People

Human trafficking is a significant problem in Indonesia, which serves as a source, transit and destination country for trafficked people. Labour traffickers exploit Indonesians through coercion, including force and debt, in Asia and the Middle East. Fraudulent labour recruitment agents and subagents are responsible for more than half of the Indonesian female trafficking cases overseas. Women and children are particularly vulnerable to sexual exploitation, and tens of thousands of them become victims annually. Additionally, traffickers exploit women and girls in forced labour for domestic service, and children may be forced to participate in drug trafficking. The pandemic has made working-class Indonesians more vulnerable, especially women and children who have lost their savings and are more susceptible to exploitation. In fact, the scale of human trafficking in the country is estimated to have increased. Myanmar nationals are also reported to be increasingly vulnerable to human trafficking in Indonesia.

Indonesia is also a significant source, transit and destination country for human smuggling, often linked to labour migration, which is facilitated by recruitment agents. Despite efforts to crack down on the fees charged by recruitment agencies, the practice continues, and corrupt officials reportedly facilitate the market. People transiting through Indonesia stay for an average of two to four weeks before switching smugglers, and border officials are believed to engage in bribery to provide falsified identity documents. Human smuggling serves as a means of economic survival for many Indonesians, especially in eastern regions such as Nusa Tenggara and Maluku. Migration flows along maritime routes from Indonesia to Malaysia continue to be dangerous and sometimes fatal, with smuggling mainly facilitated by Indonesian fishermen transporting asylum seekers. The reopening of the Malaysian economy is fuelling demand for foreign labour, and many Indonesians are seeking to return to Malaysia, where there are more than a million undocumented Indonesian workers. Rohingyas have also been smuggled from Indonesia to Malaysia.

Extortion and protection racketeering are prevalent in Indonesia's informal economy, where syndicates control markets such as gambling and counterfeit goods. Financial crime syndicates have also taken advantage of the surge in online and delivery services, with illegal online lending syndicates, often collaborating with local authorities, becoming a growing problem. Historically, gangs of thugs and militias have controlled street markets and several types of economies, and new types of gangs and aggressive rent seekers continue to collect payments from local businesses.

Trade

Arms trafficking is a moderate problem in Indonesia, with the country serving as a destination for trafficked arms from neighbouring countries such as Cambodia, Myanmar and the Philippines. The demand for arms is generated by local actors such as rebel groups, separatist movements and terrorists, who use both online and offline networks to conduct transactions. This market has been fueled by internal conflicts, and the challenge of detecting and monitoring arms circulation has further exacerbated the situation. The proliferation of arms has resulted in rising rates of violence and communal conflict in regions such as Ambon, Maluku and Poso in Central Sulawesi. However, the arms market is smaller than other criminal markets in Indonesia, and the country has low distribution of small arms compared to other countries in the region.

Counterfeit goods are a significant problem in Indonesia, as the country serves as a transit point for fake goods due to its proximity to China and its own local market for counterfeit goods. The trade has increased significantly, with e-commerce playing a major role in distribution. Despite complaints, e-commerce platforms in Indonesia have been slow to take down counterfeit materials, leading to calls for increased enforcement and specialized police forces to tackle the issue. Indonesia has been flagged as a country of concern internationally due to insufficient intellectual property protection and enforcement actions.

The COVID-19 pandemic has caused a surge in illegal tobacco sales in Asian countries, with cigarettes being one of the most commonly smuggled goods in the region. Organized crime groups and syndicates are behind networks that smuggle these goods through countries in the region, with Malaysia’s and Indonesia’s lax laws making it harder to prosecute illegal trading syndicates. The complex excise tax system in Indonesia has incentivized domestic manufacturers to under-declare their liabilities, leading to a high demand for illegally produced cigarettes domestically.

Environment

Indonesia is a major hub for illegal logging, driven primarily by wood harvesting and the conversion of land for palm oil plantations. The industry involves powerful brokers, private sector entrepreneurs and local political leaders, with most profits staying within the country. The trade has major negative impacts on the environment, social relations and the Indonesian economy, with losses of billions of dollars per year in uncollected non-tax revenues. Despite attempts to curb the trade, including the introduction of a timber legality verification system, implementation remains weak, and the legal system has failed to punish those responsible for the crime. In fact, locals who engage in illegal logging are often punished while those who fund and profit from it avoid prosecution. During the COVID-19 pandemic, illegal logging of rainforests on the Indonesian island of Sulawesi is reported to have increased by almost three-quarters due to reduced monitoring activities.

