Keynote Address by
Dato’ Seri Hishammuddin Tun Hussein
Minister of Home Affairs
At International Financial Crime and Terrorism Financing Conference 2011
Assalamualaikumwbt and good morning,
First and foremost, allow me to thank the organizers for giving me the opportunity to deliver a keynote address at this year’s International Financial Crime and Terrorist Financing Conference.
I am pleased to hear that through the synergy of public and private sector collaboration, this international conference has been able to effectively bring together international and local financial institutions, regulatory and enforcement agencies to share insights on recent developments in financial crimes and counter financing of terrorism. Indeed, it is an honor for me to address key international finance movers and shakers in my capacity as the Home Affairs Minister.
I would also like to take this opportunity to welcome all the participants especially the international delegates to the conference. I hope it is not too late to wish you a warm SelamatDatang.
Globalization and Transnational Crime
Ladies and Gentlemen,
At the turn of this century, we praised the birth of globalization, the endless limits and vast opportunities presented by a borderless world. However, in 2011, more than ten years since “globalization” first captured public imagination and dominated popular culture- we are still struggling to cope with the effects of a truly borderless world as technological developments continue to evolve rapidly, hence posing a direct threat to the security of the world.
As much as globalization encourages trade, cultural exchange and a confluence of interests, it also creates opportunities for criminal activities to operate on a larger scale, with new outfits coming into existence and flourishing as we struggle to keep up. The information revolution for example, allows clandestine networks to gain control of resources and sensitive knowledge, exposing complex systems such as that of the financial and money markets be manipulated for fraud and money laundering activities – threatening our security in ever-novel ways, with destructive potential.
Hence as borders are lifted, find ourselves exposed to a new dimension of global threat and risks- that of which I would term New Age crime- the new enemies of the 21st century global security community. At the core of the New Age crime is indeed transnational crime.
We know now more than ever, that transnational crime is a byproduct of globalization. The concept has been discussed and debated to death. Much has been said about the promise and potential of the global village. Yet, decades since the term became commonplace in public policy discourse, the uncertainties and ambiguities of globalization are as evident as ever.
Nonetheless, we should realize that transnational crime is now one of the major threats facing the world we live in today- and this is far bigger than the threat to the global system as compared to double-dip recessions, political uprising in the Middle East or even earthquakes and tsunami.
Recessions come and go, political uprising happens now and again, natural disasters come once in a while, but transnational crime happens everywhere, every second of everyday. It is a risk to global security; an enemy to peace and harmony, a threat to societies the world over.
However, trans-national crime is far too complex for anyone nation to combat it effectively. It is a global problem which requires global solutions with domestic enforcement.
The Malaysian Government is exactly taking this approach. Domestically we are working towards an integrated system between government ministries, agencies and departments to strategically and systematically deal with combatting transnational crime. An integrated working channel will be built within the government to synchronize policy crafting, enforcement of the policies as well as coordinating with the legal and judiciary systems.
To attest to our commitment at the international level, the Ministry of Home Affairs has been strategically engaging with developed countries to formsmart partnerships in addressing the threats of transnational crime. We have signed an Agreement on Security Cooperation with Saudi Arabia in April 2011 and MoU to Prevent and Combat Transnational Crime with United Kingdom in July 2011. In the next few months, I will be going to China and later Vietnam to ink similar co-operation deals.
Malaysia is serious about combatting transnational crime and we shall pursue this agenda to ensure Malaysia remains a highly secure, safe and prosperous nation for the benefits of its people and its economy.
Ladies and Gentlemen,
New Age Crime: Illegal Proceeds Pose Serious Threat to National Security
Trans-national crime is not the only threat which has made the world a much riskier place today. The rapid technological development which has outpaced the human ability to effectively monitor its use has exposed us to the looming threat of abuse from these “new age crimes”.
We do recognize that the lifting and borders for the flows of good and capital as well as the rapid developments in technology and communications has allowed money to move anywhere in the world with speed and ease. Fuelled by the advances of technology and communications, the financial system has developed into an operating global system where money can move with the click of a button.
While countries, businesses and individualshave benefitted legitimately from these developments within and without the financial industry, criminal networks have also taken advantage of these developments,albeit by shadier means. This is true as profit remains the primary motive for the commission of most serious offences. As with legitimate business organizationscriminals, both individuals and organizationsare driven by the risk-reward tradeoff.
Crime really pays when it offers higher monetary returns exceedingthe risk of detection by the authority or even and the hazard of punishment. While financial crime does not bring about physical hazard like street crime, its impact could be significantly more hazardous to national security, particularlyas the amounts involved often go beyond reasonable imagination. It is a negative system leakage which affects the efficiency of our economy and erodes our competitiveness.
In this regard, I wish to share my view on the manner that illegal proceeds may pose serious threat to national security, in terms of its threats and consequences
Looking at the threats, activities related to financial crime internationally in various forms continues to be on the rise, especially in terms of its huge monetary volume. For example, human trafficking which is closely associated an inter-linked with money laundering approximately generates as much as USD32 billion annually, with around 2.4 million estimated to be people trafficked around the globe annually.
