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Malaysian Banking Law – Banking Secrecy, Confidentiality and Banker’s Duties
Introduction
Banking secrecy is one of the most fundamental obligations in Malaysian banking law. It protects information relating to a customer’s affairs and account and forms an essential component of the banker-customer relationship.
The duty of confidentiality serves several important objectives:
Part I – Statutory Framework
Section 132 FSA 2013 – Restriction on Inquiry into Customer Affairs
General Rule
Section 132 protects customers from arbitrary investigations into their banking affairs.
Neither:
The purpose is to ensure that customer information remains protected from unnecessary governmental intrusion.
Exception
BNM may inquire into a customer’s affairs where necessary for exercising its statutory functions under:
Case Scenario
Facts
A licensed bank reports suspicious money transfers involving one of its customers.
BNM commences an anti-money laundering investigation and requests account information.
The customer objects, claiming banking secrecy.
Solution
The objection fails.
Section 132(2) expressly authorises BNM to obtain such information for regulatory and supervisory purposes.
Principle
Banking secrecy protects privacy but does not prevent legitimate regulatory oversight.
Section 133 FSA 2013 – Duty of Secrecy
General Rule
Section 133 imposes a statutory duty of secrecy on:
The obligation continues even after employment or office ends.
Scope of Protection
The duty covers:
Public Information Exception
The duty does not apply where information:
Criminal Liability
A breach of section 133 may result in:
Prohibition on Further Disclosure
A person who knowingly receives information disclosed in breach of section 133 is prohibited from further disseminating that information.
Section 134 FSA 2013 – Permitted Disclosures
Although secrecy is the general rule, section 134 recognises that confidentiality cannot be absolute.
A financial institution may disclose customer information:
The 18 Permitted Disclosures under Schedule 11
1. Customer’s Written Consent
Disclosure authorised by the customer.
2. Deceased Customer’s Estate
Disclosure for probate, letters of administration, faraid certificates and distribution orders.
3. Bankruptcy or Winding-Up
Disclosure involving bankrupt customers or companies under liquidation.
4. Civil and Criminal Proceedings
Disclosure where litigation involves:
Disclosure necessary to comply with garnishee proceedings.
6. Court Orders
Disclosure pursuant to orders issued by courts not lower than the Sessions Court.
7. Enforcement Agencies
Disclosure for investigations conducted under written law.
8. PIDM Functions
Disclosure to facilitate functions of the Malaysia Deposit Insurance Corporation.
9–10. Capital Market Authorities
Disclosure involving:
Disclosure for taxation and information-exchange purposes.
12. Credit Reporting Agencies
Disclosure to registered credit reporting agencies.
13. Supervisory Authorities
Disclosure to regulatory authorities performing functions similar to BNM.
14. Centralised Group Functions
Disclosure for:
Disclosure relating to:
Disclosure to outsourced service providers.
17. Consultants and Adjusters
Disclosure to professional advisers.
18. Suspected Criminal Activities
Disclosure where the bank reasonably suspects that an offence has been, is being or may be committed.
Confidentiality During Court Proceedings
Even where disclosure is permitted, section 134 allows courts to protect customer privacy.
The court may:
Part II – Confidentiality under Common Law and Equity
Tan Eng Seong v Malayan Banking Bhd
Principle
Confidentiality is an implied contractual duty.
Disclosure of customer information to the customer’s brother constituted a breach of confidence.
Significance
Wong Yeng Mun v CIMB Bank Berhad
Principle
Confidentiality belongs to the customer.
Sending bank statements to the wrong address constituted a breach.
Significance
Tan Lay Soon v Kam Mah Theatre Sdn Bhd
Principle
Confidentiality belongs to the customer and may be waived.
Consent may be:
Part III – Extra-Territorial Disclosure
Attorney General of Hong Kong v Zauyah Wan Chik
Principle
Banking secrecy legislation does not automatically have extra-territorial effect.
Disclosure compelled in foreign proceedings does not necessarily create criminal liability in Malaysia.
Significance
The administration of justice may justify disclosure outside Malaysia.
Part IV – Illegally Obtained Information
Wako Merchant Bank v Lim Lean Heng
Principle
Information obtained in breach of banking secrecy laws remains admissible if relevant.
Parliament criminalised unlawful disclosure but did not render such information inadmissible.
Significance
The court distinguishes:
Part V – Public Information
Hj Salleh Hj Janan v Financial Information Services Sdn Bhd
Facts
Financial Information Services Sdn Bhd provided information that the plaintiff had previously been adjudged bankrupt.
The information was based on court orders published in newspapers and the Gazette.
The plaintiff sued for libel.
Held
The claim was dismissed.
The defendant merely repeated information already contained in public court records.
Principle
A public fact is not confidential.
Information already published in:
Significance
Banking secrecy protects confidential information.