Indonesia also faces massive illegal wildlife trade, with poachers targeting endangered species such as tigers, pangolins, cockatoos and orangutans. The market is one of the largest criminal markets in the country, with significant overlap with the legal wildlife trade market. There is no accreditation mechanism to differentiate between animals that are commercially bred and those captured in the wild. The illegal wildlife trade is expanding due to hobby communities and social media networks, with almost all traded animals believed to be poached. In addition, Indonesia has a significant illegal, unreported and unregulated fishing industry, with foreign actors from neighbouring countries such as the Philippines, Vietnam and China involved in the crime.

Illegal mining and drilling of non-renewable resources is a major issue in Indonesia, with millions of people participating across the country. The COVID-19 pandemic has led to an increase in artisanal mining, associated with safety concerns and environmental damage. Illegal mining for gold and other metals has resulted in fatalities, and illegal tin mining has raised tensions between miners and fishermen. The illegal mining market generates billions of dollars annually, making it one of the most significant criminal markets in Indonesia and South East Asia. Corruption is prevalent in the market, with low-level officials and the military allegedly receiving bribes to turn a blind eye to illegal activities. South Sumatra, home to Indonesia's largest coal reserves, has hundreds of thousands of hectares of land occupied by illegal mining operations. Illegal oil drilling also takes place in various provinces.

Drugs

Indonesia is a transit and destination country for heroin that is smuggled from Thailand, Laos and Myanmar. Although drug trafficking is a significant criminal market in Indonesia, the heroin trade is relatively small compared to other countries in the region. Corruption is rampant in the market, with reports of state-embedded actors accepting payments to facilitate illegal drug trades. The heroin trade in Indonesia is profitable for both domestic and foreign actors, and demand primarily comes from within the country.

Bali is one of the most popular places for cocaine consumption and other drug use. While cocaine use in Indonesia is moderate, the drug is increasingly sold through social media platforms and transported via post. In 2022, the country's biggest cocaine seizure to date was made. Cannabis is mainly used in the northern part of Sumatra for cooking and producing cigarettes and herbal medicine, and it is mostly grown for domestic consumption. Although both locals and foreign nationals participate in the cannabis trade, locals play a more significant role in the market.

The synthetic drug trade in Indonesia is thriving, with methamphetamine being the most widely used and seized drug. Methamphetamine in the country is produced by Middle Eastern and Chinese criminal organizations, and Indonesia serves as a transit country for methamphetamine being transported to Australia and New Zealand. The synthetic drug market is highly sophisticated, with major established domestic producers enjoying state backing. The synthetic drug trade continues to become more prevalent, and drug consumption in general has risen significantly in the country.

Cyber Crimes

Indonesia boasts one of the world's largest digital economies, but its vulnerability to cyber-attacks is a growing concern. This is due in part to a shortage of skilled professionals and inadequate digital infrastructure. During the COVID-19 pandemic, cyber-attacks increased fivefold, making it even more challenging to regulate and enforce data protection, especially when the government is accused of using cyber-malware and surveillance software against its critics. Data breaches are prevalent in Indonesia, but there has been little effort to address security vulnerabilities or provide recourse for victims. Cybercriminals have capitalized on the pandemic by creating fake apps to monitor COVID-19, which has resulted in unsuspecting victims inadvertently installing malware on their devices. The most common cybercrime methods in Indonesia include malware and distributed denial-of-service, with no specific targets. The origin of these attacks is challenging to identify, but there may be transnational criminal networks profiting from these operations.

Financial Crimes

Illegal online trading platforms have proliferated in Indonesia, with influencers promoting fraudulent apps that attract investors to trade stocks, resulting in millions of dollars in losses. Financial crime syndicates are constantly coming up with new ways to infiltrate financial systems for a profit, and many banks in the Asia-Pacific region report that new digital services have led to increased losses to online financial fraud. Every hour, tens of thousands of reports of financial fraud flood into Indonesia, with senior management of companies found to be responsible for most cases, often by recording fictitious sales.