The Financial Action Task Force’s recent report on Money Laundering Risks Arising from Trafficking of Human Beings and Smuggling of Migrants also highlighted that organised crime has taken advantage of the flow of people, money, goods and services to extend their international network. The United Nations Office on Drugs and Crime meanwhile noted that trafficking of human beings as the third largest source of income for organized crime after drugs and arms trafficking.
However, these are merely estimates. We will never know the real extent of the market for human trafficking and money laundering as we are only basing our figures on reported illegal proceeds. We will have to bear in mind of the existence of parallel economies known as the black or shadow markets. Among ASEAN countries alone, estimated ‘shadow’ economy ranges between 13% - 44% of country’s total GDP.
From Malaysian context, based on prosecution of money laundering cases alone, there has been gradual but steady increase of illegal proceeds identified to be generated from the various crimes, which currently amounts to RM2.3 billion. While this figure may appear high and alarming, it is also a testament to our collective capability and achievements in detecting criminal activities, bringing those responsible to justice, and depriving them of their ill-gotten proceeds. For this, I laud the proactive collaboration between the financial institutions, regulatory authorities and law enforcement agencies, who have worked tirelessly to enhance Malaysia's defenses against financial crime and drive the point home that crime does not pay.
Ladies and Gentlemen,
Financial Industry and National Security Agencies Collaboration
While some countries may enjoy reduction in term of reported cases, the amount involved is still significantly large. The question is - what are the consequences of this phenomenon on national security as a whole?
From law enforcement perspective the rise of financial crimes has posed growing challenges in two main aspects, first, in deterring thecommitting of the crime itself and second, the detection of financial trail of illegal proceeds.
This has led to the growingimportance placed on financial investigation to address swift movements of illegal funds across financial system and cross borders, effectively suppressingthe potential benefits from criminal activities and thus reducing the incentive for committing the crime
In order to ensure financial investigations are carried effectively and standardized across the globe, we need more train more experts in the area and encourage international collaboration between the financial regulators and national security agencies. On this note, I reckon that law enforcement agencies should regard financial institutions as an important strategic partner in combating financial crimes. Similarly, financial institutions should look upon law enforcement agencies as a critical element in developing a conducive environment for business to operate and prosper.
Ladies and Gentlemen,
As all of you will know, the financial system and any finance business are built on the principal of trust. When the system is compromised- abused by irresponsible profiteering criminal elements, then definitely there will be an erosion of this trust in the public eyes. The break-down in the “trust” relationship between the various stakeholders of the financial industry will tarnish the integrity of the financial sector and may lead to an imminent run on these institutions, hence destabilizing the industry. As you are well aware, the financial industry has systemic impact on any economy- hence destabilizing of the financial industry will risk bringing any economy down to its knees.
The global economy- which is still reeling from the impact of the 2008/2009 Global Financial Crisis and anemic growth in Western-can ill-afford another financial crisis, what more once which is caused by financial crimes.
Ladies and Gentlemen,
Recently, we observed the 10th anniversary memorial of Sept 11- the single most important event which has framed the way we live in the 21st century thus far. Yes, Osama bin Laden is no longer around, but that does not mean the world is a safer place now. Terrorism is still a looming danger waiting to strike its victims- anywhere, anytime.
One way we can weaken terrorism effectively- not unlike killing-off a business, is by cutting the source of financing for terrorism. Financial regulators and security agencies across the globe- must continue to work closely together to monitor and crack-down on the source of financing for terrorist networks and activities.
The financing trails must be cut-off completely, if we want to weaken terrorist organizations and push terrorism down the security priorities of our nations.
Ladies and Gentlemen,
Three Holistic Strategies
Recognizing the significant threat and serious consequences of financial crimes and terrorism financing and their transnational nature, the Malaysian Government is putting greater efforts towards three strategic initiatives, covering (i) multi-agency collaborative strategic efforts; (ii) talent up-skilling; and (iii) research-based initiatives - to combat growing concern of serious crimes that may pose security threats to the country
More joint multi-agency efforts to combat serious crimes have been fostered covering various aspects of crime prevention and management, such as joint investigation, intelligence sharing and strategy-setting with domestic and foreign counterparts, with increased resources devoted to specific targeted areas;
The capability of relevant officials and investigators will be upgraded with the latest tools and investigation techniques, particularly in respect of financial investigation and asset tracing. This effort is geared at both ends – public sector investigators and those in private sector, with more structured and higher quality training programmes being offered, as well as the building of new infrastructure for training and research to create larger pool of qualified financial investigators; and
These will be complemented with more in depth research on trends and strategies to counter serious crimes. The research will be the basis of initiatives and action plans to combat serious crimes.
On a final note, I personally believe that the New Age crimes which encompassesfinancial crime and terrorism financing which are trans-national in nature are one of the major threats to global security today. Therefore it is my hope, that with the gathering of great minds for this conference today, we shall be able to exchange views and share insights on the ways to combat threats to national security stemming from the financial industry.
It is also my hope that all of you here today will renew your commitment to fight criminal financial activities and terrorism and help create a more secure environment to mitigate risks to the global economy and enhance its growth prospects.
May all of us seek to gain from the International Financial Crime and Terrorism Financing Conference 2011.
Thank you once again for giving me the opportunity to speak and I wish all of you a productive and successful conference.