Govt can’t forfeit clean funds just because account held tainted money, court rules

The government cannot forfeit an entire bank account merely because part of the money in it is linked to criminal activity, the Court of Appeal has ruled.

A three-member bench allowed in part an appeal by LWC Good Service Sdn Bhd against a High Court order forfeiting RM1.36 million from two of its bank accounts under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Amla).

Justices K Muniandy, Azman Abdullah and Dean Wayne Daly heard the appeal.

Muniandy, who delivered the unanimous judgment, said the prosecution established a direct money trail showing the transfer of RM360,000 from a “mule account” linked to the Comoncaps investment scam into LWC’s Hong Leong Bank account.

However, he said there was no evidence linking the remaining funds to the scam.

The court ordered RM360,000 in the Hong Leong Bank account to be forfeited, but directed the return of RM863,179.84 in the same account and RM139,329.24 in LWC’s CIMB account.

“Suspicion, however compelling or grave, does not take the place of legal proof,” Muniandy said in the written grounds.

He said Amla could not be transformed into a “catch-all confiscation device” that allows money to be seized merely because a company’s corporate profile is irregular or its trading partners are financially non-compliant.

Muniandy said forfeiting funds not proven to be linked to unlawful activity would amount to an “unconstitutional deprivation of property without authority of law” under Article 13 of the Federal Constitution.

“The state cannot confiscate unrelated account balances based purely on suspicion, non-compliance or commingling without a predicate evidentiary link,” he said.

The court said the doctrine of severability required the proven tainted funds to be separated from the remaining balance.

LWC was among 28 respondents in civil forfeiture proceedings arising from the Comoncaps investment fraud in which 22 victims allegedly lost about RM3.49 million.

The High Court ordered the forfeiture of LWC’s entire Hong Leong Bank balance of RM1.223 million and its CIMB balance of RM139,329.24.

The Court of Appeal said the High Court erred by failing to distinguish the RM360,000 proven to be tainted from the remaining funds.

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