Criminal Actors

Over the past two decades, mafia-style groups in Indonesia have evolved into looser and more mobile networks. Although the government does not officially recognize their existence, some of these groups have existed since the 1980s and have been supported by wealthy and/or military families. These groups are involved in a range of sectors, including property, gambling, drugs, car dealerships, forestry, mining and manufacturing. They typically have low membership and secretive internal structures. Other mafia-style groups in Indonesia include paramilitary-style militias, which have a long history in the country and are linked to police and military elites, or to competition between regional and national political parties. These groups often make money through debt collection, informal security provision and other coercive tactics.

State-embedded actors have significant control over criminal markets in Indonesia, and corruption is rampant at both national and regional levels. This includes the procurement of goods and services, licensing, bribery, budget misuse, illegal taxation, money laundering and obstruction of corruption investigations. Prison officers and border control officers are believed to facilitate drug trafficking operations. State-embedded actors also appear to influence the democratic process by buying votes to acquire strategic political positions.

Criminal networks are significant in Indonesia and are believed to be involved in various forms of organized crime, including drug trafficking, human trafficking and terrorism. Many criminal networks include state actors, making it difficult to distinguish between criminal and corrupt state networks. The networks often influence the democratic process by participating in political campaigns and buying votes. Larger criminal networks adhering to religious interests have also carried out terror-like operations. Criminal human trafficking networks are believed to exist primarily in rural areas, especially in eastern Indonesia.

Foreign criminal actors are heavily involved in Indonesia's human trafficking and drug trafficking markets. Chinese and Myanmar organizations reportedly fund the production of methamphetamine in Myanmar and transport the drugs through Malaysia into Indonesia. Meanwhile, Middle Eastern organizations produce methamphetamine in the Pakistan–Afghanistan border region and transport it using vessels with Iranian crews. Motorcycle gangs have also expanded internationally, with ad hoc and disorganized connections to amphetamine and weapons trafficking. Foreign and local criminal actors in Indonesia reportedly have a high level of interaction.

Private sector corruption is a serious concern in Indonesia. Private companies control most of the country's land mass, often paying the police and military to guard their concessions in mining and logging industries, which results in the persecution of local communities. The powerful elites controlling landed interests are linked to issues like deforestation, illegal logging and illegal palm oil development, with one in five hectares of palm oil being illegal. Private sector actors are also involved in illegal plastic supply chains, with many legal businesses mislabelling waste and plastic shipments to raise profits and engaging in money laundering and other illegal activities.

Leadership and governance

In recent years, Indonesia's political leadership and governance have faced criticism for a decline in state legitimacy, human rights, economic equality and security. The current administration has been accused of attempting to maintain its power and potentially avoid elections, with calls from ministers to defer elections and amend the constitution to allow the president to stay in office for three consecutive administrations instead of two. Polling shows that Indonesians are not interested in postponing elections, and the current president's approval has fallen steeply, largely due to a rise in cooking oil prices and allegations of government corruption and the existence of palm oil cartels. It is reported that organized crime is not seriously dealt with, and several internal conflicts between the government and separatist movements threaten government resilience to organized crime.

The hobbling of the anti-corruption commission has made it difficult to root out illegality and criminality in Indonesia. The current president has been accused of using the threat of crime, particularly illegal drugs, to secure favourable election results. This has also further politicized the police, who are known to be politically loyal to the president. Currently, the anti-corruption agency's role has shifted away from prosecution to prevention. Despite attempts to weaken the institution, they continue to investigate high-profile politicians and government officials for their involvement in corruption.

Indonesia has ratified all international treaties related to organized crime and established extradition agreements with several countries. It prioritizes international cooperation to combat organized crime and contributes to the efforts of regional organizations, including the Association of Southeast Asian Nations, to address transnational organized crimes such as people smuggling, human trafficking, drug trafficking and cybercrime. Indonesia has been strengthening its collaboration efforts to tackle cybercrime with other allies in the region, such as Australia. However, several countries believe that Indonesia is not doing enough against Chinese cyber and physical capabilities.

