What Directors Must Know About Company Mule Accounts

When does a company account become a mule account?

A mule account is a bank account used to receive or pass on money from crime. When it belongs to a company, every director on the SSM (Companies Commission) register may be looked at by investigators.

Directors may be investigated. The real question is whether each one is personally liable, and that depends on what they knew, what they should have known and what they did to stop the misuse.

If the company account is also frozen, our business account freeze guide covers the day-to-day side. If staff wages are at risk, see our guide on payroll when the business account is frozen.

What duties do directors have under the Companies Act 2016?

Every director of a Malaysian company has duties set by the Companies Act 2016. Section 213 requires directors to act honestly and in good faith in the company’s best interests. ^[f1] That includes using reasonable care, skill and diligence.

Section 214 goes further: a director who knew or ought to have known of wrongdoing in the company may be personally liable. ^[f4] “Ought to have known” is the key phrase. Turning a blind eye to suspicious transactions is not a defence.

These duties stand apart from AMLA. A director who is never prosecuted for money laundering may still face action under the Companies Act for failing in those duties.

What is a director’s risk under AMLA?

When a company account is used for money laundering, AMLA section 4 applies. ^[f2] The penalty is up to 15 years in jail and a fine of RM5 million or five times the value of the proceeds, whichever is higher.

To convict a director under AMLA, the prosecution must prove the director took part in, helped with or was party to the laundering. That includes a director who knew the account was being misused and did nothing.

The Penal Code adds another risk. Section 424 covers dishonestly hiding property. ^[f3] If company money was moved to hide it from the authorities or creditors, directors who took part in or approved those transfers can face separate charges. Our Penal Code guide explains these offences.

Knowledge or negligence: why does the difference matter?

It decides both the charge a director may face and the defences open to them.

Knowledge means the director knew the account was receiving or sending illegal money. It can be shown by direct evidence, such as messages, emails or instructions. It can also be shown by circumstances, such as a pattern of approving unusual transactions.

Negligence means the director did not know but should have. A director who never read bank statements, never questioned large payments from unknown sources or skipped the board meetings where money was discussed may be found negligent.

Knowledge can lead to money laundering charges under AMLA. Negligence may amount to a breach of director duties under the Companies Act. The sentences and defences differ.

A director who kept an active eye on the accounts, asked questions and put controls in place is in a very different position from one who did nothing. ^[f5]

How can I protect myself now?

If the company account has been flagged or frozen, start building your defence record today.

Check the board minutes. If you raised concerns about transactions, make sure those minutes are kept safe. If minutes were not kept properly, note the gap and work with your lawyer to piece together what was discussed.

Gather your compliance record. Policies you helped write, audits you asked for and compliance training you attended all support you. If the company had no compliance procedures at all, that may point to the failure of the director responsible for them, not yours.

Record your access. Were you a signatory on the frozen account? Did you have online banking access, and could you see the transactions? The less access you had, the easier it is to argue you could not have known.

Keep every message. Emails, WhatsApp messages, board chat groups and meeting notes that show what you did and asked are evidence. Do not delete anything; our guide on preserving evidence explains why.

What if one director was responsible?

In some cases, one director or a small group ran the misuse while the others were not involved. Malaysian law does not make every director guilty for what one director did.

The other directors still need to show they did not simply go along with the managing director or whoever ran the account. Accepting financial reports without checking them is a risk.

If you know or suspect who was responsible, do not confront them. Tell your lawyer, who can advise you on helping the investigation without harming your own position.

Co-directors should think about separate lawyers. Your interests may not match theirs, and one lawyer acting for all directors creates conflicts. Each director needs advice on their own knowledge and conduct.

What about nominee directors?

Nominee directors are in a hard spot. Some are appointed as a formality, have little to do with running the company and never see its day-to-day transactions.

“I was only a nominee” is not a defence on its own. By taking the appointment, a nominee took on the duties that come with it. ^[f1] The court will look at what the nominee could reasonably have done in their role.

Even so, a nominee who was kept away from the finances, never received board papers and could not access the company’s banking is in a different position from a managing director who approved every payment. A lawyer can help set out your particular facts.

If you are still a nominee director of a company under investigation, ask a lawyer about your options before you decide whether to stay or resign. Either choice has legal effects.

How should I deal with investigators?

When JSJK (the police commercial crime department) or another authority contacts you as a director, how you respond affects your position. Cooperating can help you, but do it carefully.

Do not give a statement without legal advice. If you are arrested, you have the right to consult a lawyer before questioning, but a lawyer has no general right to sit in on the interview. Our guide on being called in by JSJK explains what to expect.

Hand over documents when asked, but through your lawyer. Do not offer information about other directors or staff without advice, because what you say can be used against you.

If you have evidence that you acted properly and did not know, your lawyer can present it at the right point in the investigation. Early, well-documented cooperation can affect whether you are charged. The first step is finding the right legal help.

Sources

1. Companies Act 2016, Sections 213-214 (director duties and liabilities)
2. Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA), Section 4 (money laundering offences)
3. Penal Code, Section 424 (dishonest concealment of property)
4. Raj, Ong & Yudistra, “Unveiling the Mystery: When Your Bank Account Gets Frozen by the Law” (2024)
5. Suruhanjaya Syarikat Malaysia (SSM), Companies Act 2016 director obligations