Datuk Seri Azam Baki: Pulse on AFC in Malaysia

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ACAMS Today  interviewed Datuk Seri Azam Baki, chief commissioner of the Malaysian Anti-Corruption Commission (MACC). Azam Baki began his career at the Anti-Corruption Agency (ACA) in 1984, now the MACC, as an assistant investigation officer. Throughout his service at the ACA, he carried out duties as an investigation officer, intelligence officer, prosecuting officer and he took part in community education activities. He graduated with a diploma in electrical engineering from Universiti Teknologi Malaysia, a degree in law (Jurisprudence) from the University of Malaya, and a master’s degree in business operation from Asia e University. Azam Baki has served the MACC for over 35 years. Finally, he was a pioneer in the forfeiture of properties system under the Anti-Corruption Act 1997, the MACC Act 2009 and the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2010 (AMLATFPUAA).

ACAMS Today:  You have held various key roles with the MACC for more than 35 years and now you are the MACC chief commissioner. How has crime and corruption changed in Malaysia throughout your career?

Datuk Seri Azam Baki: When I joined the agency in 1984, it was still known as the ACA. At that time, the ACA positioned itself as a specific body designed solely to investigate corruption cases. Then it went through changes that better highlighted the government’s efforts to strengthen the agency’s powers and made it more independent until we finally had our own Anti-Corruption Commission in 2009.

In line with economic progress over the decades, the types of corruption offenses under investigation in our country have evolved from small corruption cases to those that are more complex and syndicated in nature.

In recent years, corruption is coupled with money laundering activities, which means there is a need for greater improvements in our investigative techniques. Hence, forensic approach, financial tracking and asset tracing, intelligent-based investigation and forfeiture of criminal assets (among others) have become highly relevant and are now being used and practiced in the MACC.

The government enacted the AMLATFPUAA as a strategic national response to the Financial Action Task Force’s (FATF) Recommendations on how to fight money laundering and terrorist financing activities. We have found that crimes are now becoming more transnational and globally linked. Therefore, the Mutual Assistance in Criminal Matters Act 2002 was enacted to complement cross-border investigation and recovery of criminal assets abroad.

I do believe there have been many positive changes and great improvements in the MACC to ensure it remains relevant and able to withstand the evolution of corruption offenses both in our country and globally. I have been with the MACC long enough to see the internal changes and I assure you that our main focuses have always been and will remain eradicating corrupt practices within our shores, educating the masses on the importance of reporting corrupt practices and abstaining from acts of corruption. We are always watching!

AT: You recently passed 100 days since being appointed chief commissioner. What are your priorities for the MACC for fiscal year 2020-2021?

DSAB: I believe, along with my fellow officers, the MACC has to be aggressive and highly responsive to corruption and misuse of power in our country. For example, in 2019 we initiated and prosecuted a number of high-profile cases, forfeiting 1.29 billion ringgit ($3.07 billion) in proceeds of crimes.

The global economic downturn caused by the COVID-19 pandemic has inevitably impacted the domestic economy. Whilst efforts to boost the domestic economy as well as international trades and commerce are at play, it is pertinent that any leakages in the economy are dealt with appropriately.

For the fiscal year 2020-2021, the priorities for the MACC remain in these three key sectors: law enforcement, public procurement and grand corruption cases. These are critical areas in the national agenda for fighting corruption and for driving Malaysia toward being a developed and high-income nation.

The fight against corruption, particularly in these three key sectors, has been the focus of previous national initiatives like the National Integrity Plan, Vision 2020, the Government Transformation Programme and others. The most recent commitment has been well documented in the National Anti-Corruption Plan (NACP) 2019-2023, which is comprised of 115 initiatives in the areas of governance, integrity and anti-corruption, of which the MACC primarily leads 12.

AT: Is Malaysia achieving the right change of culture (in terms of corporate governance, law enforcement and public sector administration) under the NACP?

DSAB: On July 6, 2020, at the prime minister’s department monthly gathering, the Malaysian prime minister said, “That is why the Anti-Corruption Plan that was agreed upon during the previous administration will continue.” He concluded, “We want to ensure that all matters pertaining to administration will be conducted according to the rule of law.”

The anti-corruption plan mentioned by the prime minister was the NACP. The NACP 2019-2023 was introduced on January 29, 2019, as an anti-corruption policy with the goal of making Malaysia corruption-free and a nation that exhibits transparency, accountability and integrity. This plan was designed in tandem with Article 5 of the United Nations Convention Against Corruption.

The NACP set six priority areas that are core pillars in the fight against corruption: political governance, public sector administration, public procurement, legal and judicial, law enforcement and corporate governance. The Governance, Integrity, and Anti-Corruption Centre (GIACC), which is set up under the prime minister’s department, is critical in coordinating multi-actor contributions toward accomplishing goals under this NACP.