Indonesia has a legal framework in place to combat organized criminal activities, with most anti-crime legislation focusing on drug, flora and fauna crimes and forestry and illegal fishing crimes. However, concerns have been raised about the revision of the Corruption Act, which may weaken state capacities to tackle corruption. Despite the government's aim to improve the country's fight against crime, critics worry that projected changes in the penal code will allow authoritarian action against certain minorities.

Criminal justice and security

Indonesia's judicial system lacks specific units to deal with organized crime, and corruption and fraud persist in all state spheres, giving criminals a means to interfere with prosecutions. Judicial authorities have a low awareness of trafficking crimes and relevant legislation, and illegal logging cases are not frequently pursued, with only a handful of companies facing legal action. Prisons are overcrowded and conditions are harsh, with some drug networks operating inside them. Although the police have a mandate to combat organized crime, Indonesia's law enforcement agencies lack specific units dedicated to tackling it. Many believe that current capacities remain insufficient, particularly due to a lack of training in controlling Indonesia's maritime boundary. Corruption at all levels of government impedes law enforcement's efforts to address criminal markets, with the police having a reputation for corruption. The police have also been accused of being politicized, with weak horizontal accountability.

Indonesia's vast number of remote areas and weak border infrastructure make it particularly vulnerable to transnational organized crime. Efforts to combat drug trafficking have been hampered by poor border management and lack of necessary infrastructure. However, the government has been working on developing border infrastructure for almost a decade and has collaborated with neighbouring countries to improve border control. During the pandemic, Indonesia limited crossings at several check-points, but experts expected a rebound in illegal border crossings as the country reopened. Insufficient information and communications infrastructure make it challenging to connect Indonesia's geographically dispersed population digitally. The government's plan to create three new provinces in Papua has been met with opposition from native Papuans, who see it as an attempt to break up the separatist movement rather than an effort to address border issues.

Economic and financial environment

Indonesia has made significant efforts to combat money laundering by implementing legislation and adopting standard international recommendations. The country's financial intelligence agency is responsible for preventing money laundering, managing data and information, supervising compliance and investigating financial transactions. Although disclosing beneficial ownership is mandated, no tangible outcomes have been seen yet. In June 2021, the Constitutional Court expanded the interpretation of the money laundering law, allowing all civil servants authorized to investigate crimes to conduct parallel money laundering investigations. This move is expected to increase investigations related to environmental crimes such as illegal logging. In recent years, the majority of cases reported on this crime have been related to terrorist financing, followed by corruption and tax evasion.

The Indonesian government is working to improve the country's economic competitiveness and accelerate post-pandemic economic recovery. New legislation includes provisions to lower corporate taxes, simplify business licences, reform labour laws and reduce bureaucratic and regulatory investment barriers. However, some experts question the ability of the new laws to guarantee economic regulatory capacity or sustainable growth. The government is also considering introducing new taxes, including a value added tax increase and a wealth tax on the rich, to rebalance the country's finances after borrowing and spending during the COVID-19 crisis. The pandemic has forced the government to borrow heavily and invest large sums of money, leading to a crackdown on tax evasion with the aid of training, financial data and international agreements to follow the money trail more efficiently. Preventative laws are in place to combat tax crimes, and those found guilty may face fines of two to four times the failed payment value and prison sentences ranging from six months to two, or even six, years. E-commerce is rapidly growing as a market platform for advertising in Indonesia, but criminal actors have taken advantage of these platforms to sell illicit items such as drugs, fauna and flora. While there is no evidence of criminal groups being involved in the regulation of economic markets, it is possible that corrupt officials have aided criminal actors in influencing economic decisions.

Civil society and social protection

Indonesia has implemented measures to support victims of and witnesses to crimes, including human trafficking and drug-related crimes. However, there have been allegations that the witness and victim protection agency has had slow response times and been oppositional to witnesses. Limited support is available for whistle-blowers, and victims of sexual assault often hesitate to report incidents due to cultural norms and conservative Muslim beliefs. Civil society organizations supplement government services for male victims, and funds have been allocated to support Indonesian victims of human trafficking abroad. NGOs have established rehabilitation centres for drug users and victims of drug-related crimes.