It does not protect information that has already entered the public domain.
Part VI – Banker’s Professional Duty and Concurrent Liability
Bank Utama (M) Bhd v Insan Budi Sdn Bhd [2009] 1 MLJ 148
Facts
The plaintiff obtained an international trade facility from Bank Utama for the import and sale of raw sugar.
To facilitate the transaction, the plaintiff instructed the bank to issue a confirmed, irrevocable, divisible, assignable and transferable cash-blocked SWIFT Telegraphic Transfer (STT).
The bank subsequently transmitted the SWIFT instruction using an incorrect procedure.
Instead of sending the SWIFT transfer through the proper SWIFT system, it was transmitted by facsimile.
As a result:
Issue
Could the bank be liable simultaneously:
Held
The Court of Appeal dismissed the bank’s appeal.
The court held that the bank was liable.
Reasoning
Wrong Procedure Used
Evidence showed that the SWIFT transfer could not be processed because the bank used an incorrect transmission procedure.
The failure directly caused the collapse of the transaction.
Concurrent Liability Exists
The court held that professional advisers may owe duties:
Unless the contract expressly excludes tortious liability, both causes of action may coexist.
Professional Duty to Advise
The bank argued that it merely followed instructions.
The court rejected this argument.
The customer instructed the bank to issue a SWIFT transfer but did not understand the technical operation of the SWIFT system.
The bank officer, as a banking professional, ought to have known that:
A SWIFT message cannot be transmitted by facsimile.
The bank therefore had a duty to advise its customer of the correct procedure.
Hasan Lah JCA
The Court of Appeal adopted the modern principle that:
A professional adviser may be liable concurrently in contract and negligence unless the contract excludes tortious liability.
The court relied upon authorities from:
Legal Principle
Bankers are professionals.
Where a bank undertakes to perform specialised banking services:
Case Scenario
Facts
A customer instructs a bank officer to transfer funds through an international payment system.
The customer incorrectly believes the transfer can be completed through ordinary email.
The bank officer knows this is impossible but remains silent and follows the customer’s mistaken instruction.
The transaction fails and the customer suffers losses.
Solution
Applying Bank Utama v Insan Budi:
The bank may be liable:
Critical Analysis
This case significantly expands the traditional banker-customer relationship.
Traditionally, banks merely executed customer instructions.
However, where the bank possesses specialist knowledge unavailable to the customer, the court may impose a duty to advise.
The decision demonstrates that modern banks are not merely custodians of money but professional service providers expected to exercise expertise and reasonable care.
Key Examination Principles
Section 132 FSA 2013
Conclusion
Malaysian banking secrecy law combines statutory protection under sections 132–134 FSA 2013 with contractual, equitable and tortious principles developed by the courts. The cases demonstrate that confidentiality belongs to the customer and remains a cornerstone of banking law. At the same time, modern banking law imposes broader professional obligations on banks, including duties of care and advice. Consequently, a bank may face criminal liability for unlawful disclosure, civil liability for breach of confidence, and concurrent liability in contract and negligence where it fails to perform its professional functions with reasonable skill and care.
Introduction
Banking secrecy is one of the most fundamental obligations in Malaysian banking law. It protects information relating to a customer’s affairs and account and forms an essential component of the banker-customer relationship.
The duty of confidentiality serves several important objectives:
- Protecting customer privacy;
- Preserving confidence in the banking system;
- Facilitating honest disclosure between banks and customers; and
- Ensuring that confidential information is disclosed only in circumstances recognised by law.
- Section 132 Financial Services Act 2013 (FSA 2013) – Restriction on inquiry into customer affairs;
- Section 133 FSA 2013 – Statutory duty of secrecy; and
- Section 134 FSA 2013 – Permitted disclosures and exceptions to secrecy.
Part I – Statutory Framework
Section 132 FSA 2013 – Restriction on Inquiry into Customer Affairs
General Rule
Section 132 protects customers from arbitrary investigations into their banking affairs.
Neither:
- The Minister of Finance; nor
- Bank Negara Malaysia (BNM)
The purpose is to ensure that customer information remains protected from unnecessary governmental intrusion.
Exception
BNM may inquire into a customer’s affairs where necessary for exercising its statutory functions under:
- The Financial Services Act 2013;
- The Islamic Financial Services Act 2013; or
- The Central Bank of Malaysia Act 2009.
Case Scenario
Facts
A licensed bank reports suspicious money transfers involving one of its customers.
BNM commences an anti-money laundering investigation and requests account information.
The customer objects, claiming banking secrecy.
Solution
The objection fails.
Section 132(2) expressly authorises BNM to obtain such information for regulatory and supervisory purposes.
Principle
Banking secrecy protects privacy but does not prevent legitimate regulatory oversight.
