https://www.chiangraitimes.com/finance/southeast-asia-strengthens-its-fight-against-financial-crimes-and-money-laundering/

Financial crimes and money laundering have been the twin evils that SE Asia has struggled with due to the high rate of economic growth and the varied financial structure. The region has become susceptible to illegal financial practices as economies interconnect and the number of online transactions increases.

The governments and the regulators in Southeast Asia have responded to this by increasing measures to contain these threats through the adoption of new technologies, improving regulatory frameworks and cross-border cooperation.

Rising menace of financial crimes in Southeast Asia

In the last ten years, there is a shift in financial crimes in Southeast Asia. Whether it is classical money laundering via real estate and casinos to more advanced digital frauds with crypto-assets, cyberfraud and shell companies, the region has emerged as a hub of illegal financial transactions. The rise in the digital payment method, although a good aspect of the economy, has encountered new avenues of exploitation by criminals.

The United Nations Office on Drugs and Crime (UNODC) revealed that billions of dollars are laundered every year in Southeast Asia and are used to finance organised crime, corruption, and even terrorism. The porous borders, variations in the application of law and gaps in regulations have traditionally rendered this area an appealing playground for criminal activities.

National-Scale Reform and Regulatory Reform

Some Southeast Asia nations have initiated major reforms to strengthen their anti-money laundering (AML) regimes. An example is the revision done by Malaysia on its Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLA) where compliance is made more rigorous and the penalty of non-compliance increased.

Thailand has boosted the capabilities of its Anti-Money Laundering Office (AMLO) and harmonised its country strategies with the global AML policies. Singapore, which already has a robust regulatory position, is also improving its surveillance systems and reporting procedures, especially those of virtual asset service providers (VASPs).

Indonesia has also made efforts to fight against money laundering through the formation of inter-agency task forces as well as the enhancement of Suspicious Transaction Reports (STRs), and enhanced collaboration of the Financial Transaction Reports and Analysis Centre (PPATK) and law enforcement.

ASEAN and APG Regional Cooperation

The emphasis on regional cooperation is one of the characteristic aspects of the approach of Southeast Asia. The Association of Southeast Asian Nations (ASEAN) has identified financial crime as a transnational menace that needs co-ordination. Under the ASEAN Senior Level Committee on Financial Integration, member states have agreed to harmonize their financial regulatory systems including the AML laws.

The regional body of the Financial Action Task Force (FATF) is called the Asia/Asia-Pacific Group on Money Laundering (APG), which assesses and advises the Southeast Asian states.

Mutual evaluations have been conducted in several countries and have led to some changes in regulations in a country to comply with the 40 Recommendations by FATF. These assessments serve as drivers, and they compel nations to fill in the gaps in customer due diligence procedures, beneficial ownership transparency, and enforcement systems.

Technology in the Enforcement of AML

SE Asian governments and financial institutions are also adopting technology-intensive AML technology as financial crime increases its digitalization. Artificial Intelligence (AI) and Machine Learning (ML) is also being used more and more to examine the transaction patterns and determine where there are anomalies that may point to money laundering or fraud.

As an example, the use of AI-based transaction monitoring systems that can identify suspicious activities in real-time has been introduced in the banks of the Philippines.

Vietnam has also invested in blockchain-driven identity verification tools in an attempt to improve Know Your Customer (KYC) protocols. Besides accelerating compliance procedures, these technologies will also alleviate the load of manual observation, so more precision and prompt actions will be possible.

Public-Private Partnerships Are the Core of the Matter

One of the significant steps towards a better AML strategy in the region has been the increasing focus on the public-private partnership. Governments have understood that it is impossible to effectively enforce AML without involving financial institutions, fintech companies, and even citizens.

One such example is Singapore Anti-Money Laundering and Countering the Financing of Terrorism Industry Partnership (ACIP). Established by the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department, ACIP is a platform that addresses the intelligence sharing between banks, regulators, and law enforcement as well as best practices.

Financial Intelligence Units (FIUs) have also been launched in countries such as Malaysia and Indonesia to foster the involvement of the private sector in the reporting of crimes and in the facilitation of criminal probes. Such collaborations will make sure that information is not siloed and that systemic risks can be combated through collaboration.

Ways That Have Yet to Be Found

Although there has been a huge success, Southeast Asia continues to struggle in the effort to eliminate money laundering. Among the challenges, it is necessary to point out the inconsistency of AML legislation implementation in different countries that creates weak links in the chain of regional enforcement.

Political interference and the absence of resources, as well as the use of outdated technology, still permeate effective monitoring and prosecution in some jurisdictions.

Also, the emergence of decentralized finance (DeFi) and peer-to-peer cryptocurrency exchanges adds nuance to tracking illicit flows. The legal system is usually not fast enough to adapt to the new technological innovations and this leaves criminals with a loophole to exploit.

The language barrier, legal diversity, and dissimilar financial maturity of the ASEAN states also hamper the coordinated enforcement operations. However, the impetus that has been created over the past few years is an indication that these obstacles are being dealt with seriously.

The SE Asian region is making practical and concerted efforts to enhance its financial crime and AML Compliance measures. The region is showing its dedication to financial transparency and integrity through legal reforms, regional alliance, the use of technology, and intelligence sharing.

Although there are still a number of challenges, the capacity and desire to deal with money laundering suggests that Southeast Asia is headed in the right direction. These proactive initiatives will guide in preserving the financial systems, protecting investors, and ensuring long term stability of the economy as the digital economies increase.