To combat organized crime, including human trafficking, forced labour and drug abuse, the Indonesian government has established prevention strategies. The government has created various task forces and distributed awareness materials to address these issues. However, NGOs have raised concerns about the effectiveness of the government's ban on Indonesian fishermen working aboard Chinese-flagged vessels to prevent trafficking for forced labour. The government also lacks standard operating procedures for proactive victim identification and referral to rehabilitation services. Nevertheless, mechanisms are available for local communities to report organized crime through call centres, texts or online platforms. Efforts to increase financial inclusion and literacy among the population, particularly the 97% of the workforce that lacks access to formal banking, are being made. However, the country faces challenges in preventing financial crimes such as online trading and gambling, which pose a threat to the economy.

Indonesia's government has been accused of failing to grant press freedom, with a rise in attacks on journalists, particularly those covering the environment and natural resources. While an independent media is protected by the Constitution, the government sometimes restricts the media using regulations relating to blasphemy, hate speech, defamation and false information. In addition, concerns have been raised over the operation of cyber police units, which experts believe to be detrimental to free speech, and a new agency regulating academic research has raised questions about the independence of scholarship. Civil society is under constant threat, and its space is shrinking. NGOs and other non-governmental groups are obliged by law to register in a government database, and they suffer harassment from government and religious groups. Attacks against human rights defenders have increased in recent years.

People

Malaysia is a destination country for forced labour and sex trafficking, with the majority of victims being foreign workers. The prevalence of forced labour is highest in industries such as agriculture, including palm oil plantations, construction, electronics, garment production and rubber products. Despite allegations, the government has not investigated these issues or allocated a bigger budget to increase the number of labour inspectors. Corruption also poses a significant obstacle to anti-trafficking efforts, as some officials profit from exploiting foreign nationals and colluding with traffickers. With the COVID-19 pandemic, there has been an increase in this type of crime on the internet. Traffickers use fraudulent recruitment practices to lure women and girls from South East Asia, Nigeria and Rohingya refugee camps in Bangladesh to Malaysia for commercial sex.

Due to extreme labour shortages and high demand for workers to fill ‘3D jobs’ (dirty, dangerous and demeaning), human smuggling is prevalent in Malaysia. Criminal networks bring labour forces illegally from less-developed countries, and South East and South Asian nationals are smuggled as far as the Middle East, Europe, North America and Australia. Additionally, state-embedded actors have been involved in human smuggling, fuelling corruption and affecting the public sector, thereby limiting the capacity to identify victims. In Malaysia, victim protection programmes do not apply to people who have been smuggled unless there is proof that they are being exploited sexually or exploited for forced labour or as organ donors, resulting in them becoming victims of human trafficking.

Extortion cases involving housing developers, construction site managers, contractors and other employers have been on the rise in Malaysia. Gangs running extortion rackets are increasingly targeting public projects and private companies in the Klang Valley. They demand payment from the head or manager of a project, including business owners, as a ‘fee’ for protection services to ensure the project is not disrupted.

Trade

Malaysia’s geographic location has favoured the smuggling of small arms and light weapons into the country in recent years. The Strait of Malacca, historically an important trade route, is now also used for criminal activities such as drug trafficking, human trafficking and cigarette smuggling, as well as arms trafficking. Small arms and light weapons are often smuggled across the Thai and Kalimantan borders or on boats from Indonesia and are used for illegal activities such as drug trafficking and armed robberies. Firearms remain easily accessible through purchasing or rental services, and illicit firearms have been seen at rallies throughout Malaysia. Corruption among law enforcement officers who claim to have lost their firearms has also contributed to the problem. Police suspect that firearms smuggling is being carried out at the Thailand–Malaysian border for the benefit of Islamic State cells, which are believed to be planning attacks in the country.

Counterfeit goods are a significant problem in South East Asia, particularly in countries such as Malaysia and Thailand, which play a significant role in manufacturing and repackaging fake products for international markets. The region is vulnerable to counterfeiting due to its proximity to China, the world's leading source of counterfeit products. The market for counterfeit goods includes a wide range of products, from luxury brands to pharmaceuticals, food products, automotive parts and cigarettes. Counterfeit medicines are also a significant issue.

