Brunei’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Regime: Areas for Improvement

Investigation and Prosecution

Brunei faces significant challenges in investigating and prosecuting money laundering (ML) and terrorist financing (TF). The Royal Brunei Police Force has the power to investigate ML related to all predicates and TF, but specialist agencies may also need to be involved.

• Lack of capacity: Brunei lacks the necessary resources and expertise to effectively investigate and prosecute ML and TF cases.
• Limited powers: While the police force has some powers to investigate ML, they may not have the authority to tackle more complex cases involving predicate offenses.

Preventive Measures—Financial Institutions

The Money Laundering Order (MLO) sets out AML/CFT preventive obligations for financial institutions, but these are not adequately addressed. Draft guidelines and notices for Customer Due Diligence (CDD) have been circulated but not issued, leaving financial institutions without clear regulatory instructions to implement CDD and record-keeping obligations.

• Limited guidance: Financial institutions lack binding regulatory instructions on implementing CDD and record-keeping requirements.
• Inadequate supervision: Onsite supervision has only covered a limited number of banking sector institutions and one insurance company, with no inspections conducted for other sectors at the time of the onsite visit.

Reporting

Strategic Transaction Report (STR) reporting is low in Brunei, with only a handful of banks reporting. Several factors contribute to this, including lack of understanding of ML/TF risks, insufficient guidance on typologies, concerns about the legal framework and safe harbor provisions.

• Low reporting rates: STR reporting is limited, with several factors contributing to low levels of reporting.
• Insufficient guidance: Financial institutions lack clear guidance on typologies and may be hesitant to report suspicious transactions due to concerns about the legal framework and safe harbor provisions.

Internal Controls and Audit

The MLO sets out limited requirements for financial institutions on internal controls and audit. An Administrative Notice was issued in 2007 to appoint compliance officers, which has been implemented by banks and finance companies since early 2008.

• Limited requirements: The MLO only sets out basic requirements for internal controls and audit.
• Implementation: Financial institutions have implemented some measures, such as appointing compliance officers, but these may not be sufficient to address AML/CFT risks.