Verity journal

In Malaysia’s modern economy, businesses beyond the financial sector are increasingly under scrutiny for their roles in combating money laundering and terrorism financing. Entities such as real estate agencies, jewellery businesses, legal practices, and accounting firms may not traditionally be associated with financial regulation, but they now fall under a crucial compliance category known as Designated Non-Financial Businesses and Professions (DNFBPs).

These industries handle large sums of money, sensitive client information, and high-risk transactions—making them potential entry points for illicit financial activity. To prevent such exploitation, Malaysia has imposed strict Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) regulations on these sectors. Understanding these obligations and complying with them is now critical for the survival and reputation of these businesses.

What Are DNFBPs?

Designated Non-Financial Businesses and Professions (DNFBPs) are non-financial entities that are vulnerable to financial crimes due to the nature of their work. While the term may sound technical, it applies to a broad range of everyday business sectors in Malaysia, including:

• Real estate agents involved in buying or selling property
• Jewellery and precious metal traders
• Legal firms, especially those dealing with property transactions or client fund management
• Accounting and auditing firms handling client assets or financial records
• Company secretaries and trust and company service providers

These professions are governed under Malaysia’s Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) and guided by international standards set by the Financial Action Task Force (FATF).

Malaysia’s Financial Intelligence Unit (FIU), housed within Bank Negara Malaysia (BNM), oversees compliance among DNFBPs. The FIU issues directives, audits practices, and ensures that businesses are aligned with AML/CFT rules, particularly when dealing with high-value transactions or foreign clients.

Why Compliance Matters for DNFBPs in Malaysia

1. Legal Obligations

Businesses in these sectors are legally required to implement AML/CFT controls, including:

• Customer Due Diligence (CDD): Verifying customer identities, sources of funds, and risk profiles.
• Enhanced Due Diligence (EDD): Extra scrutiny for high-risk clients, politically exposed persons (PEPs), or cross-border transactions.
• Ongoing Monitoring: Continuously reviewing transactions to detect suspicious or unusual activity.

Failing to comply with these obligations can lead to serious legal consequences such as hefty fines, criminal prosecution, and even license revocation.

2. Risk Management

Compliance isn’t just about satisfying regulators, but is also a form of risk mitigation. Non-compliance exposes businesses to:

• Legal Risks: Violations can trigger audits, investigations, and criminal charges.
• Reputational Damage: Trust is critical in industries like law, accounting, and property. Compliance failures can erode public and client confidence.
• Operational Risks: Fraud, embezzlement, and links to criminal activity can disrupt business continuity.

Top AML Compliance Steps for DNFBPs

To comply with Malaysia’s AML/CFT regime, industries such as real estate, legal services, and accounting must fulfil several key requirements:

1. Know Your Customer (KYC)

KYC is the cornerstone of AML compliance. It involves collecting and verifying customer information to ensure transparency. This includes:

• Government-issued ID verification
• Business registration documents (for corporate clients)
• Source of funds or wealth declarations

2. Monitoring Suspicious Activities

Businesses must be proactive in identifying red flags such as:

• Unusual cash transactions
• Multiple high-value purchases just below reporting thresholds
• Clients reluctant to provide identification

3. Record Keeping

All customer and transaction records must be kept for at least six years. This includes contracts, payment receipts, ID documents, and communication logs. These records serve as evidence in case of audits or investigations.

4. Reporting to Authorities

Businesses must report:

• Suspicious Transactions
• Large Cash Transactions (typically RM25,000 and above)
• Client Due Diligence failures where a relationship is terminated due to risk concerns

Challenges DNFBPs Face in Maintaining Compliance

Despite the importance of compliance, many businesses face significant challenges:

1. Complex Regulatory Environment

Understanding the full scope of AML/CFT obligations can be challenging for businesses outside the financial sector. With frequent updates to guidelines and enforcement priorities, staying compliant requires dedicated attention and expertise.

2. Lack of Resources

Smaller law firms, boutique accounting practices, independent real estate agents, and jewellery businesses often operate on tight margins with lean teams. Unlike banks or large corporations with dedicated compliance departments, these businesses may:

• Lack in-house compliance officers who are trained to interpret regulations and implement controls.
• Rely on manual record-keeping instead of automated compliance systems, making monitoring time-consuming and error-prone.
• Face challenges in affording specialist compliance software or subscription services that provide real-time updates on regulatory changes.
• Struggle to allocate staff for ongoing training, especially when personnel wear multiple hats and have client-facing responsibilities.
• Delay implementing robust customer due diligence (CDD) procedures due to the costs and time involved in background screening or document verification.

How Verity Intelligence Helps DNFBPs Stay Compliant

Verity Intelligence is a trusted partner in helping businesses such as those in real estate, legal, jewellery, and accounting sectors to stay compliant with AML and CFT regulations in Malaysia.

1. Background Screening Services

Verity offers comprehensive background screening solutions that form the backbone of customer due diligence:

• Criminal Record Checks: To assess whether clients or employees pose a risk.
• Financial Background Checks: To verify creditworthiness or detect red flags.
• Employment History Verification: To confirm credentials and flag inconsistencies.
• Education Verification: Crucial for legal and accounting professions that rely on certified expertise.

These services help organisations meet their KYC, EDD, and risk profiling requirements efficiently and affordably.

2. Customised Compliance Solutions

Verity understands that a one-size-fits-all approach doesn’t work. They tailor screening solutions to meet the specific needs of different sectors—whether it’s validating client identities in property transactions or screening new hires in a legal firm.

Conclusion

Real estate businesses, jewellery traders, legal practices, and accounting firms in Malaysia are now at the frontline of the fight against money laundering and terrorism financing. Compliance with AML/CFT regulations is not only a legal mandate but a business imperative.

Failing to comply can damage reputations, result in legal action, and even put your business at risk of closure. By working with a trusted partner like Verity Intelligence, your business can implement robust background screening processes, reduce risk exposure, and maintain long-term operational and legal integrity. Contact Verity Intelligence today to secure your business.