Illicit tobacco trade, particularly in ‘illicit whites’, is a rampant issue in Malaysia. This is due to a combination of law enforcement pressure in Singapore and uncoordinated policy decisions in Malaysia, which drive cigarette smuggling. In addition, high taxation on alcoholic beverages and cigarettes in Malaysia has led people to obtain both products from illicit sources. During the COVID-19 pandemic, the illicit tobacco trade saw a decrease, but it has risen again since the lifting of restrictions.

Environment

Illegal logging and deforestation have been significant issues in Malaysia. A significant portion of the logging is linked to the palm oil industry, which has been accused of engaging in illicit activities. Corrupt government officials and economic groups have been implicated in these crimes. State-embedded actors involved in illegal logging have been difficult to combat, with corruption identified as a major problem in Sabah and Sarawak, where two-thirds of the remaining natural forests are located. Despite tough laws in place, few loggers face serious consequences for breaking the law, and criminal networks are sometimes involved in forced labour and abuse within the forestry sector. Environmental activists and indigenous communities have called for stricter regulations on the palm oil industry and a ban on the export of unprocessed logs.

Wildlife trafficking is major issue in Malaysia, and the country is one of the top 10 hubs for wildlife smuggling in the world. It is home to a diverse range of animals and is a source and transit country for internationally trafficked wildlife products, such as ivory, rhino horn, pangolins, tigers and tiger parts, birds, reptiles and Testudines. The Thailand–Malaysia border crossings are often used to smuggle pangolins and ivory into China and Vietnam. Despite efforts to combat this crime, it is likely that state-embedded actors and major, highly organized Malaysian networks are involved. Malayan tigers and hornbills are among the animals most at risk of extinction due to poaching and trafficking.

Illegal gold mining continues to be a persistent problem in Malaysia, despite government efforts to crack down on it. The country has also been the site of illegal bauxite and iron mining, but the government ban has significantly reduced these activities. The Malaysian government has launched a task force to tackle illegal mining activities, but neither the COVID-19 pandemic nor law enforcement has stopped illegal miners from operating in forest reserves.

Drugs

Malaysia is a significant transit country for the transportation of heroin and other illegal narcotics in Asia and Oceania. The country acts as a hub for transporting these substances to other countries, such as Indonesia, Singapore, China, Japan, Korea, New Zealand and Australia. Pakistani syndicates and transnational criminal networks are among the actors involved in the illicit heroin trade in Malaysia. Due to COVID-19-related border and transportation controls, heroin traffickers have shifted to maritime routes through the Andaman Sea and the Strait of Malacca to ship drugs from Myanmar and Thailand. Malaysia is also involved in the cocaine trade, primarily as a transit country. Nigerian syndicates are involved in trafficking multiple drugs, including cocaine, using Malaysia as a transit point. Although the death penalty is still in force for drug trafficking, Malaysia is still considered a ‘softer’ option for transit compared to some other countries.

Malaysia is a moderate market for cannabis as its usage is low and is decreasing. The drug enters on small fishing boats through remote mangrove forests and is then distributed through a peer-to-peer network and online. Canada and the US are among the six most frequent countries of origin, as the demand for high-quality cannabis is increasing. Cannabis also flows into the country from Laos, and there is a concern of cannabis coming into the country from Thailand, which decriminalized it in 2022. Regarding the synthetic drug trade, the number of methamphetamine users in Malaysia is reaching or surpassing that of heroin users, and the country has become an attractive destination for international drug trafficking syndicates. Methamphetamine shipments come from various countries, including China, Myanmar, Thailand, the US, Laos and Nigeria. Even though the primary destination of this drug is Malaysia, the country is also a transit point for other destinations such as Indonesia, Japan, the Philippines, other countries in Asia and Australia. Malaysia is also known for its ecstasy (MDMA) laboratories, as it is the second most common country of origin for the drug in Asia. However, the production of methamphetamine has been declining, while the emergence of new psychoactive substances has been on the rise in the country.

Cyber Crimes

Malaysia is experiencing a significant increase in cybercrime, with a sharp rise in reports of hacking and other digital crimes. Losses from cybercrime affect both individuals and businesses across the country. The rise in this type of crime is attributed to several factors, including the rapid growth of Malaysia's digital economy and the increasing adoption of digital technologies by individuals and organizations. To combat cybercrime, the Malaysian government has taken several measures, including establishing a dedicated agency for cyber-security, implementing cyber-security laws and regulations and increasing public awareness campaigns on digital safety and cyber-security best practices. Despite these efforts, cybercriminals continue to evolve their tactics and techniques, making it challenging for law enforcement agencies to keep up. Therefore, cyber-security remains a top concern for Malaysia, and efforts to strengthen the country's digital defences continue.

