M’sia warned of potential financial abuse by rogue nations

KUALA LUMPUR: The United States has alerted Malaysia about its concern over illicit ship-to-ship oil transfers in Malaysian waters and the potential abuse of its financial institutions by “rogue nations and outside actors”, says a top US Treasury official.

US Treasury’s Undersecretary for Terrorism and Financial Intelligence Brian Nelson (pic) said that his trip to the South-east Asian region from Monday until yesterday revolved around two key issues, namely disrupting Russia’s ability to sustain its war in Ukraine as well as countering terrorist financing by Iran and its proxies.

“This trip is about alerting Malaysia to the concerns that we have and working with them to address those concerns,” he told selected Malaysian media at the American Malaysian Chamber of Commerce headquarters yesterday.

The trip comes as the Treasury increases its focus on financing militant groups routed through South-east Asia, including fundraising efforts and illicit sales of Iranian oil.

Nelson said the United States had been monitoring ship-to-ship oil transfers in Malaysian waters, which can pose major environmental and safety risks.

“I would only say we have seen and we promulgated some sort of guidance to the marine sector about the type of services that engage in ship-to-ship transfer, which particularly happens at night, which we see from time to time, really designed to obfuscate the origin of the commodity, or in this case, Iranian oil,” he said.

Nelson spoke of “all of the relatively expensive infrastructure that it takes to pull these things off ”.

“And typical markers that we see are like when they turn off their location device and when they’re trying to obscure the name of the ship, or they falsify or forge critical documents about the commodities that were issued,” he said.

As such, he said the United States was alerting the industry about these practices.

“And if Iran is engaged in shipto-ship transfers, we want to make sure that we’re doing everything we can to alert, both to the threat and also to the sort of critical mitigating steps that each industry actor can and should take in order to prevent those types of practices from continuing,” he explained.

Nelson spoke of “outside and bad actors” perpetuating the war and conflict in the Middle East and Ukraine who need permissive jurisdictions to hide and move their funds.

“We have also seen a concerning increase in the last 20 years in attempts by Iran and its proxies, including Hamas, to raise and move money in the region.

“It’s appalling that they would seek to exploit the understandable outpouring of support for the Palestinian people and syphon the money for violence and destabilising activities instead.

“We urge all those who wish to support humanitarian assistance in Gaza, which is of course an incredibly important cause, to do so through established, reputable charity sources to ensure that it is not diverted,” he said.

Asked about the sanctions imposed on four Malaysian-based companies accused of helping Iran’s production of drones in December last year, he said that they had been impactful and are still in place. The goal of such sanctions was to encourage behavioural change, he said.

“This is a powerful tool that we find effective, in the context that most of this activity is designed to drive profit or provide capital for ongoing operations, and our sanctions have the ability to disrupt both of those features.

“So from that perspective, we think that it’s impactful,” he said.

In December last year, the US Treasury imposed sanctions on four Malaysia-based companies it accused of helping Iran’s production of drones.

Washington accuses Iran of supplying deadly drones to what it says are terrorist proxies in the Middle East and to Russia for use in Ukraine. Nelson said Malaysia had shown good cooperation in addressing these issues.

“We have a long and comprehensive relationship with Malaysia on a lot of fronts, including economics and security.

“And I would say that the cooperation by necessity is deep because we are interrelated in so many ways,” he said.