Money laundering is a global issue that must be effectively mitigated across the nation. Despite various initiatives, investigation outcome either in the form of prosecution, conviction, or confiscation remains low. Therefore, this study aims to investigate the factors influencing money laundering investigating outcome, based on rational choice theory. The study conducted focus group interviews with 15 investigating officers to have an in-depth understanding of factors and challenges faced by investigating officers in conducting money laundering investigation which influences their investigation outcome. The findings demonstrate that money laundering investigation outcome is influenced by three factors, which are cost-benefit analysis, individual belief, and organizational context. The findings of the study provide significant contributions in confirming the theoretical foundations underpinning this research and suggest recommendations for the relevant regulators in improving money laundering investigation and prosecution decision making.
TopIntroduction
Money laundering is a term generally used by practitioners and researchers to illustrate the process by which offenders disguise the illegal proceeds of crime as if it is obtained from a legitimate source (Hamin, Wan Rosli, Omar, & Pengiran Mahmud, 2013; Mohamed & Ahmad, 2012; Ping, 2008; Shanmugam, Nair, & Suganthi, 2003). In most cases, illegal proceeds derived from offences such as fraud, corruption, bribery, criminal breach of trust, human trafficking, sales of drugs will be laundered through creative means. Tax evasion is also a major cause of ill-gotten money (Rafay & Ajmal, 2014)
Globally, a lot of initiatives have been taken to mitigate money laundering offences (Nasir, 2020). This includes the passing of anti-money laundering legislations, issuance of international anti-money laundering standards, establishments of guidelines and the introduction of international cooperation between countries. The Financial Action Task Force (FATF) recommendations were then introduced as a guideline for countries to promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and the financing of proliferation, and other related threats to the integrity of the international financial system. However, its implementation varies depending on the member countries. Therefore, the countries have diverse legal, administrative, and operational frameworks and different financial systems, and so cannot all take identical measures to counter the financial threats.
Despite efforts undertaken by various countries and international agencies, the United Nation statistics implicated that around 2% to 5% of the global Gross Domestic Products (GDP) which are equivalent to USD 1 to 2 trillion per year are at lost due to global money laundering transactions. However, less than 1% of the global illicit financial flows are successfully seized by the authorities (United Nations Office on Drugs and Crime (UNODC), 2011). This estimations represents just the tip of the iceberg in showing money laundering’s true global scale (PWC, 2014). The negative outcomes of money laundering offences are not only economically implicated, but also the reputational implication that a country needs to negate as both are costly and risky.
Due to such risks, regulators and law enforcement agencies are treating money laundering as a priority issue to be effectively tackled by governments across the nation. Recommendation 30 of FATF Recommendations (2012), specifically addresses the “Responsibilities of Law Enforcement and Investigative Authorities”, include the need for a country’s competent authority to ensure that money laundering predicate offences are properly investigated through the conduct of a financial investigation. In such investigation, law enforcement agencies should be able to identify, trace, and initiate confiscation process through the different provisions of freezing, seizing and forfeiting of property involved in money laundering offences.
One of the most controversial reports on money laundering was issued by the Global Financial Integrity (GFI), a non-profit Washington DC-based research and advisory organisation. Based on the GFI Report (2019), a 10-year study (2006 to 2015) on illicit financial flows of 148 developing countries implicated an increasing trend in money laundering activities. Illicit financial flows are essentially money laundering in a form of illegal financial leakage or capital flight when money is illegally earned, transferred, or spent.
GFI report has named and ranked Malaysia as one of the countries that has been implicated with money laundering activities. Indeed, Malaysia was ranked at the 4th position after China, Russia and Mexico for countries with highest amount of illicit financial flows or financial leakages over a ten-year period of 2002 to 2011 (Kar & LeBlanc, 2013). Financial leakages are increasing from year to year due to the uncurbed money laundering activities which are happening all around the world. Over the period of 2009 to 2013, the report claimed that Malaysia has accumulated total illicit financial flows of USD 242.6 billion. Table 1 summarises the GFI statistics for the year 2009 to 2013.
Table 1. Illicit Financial Flows for Malaysia 2009 to 2013
| Year | 2009 | 2010 | 2011 | 2012 | 2013 | Total |
| Illicit Financial Flows (USD Billion) | 34.4 | 62.1 | 50.2 | 47.8 | 48.2 | 242.6 |
Source: Global Financial Integrity (GFI) Website