Company Account Frozen After an Employee's Misuse?

How an employee turns a company account into a mule account

It can start without the owner knowing. An employee with access to the company bank account starts handling transactions that have nothing to do with the business. Money comes in from unknown sources and goes straight out again, and the employee may keep a cut.

The employee may have been recruited by a syndicate, or may have offered the account willingly. Either way, the company account is now moving crime money. ^[f4] Banks watch company accounts for unusual patterns, and once the system flags the activity, the account is frozen.

The freeze hits the whole business. ^[f3] Payroll stops, supplier payments stop, and the company may not be able to operate. Some owners only find out when the account is already locked.

Your legal risk as the owner

As the person who controls the company account, you could be charged under Section 424B of the Penal Code. ^[f1] This section covers anyone who gives another person possession or control of their own bank account.

The penalty is a fine of RM10,000 to RM100,000, or 1 to 7 years’ jail, or both. ^[f2] You do not have to have made the transfers yourself. What you knew about the misuse, and whether you allowed it, will matter.

That is hard for an owner who truly had no idea what the employee was doing. In practice, you will need evidence that you did not know and did not allow it.

Why what you knew matters

What you knew about your employee’s use of the account, and why you gave them access, matter to your defence. ^[f5] A business owner who can show lack of knowledge and proper internal controls is in a stronger position.

The case against you weakens if you can show the employee acted alone, went around normal procedures, or hid the transactions from you. Your company’s controls, approval steps and split of duties all help.

A lawyer who handles mule account cases can look at these points and build a defence on the facts of your case.

Evidence that you did not know

Your defence needs documents, not only your word.

Bank access records. Ask your bank who logged in, who started each transfer and who approved it. If only the employee used the account during that period, this is strong evidence.

Your internal controls. Policies on payment approvals, two-signature rules and spending limits show you kept proper oversight. ^[f6] Even informal practices, once written down, can show the employee broke your rules.

Messages and emails. Normal work messages between you and the employee show an ordinary employer and employee relationship.

A timeline. Set out when the suspicious transactions happened, when you found out and what you did next. This shows you acted in good faith.

Keeping the business going while the account is frozen

The pressure is immediate. ^[f3] Staff need paying, suppliers expect their money, and customers may lose confidence. Acting early gives you more options.

Apply to vary the freeze. A lawyer can ask for essential payments such as payroll, rent and existing contracts to be allowed during the investigation. For an AMLA s44 freeze this is a written application to the agency. For a police freeze under CPC s116D, the application goes to the Sessions Court.

Ask your lawyer how to pay people. Do not move company money through a personal account or anyone else’s account without legal advice. Banks watch for that pattern, and it can make your position worse.

Tell the people who need to know. Inform key staff, suppliers and partners as needed. A lawyer can help you word these messages so they do not hurt your legal position.

What to do now

Secure all company records. Collect bank statements, staff records, access logs and internal messages before anything is changed or deleted. These are the base of your defence.

Do not confront the employee on your own. Anything you say to the employee about the investigation can become evidence. Let your lawyer advise you on how to handle them.

Speak to a lawyer before giving a statement. If police call you in, attend. But speak to a lawyer first before you give a statement, because your first statement shapes the investigation.

Write down your controls. Record how money was approved and paid in your company, even if the rules were informal. This shows you had systems that the employee went around.

Speak to a lawyer now. A lawyer who handles mule account defence can assess your risk, deal with the investigating officer and start your defence.

Why acting early helps

The investigation goes on whether or not you take part. Evidence of your controls and of the employee acting alone needs to be kept before it is lost.

If you act early, your lawyer can give your side before any decision to charge. You can also apply to vary the freeze while it can still save the business.

If an employee’s misuse has frozen your company account, a lawyer can start protecting you and the business now.

Sources

1. Penal Code (Amendment) Act 2024, Sections 424A, 424B, 424C
2. Companies Act 2016, Sections 213, 214
3. Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA)
4. Criminal Procedure Code (Amendment) 2024, Section 116D
5. Bank Negara Malaysia, AML/CFT Policy Document
6. Low & Partners, “Keldai Accounts: When Helping a Friend Becomes a Criminal Offence” (2024)