Negri MB’s RM10m tip of hot money iceberg

Mohamad is alleged to have sent RM10 million to London through a money changer. — File pic

By Lee Wei Lian

KUALA LUMPUR Dec 4 — When aides to the Negri Sembilan mentri besar sent RM10 million to London via a money changer recently, they were just following in the footsteps of many who have sought the hawala system to move ill-gotten gains and wealth to more secure locations.

Apart from flouting exchange laws and possibly the Anti-Money Laundering Act, the trail of money outside the country betrays a lack of confidence in the future of Malaysia as they are basically transferring funds outside the country through underground channels.

The Malaysian Insider understands that Bank Negara Malaysia (BNM) is unlikely to charge any of them because the list contains a number of prominent Malaysians, including top businessmen, chiefs of some government-linked companies (GLCs), politicians and several ordinary people either sending money for their children's needs abroad or just plain distrustful of Malaysia's future.

And the list is too long as BNM has discovered that these well-heeled tycoons, cutting across all racial lines, and the rest have been using the network of Indian-Muslim money changers across the world to remit millions of ringgit every month to offshore accounts.

The only thing BNM has done is to cancel the licences of the money changers, with some 40 licences taken back this year.

The case came out in the open when Batu MP Chua Tian Chang revealed that Negri Sembilan MB Datuk Seri Mohamad Hasan had used Salamath Ali money changers in KLCC Suria to send RM10 million to London. The money changer lost its licence and its shoplot is now closed, ostensibly for renovations.

Several Indian-Muslim money changers and opposition leaders say Mohamad's transfer is just one of many transacted daily to move millions of ringgit to "safe havens" abroad, potentially depriving the nation of capital and breaking local laws in the process.

Chua, who is also PKR strategy chief, told The Malaysian Insider he has access to a list of high-profile personalities who used the money changer transfer services, also known as hawala as practised in India.

He claimed among them is a senior minister's wife who allegedly had money transferred to her overseas and a major GLC chief who apparently moved £3.2 million (RM18 million) worth of funds to London.

But Chua said that he will not reveal the names until he is "absolutely sure".

“This is only the tip of the iceberg," Chua said. "Millions of dollars are going out and I think it is affecting the economy."

Money changers say however that authorities should not focus on the hawala system but rather on why some politicians have access to so much money and moving it abroad.

"We are just doing a service and the commission is very little," said a prominent money changer in central Kuala Lumpur.

Others added that it will be difficult to prove that the money has moved as transactions are in cash and politicians will not appear in person at the money changer but send runners to do the deed.

In Mohamad's case, he blamed the RM10 million transfer on an aide who chose Salamath Ali Money Changer, which later had its licence revoked on Oct 26 for contravening Section 30 of the Money-Changing Act 1998 which states that no licensee may remit or transfer funds outside Malaysia.

The hawala system has been described as a "subsystem" of the conventional banking system. It is run on trust where money given to a money changer in one country will be paid out by a money changer in another with just one phone call.

This network of money changers will settle outstanding debts later using coded chits or notes via their own clearinghouse system which could involve contra of funds, exchange of jewellery or even runners moving bags of cash.

The use of hawala in Malaysia grew after capital controls were imposed in the wake of the 1998 Asian financial crisis where the movement of large sums of money to locations outside Malaysia required Bank Negara's approval.

Some individuals also prefer it as it is cheaper and faster than using conventional banks and leaves no trail.

The United Nations had promised to eradicate hawala as a potential conduit for financing global terrorism and crime and Bank Negara has been quietly working to ensure the integrity of the local banking system particularly the independent money changing system.

In April this year, Bank Negara revoked the licences of 19 money changers and another 20, including Salamath, in October.

The list of money changers whose licences have been revoked can be found here. (TMI)