Malaysia climbs to FATF’s top tier in fighting money laundering and terrorism financing, strengthened by reforms following the 1MDB scandal.
PETALING JAYA: Malaysia has earned top recognition from the Financial Action Task Force (FATF), moving up to the “regular follow-up” category — a major upgrade from its “enhanced follow-up” status in 2015.
The FATF, the international body that sets standards to combat money laundering, terrorism financing, and proliferation of weapons, acknowledged Malaysia’s strengthened financial safeguards, placing the country among an elite group recognized for high levels of effectiveness.
Only 11 countries achieved this distinction in the last evaluation cycle, New Straits Times reported.
According to the Mutual Evaluation Report (MER) 2025, Malaysia has made significant progress over the past decade through enhanced legislation, improved supervisory frameworks and better coordination among domestic agencies.
The report highlighted that Malaysia has a “sound understanding” of its money laundering and terrorism financing risks, supported by regular national risk assessments and data-driven analysis.
“A notable strength of Malaysia’s anti-money laundering (AML), counter financing of terrorism (CFT) and counter proliferation financing (CPF) framework is its strong domestic coordination and cooperation mechanisms,” the report said.
The MER 2025 also recognized improved effectiveness in areas such as financial intelligence, supervision of financial institutions, and the enforcement of targeted financial sanctions for terrorism and proliferation financing.
The reforms following the 1MDB scandal were noted as a key driver for stronger governance, enforcement and asset recovery.
However, the report identified areas that require further attention, including cross-border crime, third-party and trade-based money laundering, and risks linked to the Labuan International Business and Financial Centre.
It also noted gaps in prosecutions for high-risk money laundering offences, transparency of beneficial ownership, and the use of mutual legal assistance (MLA) in cross-border cases.
“Since the MER 2015, Malaysia has increased the use of MLA for matters relating to money laundering, terrorism financing, corruption and fraud, although further improvement is needed in utilising MLA for investigations and prosecutions,” the report said.
Authorities continue to rely on information-sharing through joint operations and regional platforms, particularly for terrorism financing and cross-border crimes such as drug trafficking and smuggling.
Yet, the report emphasized that these measures cannot replace the underutilized MLA mechanism.
Looking ahead, MER 2025 outlines recommendations for Malaysia to further strengthen its AML, CFT, and CPF framework, with progress to be reported to FATF in 2029.
