ASEAN Islamic finance powerhouses move against crypto money laundering and terrorism financing risks

In the last month, Indonesia and Malaysia have taken decisive measures to quell money laundering and terrorism financing concerns spurred on by the unprecedented rise in digital currencies.

Indonesia took the draconian approach by banning payment fintech companies from transacting in cryptocurrencies. To ensure that these firms abide by the new rules, every fintech company involved in processing payments are required to register themselves with Bank Indonesia, the central bank. The new regulation mandates every transaction to be conducted in Indonesian rupiah and to comply with anti-money laundering and terrorism financing prevention principles in addition to other existing laws and regulations. The rules, which take effect on the 1st January 2018, however, do not cover the trading of virtual currencies; regulating the activity is nonetheless understood to be on the table.

Malaysia, on the other hand, remains on the fence on the issue of digital currency-facilitated payments (it is however keeping a hawk eye on such activities) but will be applying reporting requirements to digital currency exchangers. Bank Negara Malaysia (BNM) has released an exposure draft outlining reporting obligations for digital currency exchange business, formally categorizing them as reporting institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001. This is to ensure the public is informed of the risks associated with the use of digital currencies and to prevent these currencies to be abused for criminal and unlawful activities.

Asserting that this reporting obligation does not in any way connote the authorization, licensing, endorsement or validation by the regulator of any entities involved in the provision of digital currency exchange services, BNM added: “The invocation of reporting obligations on digital currency exchangers is the first step towards making digital currency activities more transparent in Malaysia. The bank will continue to monitor and assess the risks posed to the financial system by such activities to ensure that the integrity of the financial system is not compromised.”


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