In Bank Negara crackdown on remittances, tycoon pays up millions

A Malaysian tycoon had to pay nearly RM200 million in fines recently for illegal overseas remittances made through money changers in a Bank Negara crackdown that began four years ago, say sources.

The Malaysian Insider understands that the tycoon, who has a Tan Sri honorific, had to settle the fine or face charges in court in the coming weeks.

"The matter has been settled. It is not going to court," a source told The Malaysian Insider.

Other sources said the central bank has been acting on money changers in the past few weeks to ensure remittances are done within limits prescribed by law.

"There has been some raids and we could see some of them being charged in court. But I don't know when," one source said.

He did not specify the number of people under investigation but said it could take some time for any court action.

Bank Negara's probe into illegal remittances surfaced in 2009 when it revoked the licences of the three biggest money changers in the country for breaching the Money-Changing Act 1998.

The revocation opened a can of worms on remittances involving millions by high-profile figures but only one was revealed – Negri Sembilan Mentri Besar Datuk Seri Mohamad Hasan, who was reported to have engaged the services of a money changer to remit RM10 million in March 2008.

Batu MP Chua Tian Chang, better known as Tian Chua, revealed in Parliament in 2009 that the wife of a minister and a corporate figure with the title of Tan Sri were also implicated in the remittance of huge amounts of money through money changers.

According to Tian Chua, the minister’s wife was said to have received some RM600,000 while she was in Dubai in March 2008. A property developer from Malaysia apparently sent the money through a money changer, according to a report by respected business weekly, The Edge, in 2009.

According to documents obtained by the business weekly, Bank Negara found that Salamath Ali Money Changer Sdn Bhd had facilitated the transfer of £3.5 million, equivalent to RM22.2 million, through the Kuala Lumpur branch of CIMB Bank, for the corporate figure.

The funds were apparently used to purchase property abroad but Salamath Ali was found to have contravened the Money-Changing Act for facilitating the transfer.

It was also found to have furnished false information to the CIMB KL branch when transferring the money, said the weekly.

In its appeal, Salamath Ali had contended that it did not know of the Tan Sri. It had also denied furnishing false information to the bank and contended that the funds were transferred on behalf of two Singaporeans to purchase property.

Industry observers said the reason money changers were sought as a conduit for large transactions was that the identity of the owners of the money did not appear anywhere.

“If an individual remits money via the bank or remittance agent, his identity and purpose of the transfer of funds will have to be disclosed,” an industry official had told The Edge.

In Malaysia, only banks and remittance agents are licensed to transfer money out of the country. Money transferred out through the licensed entities are recorded and monitored by Bank Negara.

Most of the remittances are done by foreign workers sending money home to Bangladesh, India, Indonesia, Nepal, the Philippines and Thailand, industry officials said.

But the central bank had intensified its monitoring of money changers to weed out those undertaking remittance activities since 2009.

In 2006, only three money changers were investigated for breaching the Money-Changing Act. In 2008, the number was 12 while in 2009, Bank Negara probed 92 moneychangers for breaching the Act.

Industry officials said nobody can put a finger on the turnover that is generated by the 850-odd money changers in the country. A conservative estimate is RM5 billion per annum, said the business weekly.

Over the years, Bank Negara issued a large number of money-changer licences, which has made the industry highly competitive with more than 40 money-changing outlets alone in the busy Jalan Bukit Bintang.

Prior to 1998, loopholes in the process to bring in foreign currency kept the cost of operating a money-changing outlet low. But after 1998, Putrajaya introduced the Money-Changing Act, imposing tighter control on the outflow of local and foreign currency.

“For instance, if a customer comes in to buy or sell more than RM20,000 worth of foreign currency, the money changer is obliged to get details and issue an official receipt. But most of them do not do this because it will drive away customers,” an industry official told The Edge.

Over the past few years, money changers have also slowly turned into remittance agents, basically because of the big demand to transfer money out of Malaysia by foreign workers.