POWERS TO FORFEIT – A CIVIL STANDARD FOR CRIMINAL CONDUCT

POWERS TO FORFEIT – A CIVIL STANDARD FOR CRIMINAL CONDUCT

Yap Yeong Hui explains the power of forfeiture under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001

The power to forfeit properties under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (“Act”) is increasingly becoming a key tool of Malaysian enforcement agencies to tackle money laundering and corruption, and to recover the proceeds of crimes and counter terrorist financing. These powers are encapsulated in Sections 55 and 56 of the Act.

 

THE STARTING POINT – FREEZING AND SEIZURE OF PROPERTY

The groundwork leading to the exercise of the powers of forfeiture under Section 55 or Section 56 of the Act usually commences before a person is even prosecuted for any offence of money laundering or terrorism financing.

Section 44 of the Act permits an enforcement agency to issue an order to freeze any property of any person, or any terrorist property, as soon as an investigation into an unlawful activity has commenced against that person and the enforcement agency has reasonable grounds to suspect that (a) a money laundering or terrorism financing offence has been or is about to be committed by that person; or (b) the property is the proceeds of an unlawful activity or the instrumentalities of an offence.

Similarly, an investigating officer who is investigating a money laundering or terrorism financing offence has the power under Section 45 of the Act to seize any moveable property which he has reasonable grounds to suspect is the subject matter of such offence or is terrorist property or the proceeds of an unlawful activity or the instrumentalities of an offence. The investigating officer is required to obtain the approval from an investigating officer who is senior in rank to him before exercising such powers of seizure.

 

FORFEITURE WHEN OFFENCE IS PROVED

Where an offence of money laundering or terrorism financing has been proven against an accused, Section 55(1) of the Act provides that a court shall make an order to forfeit any property which is proven to be:

(a)      the subject-matter or evidence relating to the commission of such an offence;

(b)      a terrorist property;

(c)       the proceeds of an unlawful activity; or

(d)      the instrumentalities of an offence.

Section 55(1) also allows a court to order the forfeiture of any such property even where the offence of money laundering or terrorism financing is not proven if the court is satisfied that the accused is not the true and lawful owner of the property and that no other person is entitled to the property as a purchaser in good faith for valuable consideration.

FORFEITURE WITHOUT PROSECUTION OR CONVICTION

Section 56 of the Act permits the Public Prosecutor to apply to the High Court within 12 months of the seizure or the date of a freezing order, for an order to forfeit the property which has been frozen or seized even where a person is not prosecuted or convicted for the offence of money laundering.

The Judge hearing an application under Section 56 may issue a forfeiture order if he is satisfied that:

(a)      the property is the subject-matter or evidence relating to the commission of a money laundering or terrorism financing offence, a terrorist property, the proceeds of an unlawful activity or the instrumentalities of an offence; and

(b)      there is no purchaser in good faith for valuable consideration in respect of the property.

CONSEQUENCE OF FORFEITURE

Any property forfeited under the Act will be vested in the Government of Malaysia pursuant to Section 58 of the Act, without any transfer, conveyance, registration or other action being necessary. Where any registration by any authority is required, such authority shall effect the registration in the name of the public officer, authority, person or body specified by the Public Prosecutor.

GAZETTE NOTICE

The court making the order of forfeiture under Section 55, or the Judge to whom an application is made under Section 56, is required by Section 61(2) of the Act to cause a notice to be published in the Gazette calling upon third parties who claim to have any interest in the property to attend before the court on the date specified in the notice to show cause as to why the property should not be forfeited.

RECENT CASES

There has been an increase in the use by the enforcement agencies of the wide powers of forfeiture granted under Sections 55 and 56 of the Act. In 2016 itself, over thirty Section 61(2) notices were published in the Gazette. The Malaysian authorities understandably want to utilise these provisions to have properties forfeited, without the need to prove beyond reasonable doubt the commission of any criminal offence. For the properties to be forfeited, Sections 55 and 56 of the Act only require the prosecution to prove the requirements set out in those provisions on a balance of probabilities.

These powers of forfeiture were tested in several recent cases. In PP v Mohd Bakri Samsu & Anor [2016] 5 CLJ 824 and PP v Billion Nova Sdn Bhd & Ors [2015] 2 CLJ 763, the Public Prosecutor’s applications for forfeiture under Section 56 were rejected by the courts. In another recent case, Azmi bin Osman v PP [2016] 3 MLJ 98, the Court found that the Public Prosecutor had satisfied the burden of proof required under Section 56.

The Court of Appeal in Billion Nova rejected the prosecution’s forfeiture application as the prosecution had failed to prove on a balance of probabilities that a money laundering offence had been committed. In this case, the prosecution sought to forfeit monies in the respondents’ bank accounts. The application for forfeiture was made on the basis that the monies were the subject matter of an offence of engaging in a transaction which involved proceeds of unlawful activities, a money laundering offence under Section 4 of the Act.

It was alleged that the respondents were selling duty free cigarettes outside of Labuan, a duty free area, which is an offence under the Customs Act 1967, and that the monies in the respondents’ bank accounts were the proceeds of the sale of those cigarettes. However, the prosecution’s sole evidence to support its allegation that the cigarettes were sold outside Labuan was that the monies were deposited into the respondents’ Labuan bank account from outside of Labuan. The Court rightly rejected the submission that this was sufficient evidence to prove that the sale transaction had taken place outside a duty free area. In the circumstances, the prosecution failed to satisfy Section 56.

In Mohd Bakri Samsu, the properties sought to be forfeited were lands that the prosecution alleged were obtained through an illegal act. However, the Judge held that the prosecution failed to adduce sufficient proof to show how the properties sought to be forfeited were acquired and were proceeds from an illegal activity. According to the Judge, the fact that the properties were sold by the respondents to third parties at a time when there was some illegal activity committed by the accused was too remote and insufficient. There needed to be stronger evidence to connect the property with an illegal activity. The Judge alluded that what the prosecution needed to adduce was evidence in the form of tracing to show that the monies used to purchase the properties came from the illegal activity.

On the other hand, in a more straightforward case, the prosecution in Azmi bin Osman satisfied the High Court and the Court of Appeal that monies in the bank account of the accused were proceeds of illegal activities. The Courts accepted that the monies sought to be forfeited were proceeds from illegal gambling activities given to the accused, a policeman, in exchange for him giving protection to the gambling operators and were bribes given to him by the gambling operators which ought to be forfeited.

 

FINAL THOUGHTS

The above cases are of interest because they show that the prosecution are liberally applying to forfeit properties which they suspect are the subject matter of a money laundering offence or are proceeds of unlawful activities.

The cases also show that the Malaysian courts will exercise their discretion judiciously and require the prosecution to provide evidence that the assets which are sought to be forfeited are proceeds of, or connected with, an unlawful activity. 

It is foreseeable that Sections 55 and 56 of the Act will continue to be used by enforcement agencies in Malaysia to tackle money laundering, fraud, corruption and terrorism. The anticipated increase in assets being forfeited as a consequence of such actions will not only deprive persons whose assets are forfeited from benefiting from their ill-gotten gains but will also provide additional revenue to the Government.  

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SUBJECT MATTER: CASE COMMENTARY

WRITER'S NAME: YAP YEONG HUI

WRITER'S PROFILE

Yeong Hui is a Partner in the Dispute Resolution Division of SKRINE. His main practice areas are compliance advisory work, employment law and shipping law.

 

 

 
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