Introduction
The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (“
the Act”) is the key legislation which provides for the offences of money laundering, terrorism financing and dealings with proceeds of unlawful activities. The Act provides the relevant law enforcement agencies and the public prosecutor with wide-ranging powers including powers to freeze, seize and forfeit property involved in or derived from money laundering and terrorism financing offences and other serious crimes.
Whilst the Act covers a whole range of offences and crimes
1, it is most often paired with and comes into play where certain offences under the Malaysian Anti-Corruption Commission Act 2009 (“
the MACC Act”), Financial Services Act 2013 (“
the FSA”) and Capital Markets and Services Act 2007 (“
the CMSA”) are committed. For example, if an entity operates an illegal investment scheme in contravention of the CMSA, the enforcement agencies will invariably freeze and seize the assets of the operator under the Act as part of its enforcement actions.
As money laundering is essentially a profit-oriented crime, with a key objective to legitimise and clean up “dirty money” of an underlying crime, more jurisdictions have given recognition to the fact that seizure and forfeiture laws are essential to effective law enforcement against criminal proceeds from money laundering activities and to deprive wrongdoers of the benefits gained from illegal activities.
In Malaysia, this recognition can be found in Section 56 of the Act which provides that where a property is seized under the Act and there is no prosecution or conviction for an offence of money laundering or a terrorism financing offence, the Public Prosecutor may, within 12 months of the date of the seizure or the date of the freezing, apply to a High Court judge for an order of forfeiture of that property if he is satisfied that such property is:
- the subject matter or evidence relating to the commission of such offence;
- terrorist property;
- the proceeds of an unlawful activity; or
- the instrumentalities of an offence.
“Instrumentalities of an offence” refers to (a) any thing which is used in, or in connection with, the commission of any unlawful activity; or (b) any property which is wholly or partly used in, or in connection with, the commission of any unlawful activity, whether such thing or property is situated within or outside Malaysia.
Upon an application for forfeiture by the Public Prosecutor, Section 61(2) of the Act provides that notice shall be published in the
Gazette calling upon any third party who claims to have any interest in the property to show cause as to why the property should not be forfeited. If the High Court judge is satisfied that the property falls within any one of the aforesaid four categories and that there is no purchaser in good faith for valuable consideration in respect of the property, the judge will make an order for forfeiture. The standard of proof to be applied in determining whether the property falls within any of the aforesaid four categories, is the standard of proof for civil proceedings, i.e. on the
balance of probabilities.
If the Public Prosecutor does not make any application within the stipulated time, the seized property shall, at the expiration of 12 months from the date of its seizure, be released to the person from whom it was seized.
We shall now examine several recent cases which shed light on the courts’ approach to an application for forfeiture of property under Section 56 of the Act.
Public Prosecutor v Habib Jewels Sdn Bhd [2020] 12 MLJ 757, HC2
In this case, the Public Prosecutor (applicant) applied for a forfeiture order pursuant to Section 56 of the Act against the Respondent, Habib Jewels Sdn Bhd, for a sum of RM100,000 deposited into the Respondent’s bank account in 2014 via a cheque issued by the former Prime Minister, Dato’ Seri Najib Razak (‘
DSN’). The Public Prosecutor alleged that DSN had in his capacity as the Chairman of the Board of Advisors of 1Malaysia Development Bhd (‘
1MDB’) and as the Minister of Finance committed the offence of using his position or office for gratification under Section 23 of the MACC Act, and that the Respondent was one of the recipients of such monies which were subject-matter or evidence relating to the commission of an offence of money-laundering or proceeds of an unlawful activity.
The High Court dismissed the application for forfeiture and made the following findings:
Although the standard of proving the predicate offence is on a balance of probabilities, the evidence adduced must be admissible and sufficient to satisfy the Court. On the facts, the Court observed multiple shortcomings in the applicant’s affidavits and evidence, such as that they have not shown how DSN had used his position for gratification or money laundering other than merely showing that he had received monies from various entities unrelated to his public office without any clear evidence of impropriety; there were no explanation or reasons provided in the affidavits to arrive at the conclusion that the monies were gratification from use of office or position within the scope of Section 23 of the MACC Act, and even the money trail between 1MDB and DSN was not established.
The High Court also referred to the Court of Appeal case of
Public Prosecutor v Kuala Dimensi Sdn Bhd & Ors [2018] 6 MLJ 37
(“Kuala Dimensi”) for guidance on the types of facts and evidence necessary to be furnished in order to satisfy the court hearing an application for forfeiture. In this Court of Appeal case, the application for forfeiture was dismissed. The public prosecutor had,
inter alia, failed to: (i) disclose and provide the names, identity and sources of information that they had received and relied upon and the reason for their belief in such information and the involvement the respondents had to their charges; (ii) disclose all the documents relied upon by them in coming to their conclusions or as to their reasons for having relied on the documents as being a true reflection of the facts alleged; and (iii) identify the nature and extent of the participation of the respondents in the offence of money laundering.
Public Prosecutor v Kuala Dimensi Sdn Bhd & Ors [2021] 2 MLJ 469, FC
Kuala Dimensi was appealed to the Federal Court which unanimously dismissed the appeal and affirmed the Court of Appeal’s decision, i.e. that the prosecution had failed on balance of probabilities to satisfy the court of the essential requirements in Section 56 of the Act and that there was a serious lack and gap in substantial evidence in their case. The prosecution had failed to identify the nature and extent of the participation of the respondents in the offence of money laundering or to link the procurement of the properties to the predicate offence.