Since 2019, all 115 initiatives outlined under the NACP have been monitored regularly by the GIACC for progressive implementation. They are also reported periodically to the prime minister under the mechanism of the Cabinet Special Committee on Anti-Corruption (JKKMAR). Through this mechanism, these initiatives would also withstand reviews and improvements to ensure there are implementable end outcomes.

I have trust in the genuine spirits behind the NACP and I am committed to drive the MACC toward accomplishing the 12 initiatives it was entrusted to spearhead. I also ensure that the remaining initiatives driven by other ministries/departments/agencies have the necessary support from the MACC. I have observed the continuous commitment and dedication to the highest level from most ministries, departments and agencies in translating these initiatives into reality.

The introduction of the NACP by the government evidently contributed toward Malaysia’s improved Corruption Perceptions Index score in 2019. Malaysia now ranks 51st among 180 countries with 53 points, compared to ranking 61st in 2018 with 47 points. So, Malaysia is really on the right track.

AT: Do you feel that the MACC is ahead of the curve or behind the curve in delivering its message out to financial crime audiences?

DSAB: Corruption typologies in Malaysia are changing due to the development of our nation’s economic environment. Malaysia has undergone several law reforms to strengthen its anti-corruption enforcement.

The types of corruption cases that we are seeing now both domestically and internationally involve complex transactions. There is fraud, financial statement manipulation to hide illegal proceeds, and a sharp increase in the usage of financial institutions outside Malaysia to facilitate the ill-gotten proceeds and others. That is why I am passionate about ensuring my officers always have the latest technologies and investigating techniques, skills and tools. We do not want to be in a situation where we are lacking in skills―whether they be financial, accounting or otherwise―when we are investigating high-profile or high-scale cases.

I have trust in the genuine spirits behind the NACP and I am committed to drive the MACC toward accomplishing the 12 initiatives it was entrusted to spearhead

Financial crimes have now transcended across borders, so it has become a challenge for us to trace assets inside and outside the country as it involves a large scale of assets. Current examples of cases on trial are the 1Malaysia Development Berhard and SRC International Sdn Bhd cases. They are high-scale cases involving high-profile figures, which proves that we too need financial experts on our end to deal with financial analysis.

The aforementioned reasons are why Malaysia requires the new law on corporate liability enacted. The government and lawmakers had enacted Section 17A under the MACC Act 2009 in 2018, which has now been gazetted and was implemented in June 2020, and has resulted in a law that can hold commercial organizations liable if their employee or associate is found to be involved in corruption.

I believe the MACC is ahead of the curve, as can be seen by our successes in completing and prosecuting many high-profile and public interest cases for the past years. Our focus will continue on combating corruption and ultimately achieving the Malaysians’ aspiration for a country free of corruption.

AT: Does the financial community need to strengthen whistleblower protection?

DSAB: One way to detect and deal with improper conduct is through information provided by whistleblowers. Generally, a whistleblower is an insider of an organization (e.g., employee, consultant, vendor) who reports improper conduct that has occurred within that same organization.

In an effort to encourage whistleblowers to come forward with information on any alleged improper conduct, the Whistleblower Protection Act 2010 was enacted to provide a safe avenue to encourage disclosures of such alleged improper conduct to the relevant authorities in good faith, by protecting their identities, providing them with immunity from civil and criminal proceedings, and protecting them from detrimental action.

We at the MACC would in many instances rely on the information specifically given by whistleblowers that inform enforcement agencies of a corrupt act or on organized crime. Thus, there is a need for financial communities to strengthen their whistleblower mechanisms.

Whistleblower information and protection are very important to the MACC and that is why strengthening laws and providing more protection to whistleblowers will always be supported by the MACC.

In addition, the act itself must be seen by the public to be independent. We are looking at putting in a proposal to the prime minister and the prime minister’s cabinet to have an independent authority be established to oversee the act, whistleblower protection provisions and mechanisms.

To increase public confidence in making disclosures, a trained unit specialized in handling whistleblower disclosures will enable the proper reception and handling of sensitive disclosures.

AT: You have driven very successful investigations at the MACC. How was the investigative method adapted to new technology and new techniques?

DSAB: Due to growing complexity in the modus operandi of corruption cases, the MACC has adopted a proactive approach in our investigation process. One of the techniques in the proactive approach is intelligence-based investigation (IBI). There are two types of cases that need IBI: undercover investigations and high-profile cases. IBI is a methodology for intelligence gathering that will be used in these investigations. By conducting IBI, an investigation can be more effective and efficient by creating a more concentrated scope of investigation and identification of possible obstacles that may arise.

To avoid being caught, the perpetrators are resorting to the use of technology and sophisticated modus operandi in executing their plans. To always be ahead, the MACC is committed to always improving its capability, competency and capacity in terms of human resources as well as investigation tools. We equip our forensic technology division with the latest gadgets and trainings from certified experts. We send our officers to various trainings in financial, accounting, engineering and other areas to improve their knowledge and skills.

