By Tookitaki and ChatGPT

This article was created with ChatGPT, based on Tookitaki’s source material, and edited by Rae Guinto. Readers are encouraged to verify important information.

Financial crime in Malaysia isn’t just a persistent issue — it’s an escalating threat that continues to adapt and expand alongside the country’s digital transformation. From syndicate-led scams to the misuse of financial infrastructure for laundering illicit proceeds, the stakes are rising rapidly. In 2024, Malaysia recorded an estimated RM54 billion in scam-related losses, a figure equivalent to around 3% of national GDP.

Yet, the real question isn’t how much we’re losing, but whether we’re gaining any ground in the fight.

The Rise of Money Mule Networks

Among the most troubling developments is the rapid evolution of money mule networks — criminal structures that recruit or exploit individuals to transfer or receive illicit funds. Once a peripheral concern, mule networks are now core to the operational playbook of financial criminals. These mules are often recruited through job scams, social media ads, or romantic deception. Many don’t even realise they are participating in illegal activity.

Take a scenario involving love scams or job fraud: Victims are manipulated into sending money for fictitious emergencies or employment processing fees. The funds are routed through mule accounts — frequently held by students, gig workers, or the unemployed. Transactions move rapidly, with high velocity, irregular patterns, and sometimes across borders, making it nearly impossible to trace the origins of the funds in real time.

Forged Records, Fake Transactions

Another scenario emerging in Malaysia involves laundering through structured transfers supported by forged documentation. Criminal groups simulate legitimate commercial activity using fake invoices or transaction narratives. These funds flow through a chain of mule accounts, often appearing as payments for goods or services never rendered.

Key red flags include:

  • repeated transactions in near-identical amounts (structured deposits);
  • sudden account activity in previously dormant or low-use accounts; and
  • inconsistent or altered ‘know your customer’ records over short periods.

These techniques mirror broader global typologies but are particularly concerning in Malaysia, where over 30,000 commercial crime cases were recorded in the first half of 2024 alone.

Targeting the Vulnerable: Elderly and Unbanked

Money mule syndicates are also evolving to exploit Malaysia’s ageing population. In several reported cases, the elderly have unknowingly participated in laundering rings under the pretence of helping charities or aid agencies. Criminals instruct them to receive and forward funds, often increasing amounts over time.

Common warning signs include:

  • atypical e-wallet and online bank activity;
  • cross-account transfers inconsistent with typical senior spending patterns; and
  • new beneficiaries added with unusual urgency.

Public education efforts have improved, but many elderly individuals — particularly those outside of urban centres — remain unaware of these tactics.

Narcotics Money and Instant Transfers

An alarming trend in Malaysia’s financial crime landscape is the integration of narcotics proceeds into mainstream financial channels. Here, criminal syndicates deposit cash into mule accounts and use instant payment systems to rapidly layer the funds. The velocity of these transactions often exceed the detection capacity of conventional monitoring systems.

Dormant accounts are suddenly reactivated, processing high volumes of in/out transfers that don’t match the customer’s known profile. Given Malaysia’s geographic proximity to trafficking routes in the Golden Triangle, this tactic is likely to intensify without enhanced detection capabilities.

Malaysia’s Position in a Regional Crime Web

Being a regional financial hub brings with it exposure to cross-border laundering operations. Increasingly, local mule accounts are used to channel illicit funds into neighbouring countries, often leveraging cryptocurrency and remittance channels to obscure the trail. In recent cases, authorities have identified local accounts being used to purchase cryptoassets before transferring them to international wallets.

This reflects a broader ASEAN-wide trend of financial crime without borders, where syndicates exploit onboarding vulnerabilities in digital-first banks, e-wallet platforms, and fintechs.

Are We Catching Up Fast Enough?

Despite advancements, detection remains a major challenge. Transaction speed is outpacing investigative capacity. Financial institutions still rely heavily on post-transaction analysis, limiting their ability to intervene in real time. Furthermore, because many money mules appear as typical customers, red flags are often dismissed as false positives.

A deeper issue lies in fragmented data. With institutions operating in silos, there’s limited sharing of typologies, red flags, or investigative patterns. This disconnect allows criminals to repeat the same tactics across different banks undetected.

Where Progress is Being Made

Encouragingly, Bank Negara Malaysia (BNM) has intensified enforcement. In 2024, it issued RM18.9 million in fines for anti-money laundering/countering financing of terrorism breaches and conducted on-site inspections of 123 financial entities across 166 premises. More significantly, BNM and local law enforcement agencies are now treating money mule activity as a criminal offence, enabling stronger legal action and deterrents.

Malaysia has also launched public awareness campaigns aimed at educating youth and elderly populations, particularly around job scams and deceptive investments.

A Path Forward: Adaptive Risk Strategies

The way forward requires financial institutions to embrace more adaptive and collaborative approaches. That means moving beyond static rule-based systems to adopt frameworks that incorporate:

  • shared red flag databases;
  • real-time behavioural analytics; and
  • cross-border collaboration between compliance teams.

Crucially, regulators, banks, and fintechs must work in tandem to stay ahead of the curve, not merely react to it. Given the pace at which criminal methodologies evolve, reactive compliance is no longer enough.

Conclusion

Malaysia’s fight against financial crime is far from over, but it’s no longer on the defensive. The country has made significant investments in regulatory enforcement, public education, and institutional controls. Still, the rapidly evolving nature of financial crime calls for greater collaboration, smarter analytics, and faster detection.

Winning this fight isn’t just about blocking one scam at a time. It’s about building a future-ready compliance ecosystem that safeguards trust in the financial system — at home and across the region.

Tookitaki is a Singapore-based regulatory technology company that provides AI-powered solutions to help financial institutions combat money laundering and other financial crimes. Its Anti-Money Laundering Suite (AMLS) and community-driven AFC Ecosystem are used by banks and fintechs globally to strengthen compliance and reduce risk.