Financial Crimes

Financial crimes remain a severe issue in Malaysia, with customer fraud, bribery and corruption and asset misappropriation often named as common and disruptive crimes. To address these issues, Malaysian authorities have introduced new security measures in banks aimed at curbing the threat of financial crimes. However, despite these efforts, there has been a surge in online phishing/malware distribution and moderate levels of online fraud reported in recent years. Additionally, Malaysia remains vulnerable to the misappropriation of government funds.

Criminal Actors

Malaysia is currently facing an increasing problem with organized crime, with authorities identifying several active mafia groups in recent years. These groups are estimated to have tens of thousands of members throughout the country, and tensions between them have led to turf wars and a rise in violent crime, particularly related to drug trafficking and gambling. Smaller criminal networks are also involved in a range of illegal activities, including human trafficking and smuggling, fauna crimes, cigarette smuggling, pyramid schemes and cybercrime. These groups are often decentralized, ties among their members are loose and they operate outside of any hierarchical command structure.

Foreign criminal organizations dominate fauna crimes, the drug trade and human trafficking in South East Asia, with Chinese Triads being one of the largest and most dangerous groups. In Malaysia, they are more likely to be involved in sex work, loan sharking and pirated goods, while Nigerian syndicates collaborate with local gangs in drug trafficking. Chinese Triad networks in the country are run as businesses and make deals with authorities who often turn a blind eye to their activities. The synthetic drug trade, primarily in methamphetamines, involves multiple foreign networks, including Taiwanese groups and Australian outlaw motorcycle gangs.

State-embedded actors and corrupt officials are believed to be enabling human trafficking and fauna crimes in Malaysia, often through bribery and corruption. Criminal gangs also have a presence in the political arena and can influence officials to commit crimes with impunity. Corruption is also reportedly a significant issue across the private sector in Malaysia, involving bid rigging, corporate fraud and bribes. Private sector executives reportedly pay bribes to counterparts across both the private and public sectors to get work done. Additionally, procurement fraud in the private sector is perceived as a significant issue.

Leadership and governance

Recent Malaysian governments have been described as resistant to reform and accused of restricting political freedoms. In 2021, a state of emergency was declared, allowing the prime minister to rule by decree amid rising COVID-19 cases, which was criticized as an attempt to avoid a no-confidence vote. After a period of political turbulence, a new government was elected with a two-thirds majority in Parliament. However, the electoral framework has weakened the legitimacy of elected officials, and political instability has hindered the adoption of a firm state strategy against crime, which is further complicated by the fact that corruption has infiltrated the highest levels of political elites.

Although Malaysia ranks better than neighbouring South East Asian countries in terms of transparency, corruption continues to undermine the trust of Malaysia’s population. Despite an increase in corruption-related convictions against civil servants, corruption remains endemic, and the government's efforts to combat it have been described as insufficient. The lack of independent oversight regarding state-affiliated companies and investment funds has created conditions conducive to corruption. Malaysia has a dedicated government agency to combat corruption, but it has received extensive criticism from the public and is perceived as being partial and under the control of the prime minister.

Malaysia has been actively participating in efforts to combat transnational crime in South East Asia, particularly in the areas of drug, wildlife, timber and arms trafficking. The country has ratified most of the treaties regarding organized crime, but it has failed to do so with special protocols against human smuggling and the illicit manufacturing and trafficking of firearms. Malaysia has a robust legal framework for addressing organized crime, with numerous pieces of legislation against crimes that affect the environment, cybercrime, falsified medical products, the obstruction of justice, participation in an organized criminal group, human smuggling, terrorism, trafficking in cultural property and trafficking in persons. The government has implemented community-oriented policing, which relies on a partnership between the police department and the community to identify, reduce, eliminate and prevent problems related to public safety and order. However, enforcing effective strategies, particularly regarding human trafficking, remains a challenge.