In addition, we also recruit more professionals to be our officers in order to improve fighting corruption. We have our own financial analysis division to do the tedious analysis work, go through financial records, and uncover what is being hidden in the numbers. Their involvement is equivalently crucial at every part of the investigation, from information gathering to the launch of the open investigation.

AT: What are your thoughts on the development of crypto and virtual assets and the advancement of digital banking as new vehicles for corrupt practices?

DSAB: Recently, the Securities Commission (SC) was appointed as the regulator for cryptocurrency industries in Malaysia with the enforcement of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 under the Capital Markets and Services Act 2007. The SC has now registered three recognized market operators to establish and operate digital asset exchanges in Malaysia.

The MACC as an enforcement agency is always aware of the latest trends in corruption and money laundering activities in Malaysia. In terms of virtual assets, we will be working closely with the SC as the main regulator for virtual asset service providers to detect and prevent any potential corrupt practices using these platforms. On the other hand, our officers will be equipped with necessary training on virtual assets, how it works and the possible risks that may arise. We will also look into the need to strengthen our current law to cater to virtual asset transactions. In the future, we want to be able to confiscate the virtual assets and also forfeit them―same as any other currencies that are being used.

AT: Can you foresee any opportunities to improve training or education for the AML and anti-corruption community?

DSAB: As mentioned earlier, virtual assets are one of emerging typologies in money laundering and anti-corruption. It is becoming more significant with the growth of cybercrime. Online gambling, cryptocurrency and casinos are some examples of the new platforms perpetrators use to launder their money and pay illegal proceeds. As an AML and anti-corruption community, we need to enhance our knowledge on the modus operandi of these virtual assets through trainings and exposure to the real-life situations.

Anti-corruption trainings must include all potential threats and high-risk areas of corruption, abuse of power and money laundering. New methods and modus operandi for payment of illicit purposes need to be updated according to the rapid development of technology as well as the fluctuation in global politics and economy. This is where collaboration between regulators, reporting institutions and enforcement agencies is very much required.

We must also not forget the role of professional communities. We need their support through their active research activities, studies and statistical reporting, which will help us in determining the loopholes, planning the preventive mechanism, as well as bringing all the players closer in the fight against corruption.

All reports relating to recent corruption and money laundering typologies, studies and surveys compiled by authorities and independent bodies such as FATF and the Asia/Pacific Group on Money Laundering should be made available to financial firms, so they are exposed to the methods of potential criminals, thus enabling appropriate action be taken to prevent occurrence or early detection to minimize repercussion or impact to anti-corruption risks.

AT: Are there any new areas that need to be added to a financial firm’s anti-corruption trainings?

DSAB: Commercial crime always involved complex layering of accounting records in order to hide the illegal transactions. It is very crucial to have a team of professionals and experts to scrutinize all the records and uncover the modus operandi through financial records trailing, forensic accounting and financial statements analysis.

Besides that, due diligence process during first engagement with the public is crucial in eliminating the risk of corruption and money laundering. Regulators and enforcement agencies will be depending on these reporting institutions to trigger any red flags on suspicious transactions.

Another area that is becoming more significant is the use of beneficial ownership to cover illegal practices. Companies are being used to cloud the eyes of enforcement agencies and to legalize its illegitimate financial gains. The Malaysian Companies Act 2016 was amended several years ago with a new provision granting the power to a company to inquire into the beneficial owner of the shares in a company was inserted.

The MACC is also in the midst of preparing the paperwork for a new provision in our MACC Act 2009 to criminalize the use of beneficial ownership as a vehicle for corrupt practices. We have full support from the government in this matter and we will coordinate with all the relevant parties to establish a monitoring mechanism to ensure a transparent disclosure of beneficial ownership.

In the future, we want to be able to confiscate the virtual assets and also forfeit them―same as any other currencies that are being used

AT: From your perspective, where are the hotspots or trends in corrupt practices that need attention across the Asia-Pacific (APAC) region?

DSAB: The APAC region is known for its diversity in terms of culture, religion and politics. Crimes that are always intertwined with corruption (such as human trafficking, smuggling and money laundering) will continue to be the main focus in the anti-corruption agenda of this region.

In October 2019, the MACC had exposed a series of videos that showed smuggling activities and a security breach at the Thailand-Malaysia borders. This kind of evidence is very much needed and must be addressed as it is jeopardizing the economies and security of both countries involved.

I think there is a need to have better collaboration between members of the region in terms of understanding and response toward informal and formal bilateral assistance. We need to find ways to improve information sharing and evidence gathering across the region in cases that involve multinational jurisdictions. To achieve this, each country must have a shared vision in fighting corruption regardless of any differences in ideology and politics. 

Interviewed by: Dr. William Scott Grob, CAMS, AML director, ACAMS, Hong Kong, wsgrob@acams.org

Aaron Lau, CAMS-Audit, CAMS-FCI, AITLAU Management Services, Kuala Lumpur, Malaysia, aaron@aitlau.com

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