Researchable Topics in Islamic Financial Criminology

Financial Criminology	Islamic Finance & Muamalat
Camouflaged Fraud Detection	Islamic Finance Development
Money Laundering – types, prevention & detection, rules & regulation	Financial Crisis and Islamic Finance
Auditor Specialisation & Fraudulent Financial Reporting	Maqasid al-Shariah in Financial Transactions
Fraud Detection and Prevention Models	Islamic Finance Instruments
Risk Management, Fraud risk indicators and red flags	Compliance on Corporate and Shariah Governance
Risk in Islamic Banks	Theory of Islamic Contract
Tax Fraud and Preventive Mechanisms	Shariah Compliance of Financial Products
Legislative Punishment in Financial Fraud	Shariah and Legal Issues
Combating corruption	Islamic Micro-financing
Existing level of legal requirement & policies on financial criminology in Malaysia, Australia, UK & US	Shariah Audit
White collar crime and the criminal justice system	Waqaf Management
Shariah’s normative framework as to financial crime and abuse	Corporate Zakat Management
Integrity & Ethics	Zakat Investment
Whistleblowers – regulation, policies & effectiveness	Sukuk and Securitization
Commercial crime and financial implications	Operational Risks, Shariah Compliance and Internal Control
Trade-Based Money Laundering	Islamic Social Enterprise Governance
Transfer Pricing Manipulation	Economic Transformation through Islamic Microfinance
Tax Planning, Tax Avoidance and Tax Evasion	Mitigating Terrorism Financing through Effective AML/CFT Regime
GST s a Mechanism to Mitigate Money Laundering	Islamic Philanthropy and its  Governance

DNFBP Sector

A 2004 amendment  to the Anti-Money Laundering and Anti-Terrorism Financing Act (AMLA) redefined “reporting institutions” to include accountants. In the Financial Action Task Force on Money Laundering (FATF) context, accountants are part of the Designated Non-financial Businesses and Professions (DNFBPs) sector.  FATF research highlighted a trend in the use of complex commercial arrangements by money launderers and terrorism financiers to hide their money trail. These arrangements often use the services of professionals such as lawyers, accountants and company secretaries. Arising from these typologies, the FATF standards require countries to improve their Anti- Money Laundering and Counter Financing of Terrorism (AML/CFT) measures on DNFBPs.  In Malaysia, DNFBPs consist of casinos, real estate agents, dealers in precious metals or precious stones, lawyers, company secretaries, accountants and other independent legal professionals. All have been made reporting institutions (RIs). Dealers in precious metals or precious stones were incorporated with effect from December 2007.  (Extracted from the Accountants Today - August 2008).

Researchable Topics in AML-CFT

"Money Laundering" and "Terrorism Financing"  (ML/TF) are two buzz words of the new millennium.  The impact of both types of fraud on a nation economy could be detrimental.  Globally, various mechanisms have been set to mitigate ML/TF.  The Financial Action Task Force (FATF) is the leading agency entrusted to monitor this sort of fraud.  Through its Anti-Money Laundering and Anti Financing of Terrorism (AML/CFT) programs, FATF has proposed various "Recommendations".  The latest "40 New Recommendations" issued in February 2012 will form the basis of FATF upcoming Mutual Evaluation on AML/CFT regime.  For Malaysia, the following AML/CFT-related research topics would be forthcoming:

• Study on AML-CFT Initiatives at Designated Non-Financial Businesses & Professions (DNFBPs)
• Money Laundering through Tax Evasion: Development of Fraud Risk Indicators
• Risk-Based AML-CFT Evaluation of Non-Profit Organizations
• FATF Mutual Evaluation: Comparative Analysis of Country Assessments
• Money Laundering: Analysis of Predicate Offences and their Applications
• AML/CFT Implications on Politically Exposed Persons (PEPs)
• Effectiveness of  System in Detecting Suspicious Transaction Report (STR)
• DNFBP - Regulation, supervision & monitoring
• AML-CFT Cost of Compliance
• Suspicious Transaction Report for Terrorism Financing
• Assessment of Ongoing Strategy to identify and mitigate AML/CFT risks within NPO sector
• Cash Courriers: Evaluation of Current Tools to Mitigate ML/TF

Research on Possible Misuse of NPOs

Very often, the establishment of Non-Profit Organizations (NPOs) are premised on some very pure and "holy" intentions.  For example, they may be formed to garner financial support for cancer-related research; or they exist to provide material assisstance to some war-torn regions.  Nevertheless, along the way, some individuals who either run or provide support for NPOs may misuse such establishments for personal benefits.  Based on such possible eventualities, the Financial Action Task Force (FATF) has included the assessment of NPO governance as one of its 40 recommendations against money laundering and terrorism financing.  In its recent report on "Money Laundering and Terrorism Financing Risks to Australian Non-Profit Organizations", the Australian Institute of Criminology (AIC) has listed possible multiple ways in which non-profit entities may be misused:

• Misuse of Funding - this may include soliciting funds in the name of legitimate NPOs but disbursed for other than "altruistic means".  Or NPOs may be used in money laundering activity such as tax evasion.
• Misuse of Assets - this is where NPO's assets such as transport and property may be used to transport or house operative, some illegal activities
• Misuse of Name and Status - an NPO may raise funds for a particular cause but have those funds dispensed for some fraudulant activities.
• Misuse of the Notion of the Charitable Status - Here, criminal or terrorist entities may elect to establish a sham NPO, but one which is registered and engages in requisite regulatory requirements.

Fraud Considerations in the Audit of Financial Statements

The Accounting Research Institute thanks Mr Ken Pushpanathan, President of the Malaysian Institute of Certified Public Accountants (MICPA)who presented a lecture for the students of the Master in Forensic Accounting and financial criminology program.

The lecture topic was related to Fraud Considerations in the Audit of Financial Statements. Essentially, an auditor is responsible for planning and performing the audit to obtain reasonable assurance about whether the financial statements taken as a whole are free of material misstatement, whether caused by error or by fraud. Nevertheless it was further stressed that the fact that an audit is carried out may act as a deterrent, but the auditor is not and cannot be held responsible for the prevention of fraud and error. The International Auditing Standard 240 (IAS 240)specifically stipulates that an auditor in an audit of financial statements must ensure that he or she

(i) gathers information from management and others within the organization to identify and assess risks of fraud, (ii) develops specific audit procedures to address these identified risks and (iii) performs mandatory procedures to address the risk of management override of controls. Mr Ken Puspanathan further shared his experiences as an auditor and elaborated how in reality, financial frauds are committed in various forms. As such, auditors must be creative and proactive in their audit planning so as to maximise the probability of "catching the pepetrators"