Country Reports on Terrorism 2018

Country Reports on Terrorism 2018 is submitted in compliance with Title 22 of the United States Code, Section 2656f (the “Act”), which requires the Department of State to provide to Congress a full and complete annual report on terrorism for those countries and groups meeting the criteria of the Act.

NOVEMBER 1, 2019

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MALAYSIA

Overview: Although there were no ISIS-affiliated attacks in Malaysia in 2018, the country
remained a source, transit point, and, to a significantly lesser extent, destination country for
terrorist groups including ISIS, Abu Sayyaf Group (ASG), al-Qa’ida, and Jemaah Islamiya. Suspected
ISIS supporters deported from Turkey and individuals planning to travel to the southern Philippines
to support ISIS-affiliated groups used Malaysia as a transit point. Malaysia monitored, arrested,
deported, and tried suspected supporters of terrorist groups. Malaysia also cooperated with the
United States and others to increase border security capacity at airports and in the Sulu Sea, to
counter terrorist messaging on social media, and to improve terrorist prosecutions. The national
elections in May resulted in the first transition of power since independence, and the new
government pledged to review and potentially amend or repeal several pieces of legislation that
govern how terrorist suspects are arrested, investigated, and detained. Malaysia is a member of
the Global Coalition to Defeat ISIS.

2018 Terrorist Incidents: After a lull in 2017 and much of 2018, Malaysian security forces
thwarted a kidnapping-for-ransom attempt in Malaysian territorial waters in August. On September
11, two Indonesian fishermen were kidnaped off the coast of Semporna in Sabah state and later held
by ASG militants in Sulu, Philippines with a US $1 million ransom demand. One of the fishermen
reportedly escaped on December 6, but the other remained a hostage at year’s end. On September 20,
two members of a kidnapping-for-ransom group, believed to be spotters for kidnapping activities,
were killed in a shootout with Malaysian security forces on an island near the town of Kunak in
Sabah state. On December 5, three Malaysian crewmembers were kidnapped from a tugboat in Malaysian
waters near Pegasus Reef, off the coast of Kinabatangan in Sabah state, and taken to the
Philippines. During the kidnapping, the captain of the vessel was shot in the leg.

Legislation, Law Enforcement, and Border Security: On November 30, the government lifted a
moratorium it had recently imposed on several security laws, including those governing how terror
suspects are arrested, investigated, and detained. The laws included the Prevention of Crime Act,
the Prevention of Terrorism Act, the Sedition Act, and the Security Offences (Special Measures)
Act. The laws were under formal review for potential repeal or revision to remove “elements of
oppression.” However, a November 27 riot at a Hindu temple in Selangor sparked concern among
officials about the potential threat to national security, public order, and race relations, if the
laws were no longer available. Legislative amendments were not announced by year’s end, but
officials said the legislation would only be used to protect those three areas of concern.
Authorities, however, continued to use the Sedition Act against individuals who criticized the
country’s royalty.

During the year, police arrested approximately 20 individuals in Sabah state who were allegedly
involved in various terrorism-related activities, including smuggling militants into the southern

Philippines, enabling kidnapping-for-ransom operations, recruiting children as militants and
human shields, and participation in ASG-led beheadings.

Countering the Financing of Terrorism: In February, Bank Negara Malaysia (BNM), the central bank,
issued a policy directive called the Anti-Money Laundering and Counter Financing of Terrorism
Policy for Digital Currencies (Sector 6). The directive aims to ensure that effective measures are
in place against money laundering and terrorism financing risks associated with the use of digital
currencies and to increase the transparency of digital currency activities in Malaysia. It
requires all entities and persons who are involved in the exchange of digital currencies into money
and vice versa, as well as the exchange of one digital currency for another, to register with BNM.
The directive also requires the filing of reports pertaining to the identification and verification
of customers and beneficial owners and the ongoing monitoring of customers’ transactions. Lastly,
the new law establishes requirements for suspicious transaction reporting and record keeping.

In October, the FATF published its Third Enhanced Follow-up Report and Technical Compliance Re-Rating for Malaysia on AML/CFT measures. This report analyzed Malaysia’s progress in addressing technical compliance deficiencies identified in the mutual evaluation report. According to the report, as a result of Malaysia’s progress in strengthening its framework to tackle money laundering and terrorist financing since its 2015 mutual evaluation, the FATF has re-rated the country on four of the 40 recommendations, and found Malaysia to be compliant on all four, including on the “terrorist financing offense.”

For additional information on money laundering and financial crimes, see the International Narcotics Control Strategy Report (INCSR), Volume II, Money Laundering and Financial Crimes.

Countering Violent Extremism: In August 2018, the new government announced that the King Salman
Center for International Peace, a former partnership with the Government of Saudi Arabia, would
immediately cease operations and its functions would be absorbed by the Malaysian Institute for
Defense and Security. The Global Movement of Moderates, an initiative started under the previous
prime minister, announced it would cease operations as of July 31.

International and Regional Cooperation: Malaysia continued to support counterterrorism efforts in
regional and multilateral organizations and participated in numerous counterterrorism events hosted
by the UN, the GCTF, the Association of Southeast Asian Nations (ASEAN), the ASEAN Regional Forum
(ARF), the Asia-Pacific Economic Cooperation, and the East Asia Summit. Malaysia hosted ASEAN’s
Senior Officials’ Meeting on Transnational Crime, multiple UN workshops on preventing violent
extremism, and an ARF workshop on countering online
extreme messaging.

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