Criminal justice and security

The judiciary in Malaysia is headed by the Federal Court, which is divided into trial and appellate divisions. Historically, the executive government's extensive influence has compromised judicial independence. In fact, the various units tasked with organized-crime-related matters involve government officials and are not considered independent by the public. Existing laws undermine due process guarantees, and the police can detain anyone without judicial review. Pre-trial incarceration does not follow international standards, and prisons are overcrowded and unsafe.

The Royal Malaysian Police have been accused of corruption, misconduct and discrimination, leading to a lack of public trust. Malaysia's primary intelligence agency, the Special Branch, is reported to operate often without checks and balances, and its detainees have no right to lawyers or judicial review. Malaysia does not have legislation governing police use of firearms in accordance with international standards, and efforts to establish an independent oversight body to investigate complaints against the police have been unsuccessful. Although demonstrations are often held, police continue to enforce restrictions on assembly events and investigate participants in allegedly illegal protests.

Malaysia shares its borders with Brunei, Indonesia and Thailand, primarily in remote areas with challenging topography which makes it difficult to carry out extensive surveillance, exacerbating Malaysia's vulnerability to criminal flows such as smuggling, human trafficking and the illicit drug trade. Malaysia has increased border control, patrolling and cross-border collaboration with neighbouring countries to combat illegal activities, but challenges remain. Despite Malaysia's closure of its borders due to the pandemic, illegal activities such as human trafficking and contraband smuggling remained rampant along the Thailand–Malaysia border.

Economic and financial environment

Malaysia's well-developed financial system increases its vulnerability to criminal activities such as corruption, terrorism financing, fraud, drug trafficking, smuggling and tax crimes. Despite this, Malaysia has modern anti-money laundering (AML) legislation and institutional frameworks in place and has made progress in improving its AML implementation by increasing money laundering investigators and prosecutions. However, Malaysia still needs to improve its prosecution of foreign-origin crimes. The country has several agencies regulating money laundering crimes, and its effectiveness in addressing these risks is considered moderate.

Malaysia's economy has been growing steadily, with an average annual growth rate surpassing 5% for almost a decade. The country is expected to become a high-income economy in the coming years. Despite setbacks due to the pandemic, Malaysia's economy is starting to recover, driven by the manufacturing export sector and public initiatives to boost digital investments and construction activity. However, Malaysia needs to upgrade its investment and financial freedom regulations and address issues related to government integrity. The country has a vibrant private sector, but bribery is common, and there is a close connection between political and economic elites, which distorts normal business activity and fair competition.

Civil society and social protection

Although the government offers programmes including counselling, training and medical services for victims of human trafficking, potential victims are still punished with arrest, detention and deportation. Additionally, people who are smuggled are not eligible for the victim-protection programme, which often results in foreign victims being treated worse than Malaysian victims. Malaysia's law protecting whistle-blowers has shortcomings, as there is no centralized management or single authority responsible for providing that protection. The existing system also poses potential risks of leaks of the whistle-blower’s identity within the police system.

Malaysia has made strides in crime prevention by establishing institutions to promote awareness and rehabilitate offenders. The country has implemented campaigns against drugs, mobilizing communities to address local drug problems and increasing access to treatment and rehabilitation services. Although the government has maintained efforts to prevent human trafficking by implementing a national action plan and creating various anti-trafficking programmes, employment law still excludes domestic workers from certain protections, and there is a lack of adequate resources for identifying and enforcing laws against labour trafficking. Additionally, promises to combat the illicit wildlife trade have not been fulfilled.

The media market in Malaysia has been influenced by political pressure and harassment, with private news publications and television stations being controlled by political parties or businesses allied with the government. After the 2018 elections, independent outlets benefited from a reduction in political pressure and harassment, but the new government has placed more pressure on private media. Academic freedom and freedom of assembly are also limited, with disciplinary action taken against instructors and students who espouse anti-government views or engage in political activity. Several NGOs operate in Malaysia and have a strong record of campaigning for electoral, anti-corruption and other reforms. However, they must be approved and registered by the government, which has refused or revoked registrations for political reasons in the past. Several activists have been subjected to police harassment and criminal charges, particularly for speech-related offenses. The relationship between civil society organizations and the government has also been strained, with severe restrictions on NGO activity imposed due to COVID-19.