As structured programs on Anti-Money Laundering and Counter Financing of Terrorism activities are relatively new especially among many developing member countries, it remains a challenge for the financial industry and regulators alike to formulate adequate measures and mechanisms to counter these perpetrators. In this regard, compliance with the standards set by the Financial Action Task Force on Money Laundering help deter the Asia Pacific region from being targeted as a regional centre for money laundering and terrorism financing. In this regard, I am especially pleased to share with you that Malaysia has been ranked among the top 10 countries in terms of AML/CFT compliance in the recent Mutual Evaluation Report 2007 assessment exercise. Let me now turn to a subject close to us here in Malaysia, that is, Islamic insurance or better known as takaful. In recent years, takaful has grown significantly as the Islamic alternative to conventional insurance and has evolved from being a domestic operations to becoming a thriving global business. The global takaful market is expected to grow between 15 and 20 per cent per annum. Nevertheless, the market penetration level remains low, notably less than 5% in many Muslim countries and 6.8% here in Malaysia, thus providing significant market potential that remains untapped. Bank Negara Malaysia will continue to foster the continued growth of takaful business by providing a conducive business and regulatory environment. However, there is a clear need for the takaful industry to deliver innovative financial products and services, that can effectively compete with those offered by conventional insurers.
While acknowledging the necessity of having different rules in certain areas to reflect the underlying fundamental differences between the two systems, a key consideration of the Bank is to maintain a level playing field. Given the functioning of Islamic finance in parallel with the conventional financial system, neutrality in treatment between takaful and conventional insurance products is considered important to ensure the sustainability of both systems in the economy. The dual system would also serve to provide a comprehensive array of financial products and services as well as intermediaries for the overall benefit of consumers. BIS Review 123/2007  3  Allow me to also share with you Malaysia's latest initiatives to strengthen its position as an international Islamic financial centre. In line with our efforts to enhance our inter-linkages with the global Islamic financial markets, the Malaysian Government has launched the Malaysia International Islamic Financial Centre or MIFC as part of the initiatives to position Malaysia to become a leading international Islamic financial centre. It is our objective to build greater intermediation linkages between East Asia, South Asia and the Middle East which will, in turn, further expand inter-regional trade and cross border investment flows. As part of these initiatives, foreign financial institutions are allowed to establish International Islamic Banks, International Takaful Operators, as well as International Currency Business Units to undertake international currency business in Islamic finance with non-residents in Malaysia or abroad through a locally incorporated entity or a branch.