Section 133 FSA 2013 – Duty of Secrecy
General Rule
Section 133 imposes a statutory duty of secrecy on:
- Financial institutions;
- Directors;
- Officers;
- Employees;
- Agents; and
- Former directors, officers and agents.
The obligation continues even after employment or office ends.
Scope of Protection
The duty covers:
- Account balances;
- Transaction records;
- Loan facilities;
- Fixed deposits;
- Securities accounts;
- Credit information;
- Customer identities;
- Financial standing; and
- Any information acquired through the banking relationship.
Public Information Exception
The duty does not apply where information:
- Has already lawfully entered the public domain; or
- Is presented in statistical or aggregated form without identifying individual customers.
Criminal Liability
A breach of section 133 may result in:
- Imprisonment up to 5 years;
- Fine up to RM10 million; or
- Both.
Prohibition on Further Disclosure
A person who knowingly receives information disclosed in breach of section 133 is prohibited from further disseminating that information.
Section 134 FSA 2013 – Permitted Disclosures
Although secrecy is the general rule, section 134 recognises that confidentiality cannot be absolute.
A financial institution may disclose customer information:
- Under Schedule 11 FSA 2013; or
- With written approval from BNM.
The 18 Permitted Disclosures under Schedule 11
1. Customer’s Written Consent
Disclosure authorised by the customer.
2. Deceased Customer’s Estate
Disclosure for probate, letters of administration, faraid certificates and distribution orders.
3. Bankruptcy or Winding-Up
Disclosure involving bankrupt customers or companies under liquidation.
4. Civil and Criminal Proceedings
Disclosure where litigation involves:
- The bank and customer;
- Guarantors;
- Sureties; or
- Competing claimants.
Disclosure necessary to comply with garnishee proceedings.
6. Court Orders
Disclosure pursuant to orders issued by courts not lower than the Sessions Court.
7. Enforcement Agencies
Disclosure for investigations conducted under written law.
8. PIDM Functions
Disclosure to facilitate functions of the Malaysia Deposit Insurance Corporation.
9–10. Capital Market Authorities
Disclosure involving:
- Securities Commission;
- Stock exchanges;
- Clearing houses; and
- Trade repositories.
Disclosure for taxation and information-exchange purposes.
12. Credit Reporting Agencies
Disclosure to registered credit reporting agencies.
13. Supervisory Authorities
Disclosure to regulatory authorities performing functions similar to BNM.
14. Centralised Group Functions
Disclosure for:
- Audit;
- Risk management;
- Compliance;
- Information technology; and
- Finance.
Disclosure relating to:
- Mergers;
- Acquisitions;
- Capital raising; and
- Sale of business assets.
Disclosure to outsourced service providers.
17. Consultants and Adjusters
Disclosure to professional advisers.
18. Suspected Criminal Activities
Disclosure where the bank reasonably suspects that an offence has been, is being or may be committed.
Confidentiality During Court Proceedings
Even where disclosure is permitted, section 134 allows courts to protect customer privacy.
The court may:
- Conduct proceedings in camera;
- Restrict publication;
- Seal documents; and
- Make confidentiality orders.
Part II – Confidentiality under Common Law and Equity
Tan Eng Seong v Malayan Banking Bhd
Principle
Confidentiality is an implied contractual duty.
Disclosure of customer information to the customer’s brother constituted a breach of confidence.
Significance
- Family members remain third parties.
- Actual financial loss is unnecessary.
- Nominal damages may be awarded.
Wong Yeng Mun v CIMB Bank Berhad
Principle
Confidentiality belongs to the customer.
Sending bank statements to the wrong address constituted a breach.
Significance
- Negligent disclosure is sufficient.
- Banks must maintain effective safeguards.
Tan Lay Soon v Kam Mah Theatre Sdn Bhd
Principle
Confidentiality belongs to the customer and may be waived.
Consent may be:
- Express; or
- Implied.
Part III – Extra-Territorial Disclosure
Attorney General of Hong Kong v Zauyah Wan Chik
Principle
Banking secrecy legislation does not automatically have extra-territorial effect.
Disclosure compelled in foreign proceedings does not necessarily create criminal liability in Malaysia.
Significance
The administration of justice may justify disclosure outside Malaysia.
Part IV – Illegally Obtained Information
Wako Merchant Bank v Lim Lean Heng
Principle
Information obtained in breach of banking secrecy laws remains admissible if relevant.
Parliament criminalised unlawful disclosure but did not render such information inadmissible.
Significance
The court distinguishes:
- Criminal liability for disclosure; and
- Admissibility of evidence.
Part V – Public Information
Hj Salleh Hj Janan v Financial Information Services Sdn Bhd
Facts
Financial Information Services Sdn Bhd provided information that the plaintiff had previously been adjudged bankrupt.