The Federal Court stressed that when applying the civil standard of proof, merely stating facts with scanty documentary evidence is insufficient. There must be more cogent documentary evidence to support the averments made and that all facts necessary to prove the case must be presented and are probably true. Whilst the prosecution’s affidavits in this case “left much to be desired”, the respondents had through their affidavits in reply explained in detail and adduced sufficient documents justifying the manner the properties were procured.
Abdul Mudtalib Bin Ismail v Public Prosecutor [2021] 1 MLJ 252, CA
In
Abdul Mudtalib, the Appellant (who was the second respondent in the High Court) appealed against the High Court’s decision which allowed the Public Prosecutor’s forfeiture application and ordered the forfeiture of specific assets belonging to each of the several respondents in the High Court. Amongst the grounds relied on by the Appellant was that the High Court judge had erred in holding that the prosecution had satisfied the burden of proving that all properties sought to be forfeited were proceeds of the predicate offence under Section 420 of the Penal Code (i.e. cheating and dishonestly inducing delivery of property).
After carefully considering the record of appeal, the Court of Appeal agreed with the High Court judge that the evidence presented showed overwhelmingly that the properties were indeed acquired with the proceeds of unlawful activity. There was no fault in the manner in which the High Court judge had evaluated the evidence before him. Once the prosecution had established the position it asserted, the burden then shifted to the Appellant to show that the properties were obtained lawfully and the forfeiture application had no basis in law, which the Appellant had failed to discharge. In this regard, the Court of Appeal followed its previous decision in
Noor Ismahanum Mohd Ismail v Public Prosecutor [2019] 2 MLJ 536 (“
Ismahanum”).
In
Ismahanum, the public prosecutor had discharged his burden by establishing
prima facie that the monies in the bank accounts were “proceeds from an unlawful activity”, i.e. illegal deposit-taking without a valid licence contrary to Section 137 of the FSA. The burden then shifted to the appellant to either show that she had a valid licence to accept the deposits or alternatively that all or any part of the monies in the bank accounts were not the proceeds of illegal deposit-taking. To hold otherwise would be to place an unreasonable burden on the public prosecutor, and enforcement of the Act would come to a standstill as money launderers would mix legal money with illegal money to defeat the meaning of the law. It was therefore not open for the appellant to argue that not all but only some of the monies in the bank accounts were proceeds of illegal deposit-taking.
These cases demonstrate that where evidence of a predicate offence have been sufficiently proffered and successfully established
prima facie, and the properties sought to be forfeited falls under one of the four categories specified in Section 56 of the Act, the courts will grant the forfeiture order unless the respondent successfully discharges its burden of proving the contrary.
Public Prosecutor v Sim Sai Hoon [2020] 12 MLJ 684, HC
In
Sim Sai Hoon, the Public Prosecutor sought to forfeit from the Respondent the sum of RM41,261.24 frozen in 2018 and all accrued interest in his bank account. The forfeiture application arose from the commission of a predicate offence by DSN contrary to Section 23 of the MACC Act, in relation to his then capacity as Chairman of the Board of Advisors for 1MDB and as Minister of Finance, for gratification amounting to RM3.217 billion.
Here, the High Court found that the Public Prosecutor had succeeded in proving that a predicate offence under Section 23 of the MACC Act had been committed, and that the sum of RM1.2 million which the Respondent received in his bank account via cheque in 2012 were indeed “proceeds of an unlawful activity”.
However, the application for forfeiture was dismissed by the High Court as although the RM1.2 million was remitted to the Respondent’s bank account in 2012, as of 5 July 2016, the Respondent’s bank account showed a negative balance of RM21,461.26. The freezing order was only issued on 25 June 2018. In other words, the sum of RM1.2 million had been totally spent by the time the freezing order was issued. Since the subject matter or evidence relating to the commission of a money laundering offence was no longer in the Respondent’s bank account, whether wholly or partly, it could not be the subject of a forfeiture application and the court could not order so.
It was emphasised that the aim of Section 56 of the Act is to forfeit the subject matter or evidence of the offence of money laundering and not just any property – the law in respect of forfeiture of property criminalises the property instead of the person, and the Respondent should not be made to bear the brunt when the crime has ceased to exist.
The Pavilion Residences Case
On 20 May 2021, the Kuala Lumpur High Court dismissed the Government’s action for forfeiture of cash amounting to RM114 million which was seized along with other assets during the widely-reported police raid in May 2018 of a luxury condominium unit in Pavilion Residences owned by OBYU Holdings Sdn Bhd (‘
OBYU’).
3 The monies and assets were alleged to have been misappropriated from 1MDB. OBYU was named respondent in this forfeiture suit whilst DSN and UMNO staked their claim as third parties.
4 It was held that the predicate offence had not been proven and so the issue as to whether the monies were obtained from illegal activities did not arise. The High Court also pointed out that the prosecution had failed to adduce any evidence that the cash originated from 1MDB. It would appear that this case follows the approach and principles applied in the cases discussed above.
Comments
From the above discussion, it is clear that to succeed in a civil forfeiture under Section 56 of the Act, the prosecution must first establish the predicate offence of money laundering or terrorism financing on the balance of probabilities. It must then prove that the property sought to be forfeited falls under one of the four categories, in that it is the subject matter or evidence relating to the commission of the offence, terrorist property, proceeds of an unlawful activity, or instrumentalities of the offence. If the prosecution succeeds in satisfying both these requirements, the burden then shifts to the respondent to show otherwise, for example, that the property was received for valuable consideration in good faith.
it is also clear from the cases discussed that the courts adopt a strict approach in evaluating the evidence presented even if the standard is on a balance of probabilities and particular importance is placed on the sufficiency and admissibility of evidence.
Article by Lim Koon Huan (Partner) and Siew Ka Yan (Associate) of the Compliance Practice (Anti-Corruption and Anti-Money Laundering) of Skrine.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such.