https://www.klsescreener.com/v2/news/view/1641829/reliance-on-administrative-remedies-a-risk
MALAYSIA has managed to recover a large number of illegally acquired assets, but the reliance on administrative and civil mechanisms instead of criminal prosecution risks undermining deterrence and accountability in its fight against money laundering, according to the latest assessment by the Financial Action Task Force (FATF) released last week.
Between 2019 and February 2025, Malaysian authorities recovered €8.11 billion (RM39.03 billion) in assets linked to financial crime. Of that amount, €6.08 billion, or nearly 75%, was tied to the 1Malaysia Development Bhd (1MDB) scandal, much of it repatriated through foreign civil forfeiture actions and negotiated settlements rather than domestic criminal convictions.
To date, there has been only one major conviction in Malaysia related to 1MDB, involving former prime minister Datuk Seri Najib Razak. Other cases are still ongoing.
While the scale of recovery reflects Malaysia’s improved capacity to trace and reclaim illicit funds, FATF warns that the enforcement model underpinning these outcomes relies too heavily on administrative remedies — particularly tax recovery and compounds — at the expense of criminal prosecution and conviction-based confiscation.
That imbalance, the report suggests, helps explain why Malaysia’s money laundering conviction rate remains low despite a sharp increase in investigations. During the period in review, Malaysian authorities opened 2,648 money laundering investigations but secured only 234 prosecutions and 52 convictions, or roughly nine convictions a year and a prosecution-to-conviction conversion rate of only 22%.
FATF notes that this outcome remains misaligned with Malaysia’s risk profile as an open, trade-oriented economy exposed to corruption, fraud, smuggling and cross-border illicit flows. “While the significant effort and resources invested in the 1MDB case are duly acknowledged, the overall low level of money laundering prosecutions and convictions remains a concern,” says the report.
Administrative recovery over criminal accountability
FATF notes that while asset recovery strips criminals of ill-gotten gains, criminal enforcement is needed to ensure accountability and deterrence. In Malaysia, enforcement efforts seem to prioritise asset recovery over prosecution, it observes.
Outside of 1MDB, €2.03 billion in recovered assets during the period in review largely comes from the Inland Revenue Board’s (IRB) tax remedies, rather than criminal confiscation following convictions.
The task force flags this as evidence of a strong preference for administrative recovery mechanisms, which are faster and easier to execute but do not carry the same punitive or deterrent effect as criminal sanctions.
This pattern is reinforced by sentencing outcomes. Where convictions are secured, penalties are generally low.
The average prison term stands at one year and eight months, while fines were imposed in only 20 of the 52 convictions. Although the average fine appears substantial at €1.78 million, FATF cautions that the figure is skewed by two exceptionally large penalties, masking far lower sanctions in most cases.
The result is an enforcement system that prioritises recovering money but struggles to send a clear deterrent signal, the report suggests.
“Ultimately, the prospect of detection, conviction and punishment dissuades potential criminals from carrying out proceeds-generating crimes and money laundering,” FATF notes, adding that sanctions in Malaysia are not yet “fully dissuasive or proportionate”.
These concerns emerge even as Malaysia was upgraded from Enhanced Follow-Up status in 2015 to Regular Follow-Up in 2025, the highest category under FATF’s mutual evaluation process, reflecting strong technical compliance and measurable improvements in effectiveness. The designation places Malaysia alongside jurisdictions such as the UK, France, Italy, Spain, India and Hong Kong.
FATF, an independent intergovernmental body with 40 members, comprising 38 jurisdictions and two regional organisations, conducts periodic mutual evaluations to assess compliance with its recommendations and the effectiveness of national anti-money laundering, counter-terrorism financing and counter-proliferation financing regimes.
It recommends that Malaysia demonstrate a sustained increase in prosecutions for complex, standalone and foreign predicate money laundering offences; strengthen prosecutorial and judicial capacity; and rebalance enforcement priorities towards criminal prosecution rather than administrative resolution.
Malaysia will report its progress to FATF in 2029.