The information was based on court orders published in newspapers and the Gazette.
The plaintiff sued for libel.
Held
The claim was dismissed.
The defendant merely repeated information already contained in public court records.
Principle
A public fact is not confidential.
Information already published in:
- Court records;
- Newspapers; or
- The Gazette
Significance
Banking secrecy protects confidential information.
It does not protect information that has already entered the public domain.
Part VI – Banker’s Professional Duty and Concurrent Liability
Bank Utama (M) Bhd v Insan Budi Sdn Bhd [2009] 1 MLJ 148
Facts
The plaintiff obtained an international trade facility from Bank Utama for the import and sale of raw sugar.
To facilitate the transaction, the plaintiff instructed the bank to issue a confirmed, irrevocable, divisible, assignable and transferable cash-blocked SWIFT Telegraphic Transfer (STT).
The bank subsequently transmitted the SWIFT instruction using an incorrect procedure.
Instead of sending the SWIFT transfer through the proper SWIFT system, it was transmitted by facsimile.
As a result:
- The overseas bank could not process the transaction;
- The sugar supplier terminated the supply contract;
- The plaintiff lost the downstream sale arrangement; and
- Significant losses were incurred.
- Breach of contract; and
- Negligence.
Issue
Could the bank be liable simultaneously:
- In contract; and
- In tort (negligence)?
Held
The Court of Appeal dismissed the bank’s appeal.
The court held that the bank was liable.
Reasoning
Wrong Procedure Used
Evidence showed that the SWIFT transfer could not be processed because the bank used an incorrect transmission procedure.
The failure directly caused the collapse of the transaction.
Concurrent Liability Exists
The court held that professional advisers may owe duties:
- Under contract; and
- Under tort.
Unless the contract expressly excludes tortious liability, both causes of action may coexist.
Professional Duty to Advise
The bank argued that it merely followed instructions.
The court rejected this argument.
The customer instructed the bank to issue a SWIFT transfer but did not understand the technical operation of the SWIFT system.
The bank officer, as a banking professional, ought to have known that:
A SWIFT message cannot be transmitted by facsimile.
The bank therefore had a duty to advise its customer of the correct procedure.
Hasan Lah JCA
The Court of Appeal adopted the modern principle that:
A professional adviser may be liable concurrently in contract and negligence unless the contract excludes tortious liability.
The court relied upon authorities from:
- Canada;
- New Zealand;
- Singapore; and
- Malaysia.
Legal Principle
Bankers are professionals.
Where a bank undertakes to perform specialised banking services:
- It must exercise reasonable skill and care.
- It may owe both contractual and tortious duties.
- It may have a duty to advise customers regarding technical banking procedures.
Case Scenario
Facts
A customer instructs a bank officer to transfer funds through an international payment system.
The customer incorrectly believes the transfer can be completed through ordinary email.
The bank officer knows this is impossible but remains silent and follows the customer’s mistaken instruction.
The transaction fails and the customer suffers losses.
Solution
Applying Bank Utama v Insan Budi:
The bank may be liable:
- For breach of contract; and
- For negligence.
Critical Analysis
This case significantly expands the traditional banker-customer relationship.
Traditionally, banks merely executed customer instructions.
However, where the bank possesses specialist knowledge unavailable to the customer, the court may impose a duty to advise.
The decision demonstrates that modern banks are not merely custodians of money but professional service providers expected to exercise expertise and reasonable care.
Key Examination Principles
Section 132 FSA 2013
- Restricts arbitrary inquiry into customer affairs.
- Permits BNM investigations.
- Creates statutory secrecy obligations.
- Covers all customer information.
- Breach attracts criminal sanctions.
- Creates exceptions to secrecy.
- Contains 18 permitted disclosures.
- Allows court protection of confidentiality.
- Confidentiality is contractual.
- Disclosure to relatives may be a breach.
- Confidentiality belongs to the customer.
- Negligent disclosure creates liability.
- Confidentiality may be waived.
- Consent may be implied.
- No automatic extra-territorial application.
- Illegally obtained information may still be admissible.
- Public facts are not confidential.
- Banks may be liable concurrently in contract and negligence.
- Professional bankers owe duties of skill and care.
- Banks may have a duty to advise customers regarding technical banking matters.
- Failure to follow proper banking procedures may result in substantial liability.
Conclusion
Malaysian banking secrecy law combines statutory protection under sections 132–134 FSA 2013 with contractual, equitable and tortious principles developed by the courts. The cases demonstrate that confidentiality belongs to the customer and remains a cornerstone of banking law. At the same time, modern banking law imposes broader professional obligations on banks, including duties of care and advice. Consequently, a bank may face criminal liability for unlawful disclosure, civil liability for breach of confidence, and concurrent liability in contract and negligence where it fails to perform its professional functions with reasonable skill and care.
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