a middle ground with BNM. They proposed a collaborative approach, ensuring their concerns were addressed while acknowledging the importance of AML/CFT compliance.


The narrative took a new turn with the issue of Beneficial Ownership. Financial institutions, under BNM’s directive, heightened their compliance demands, leading to friction between legal privilege and financial regulation. The Malaysian Bar, ever vigilant, raised objections, resulting in fruitful discussions that led BNM to halt practices deemed excessive by the legal community.

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As the tale progresses, the Bar Council realizes the need for a sustainable solution. Their profound understanding of the legal industry positions them uniquely to spearhead AML compliance among their members. Thus, they embark on a quest to become a Self-Regulatory Body for AML/CFT compliance, a goal heartily endorsed by BNM.


As our story nears its current chapter, a meeting looms on the horizon, scheduled for February 5, 2024. The Bar Council’s journey through the complex maze of legal professional privilege in the realm of AML in Malaysia is far from over. But one thing remains clear: they stand resolute in safeguarding their members’ rights while navigating the ever-evolving landscape of financial compliance.

Thus, the story so far unfolds – a tale of adaptation, negotiation, and steadfast commitment to professional integrity in the face of changing regulatory demands.

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