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Malaysian Banking Law – Banking Secrecy, Confidentiality and Disclosure
Introduction
Banking secrecy is a fundamental aspect of the banker-customer relationship. It protects confidential information obtained by a bank concerning a customer’s affairs and accounts. The duty exists to safeguard customer privacy, preserve confidence in the banking system and ensure that banking information is disclosed only in circumstances recognised by law.
In Malaysia, banking secrecy is governed principally by sections 132, 133 and 134 of the Financial Services Act 2013 (FSA 2013), which replaced the secrecy provisions formerly found in the Banking and Financial Institutions Act 1989 (BAFIA).
The duty of confidentiality is protected through:
1. Statutory Duty of Secrecy
Section 133 FSA 2013
Section 133 imposes a duty of secrecy upon:
The protection extends to:
2. Banking Confidentiality under Contract and Equity
Apart from statute, confidentiality is also recognised as:
An Implied Contractual Duty
The banker-customer contract contains an implied term that customer information will remain confidential.
An Equitable Obligation
Equity protects confidential information and may grant remedies such as injunctions and damages for misuse of confidential information.
The Malaysian courts have developed these principles through a number of important cases.
Tan Eng Seong v Malayan Banking Bhd
Principle
Disclosure of customer information to the customer’s brother constituted a breach of the implied contractual duty of confidentiality.
The case confirms that:
Wong Yeng Mun v CIMB Bank Berhad
Principle
The bank negligently sent account statements to the wrong address where they were opened by the customer’s wife.
The court held that:
Tan Lay Soon v Kam Mah Theatre Sdn Bhd
Principle
The court held that confidentiality belongs to the customer and may be waived either expressly or impliedly.
Where disclosure is necessary to complete a transaction authorised by the customer, banking secrecy will not prevent such disclosure.
3. Cross-Border Disclosure and Extra-Territorial Effect
Attorney General of Hong Kong v Zauyah Wan Chik & Ors
The Court of Appeal held that section 97 BAFIA was not expressed to have extra-territorial effect.
Accordingly:
4. Illegally Obtained Banking Information Remains Admissible
Wako Merchant Bank (Singapore) Ltd v Lim Lean Heng
The defendants argued that banking information obtained in breach of section 97 BAFIA should be inadmissible in support of a Mareva injunction.
The High Court rejected this argument.
Legal Principle
Parliament created criminal offences for unlawful disclosure of banking information but did not provide that such information would become inadmissible in court proceedings.
Accordingly:
5. Public Information and Banking Confidentiality
An important limitation on banking secrecy concerns information that is already publicly available.
Confidentiality cannot ordinarily be claimed over facts that have entered the public domain through lawful publication.
This principle was considered in the following case.
Hj Salleh Hj Janan v Financial Information Services Sdn Bhd; Affin-ACF Finance Bhd (Third Party) [2005] 1 CLJ 241
Facts
Financial Information Services Sdn Bhd (FIS) supplied information to Affin-ACF Finance Bhd indicating that the plaintiff had twice been adjudged bankrupt.
The information originated from court records and bankruptcy orders that had previously been published in newspapers and the Government Gazette.
However, FIS failed to mention that the bankruptcy orders had subsequently been rescinded and annulled.
The plaintiff sued FIS for libel, arguing that publication of the information damaged his reputation.
Held
The High Court dismissed the plaintiff’s claim.
The court held that FIS merely reproduced information contained in public court records and publicly available publications.
Since the information related to facts already available to the public, FIS was entitled to repeat or restate those facts.
The defence of justification therefore succeeded.
Judgment of Linton Albert JC
The court adopted the principle that:
A statement that a decree or order has been made by a public court is a public fact which anybody is entitled to state.
The court emphasised that information already appearing in court records, newspapers or the Gazette loses its confidential character because it has entered the public domain.
Legal Principle
The case establishes that:
Public Facts Are Not Confidential
Information contained in public court records is no longer confidential.
A person who merely repeats or republishes such information is generally not liable for disclosing confidential information.
Repetition of Public Information Is Not a Breach of Banking Secrecy
Banking secrecy protects confidential information.
It does not protect information that has already become publicly available through lawful means.
Defence of Justification
Where a statement accurately reflects a public court record, the defence of justification may defeat a defamation claim.
Significance
This case demonstrates an important limitation on banking confidentiality.
While banking secrecy protects private customer information, it cannot be used to conceal information that has already become part of the public record through judicial proceedings.
The law protects secrecy, not secrecy that has already ceased to exist.
Case Scenario: Public Bankruptcy Record
Facts
A finance company receives information from a credit reporting agency indicating that Ahmad was adjudged bankrupt five years ago.
The information was obtained from court records published in the Gazette.
Ahmad sues, alleging breach of confidentiality and defamation.
Solution
Applying Hj Salleh Hj Janan:
Critical Analysis
The decision strikes a balance between:
Privacy Rights
Individuals deserve protection against unauthorised disclosure of genuinely confidential information.
Public Interest
Court orders, bankruptcy proceedings and other judicial records are matters of public record.
Allowing persons to claim confidentiality over publicly available information would undermine legal certainty and commercial decision-making.
The court therefore distinguished between:
6. Banker’s Duty Regarding Garnishee Orders
A bank may receive a garnishee order from a customer’s creditor.
Once served with the order, the bank owes a duty to the court not to release the attached funds unless authorised by the court.
The bank must preserve the funds pending further directions.
Failure to comply may expose the bank to liability.
Bank Utama (M) Bhd v Insan Budi Sdn Bhd
Principle
The Court of Appeal recognised that banks may owe duties not only under contract but also in tort.
Where a bank acting in its professional capacity fails to follow proper procedures in handling a credit facility, the bank may incur concurrent liability in:
Significance
The case demonstrates that a bank’s responsibilities extend beyond merely keeping customer information confidential.
Banks are professional financial institutions expected to exercise reasonable skill, care and competence when performing banking functions.
A failure to do so may result in liability under multiple legal principles.
Key Examination Principles
Banking Secrecy
Conclusion
Malaysian banking secrecy law protects customer information through statutory provisions, contractual obligations and equitable principles. However, confidentiality is not absolute. The courts have recognised several important limitations, including customer consent, legal compulsion, public court records, admissibility of relevant evidence, and the practical requirements of commerce and justice. Cases such as Tan Eng Seong, Wong Yeng Mun, Tan Lay Soon, Zauyah Wan Chik, Wako Merchant Bank, and Hj Salleh Hj Janan collectively demonstrate that while customer privacy remains a fundamental concern, banking secrecy must be balanced against broader legal, commercial and public interests.
Introduction
Banking secrecy is a fundamental aspect of the banker-customer relationship. It protects confidential information obtained by a bank concerning a customer’s affairs and accounts. The duty exists to safeguard customer privacy, preserve confidence in the banking system and ensure that banking information is disclosed only in circumstances recognised by law.
In Malaysia, banking secrecy is governed principally by sections 132, 133 and 134 of the Financial Services Act 2013 (FSA 2013), which replaced the secrecy provisions formerly found in the Banking and Financial Institutions Act 1989 (BAFIA).
The duty of confidentiality is protected through:
- Statute;
- Contract; and
- Equity.
- Criminal liability;
- Civil liability;
- Equitable remedies; and
- Regulatory sanctions.
1. Statutory Duty of Secrecy
Section 133 FSA 2013
Section 133 imposes a duty of secrecy upon:
- Financial institutions;
- Directors;
- Officers;
- Employees;
- Agents; and
- Former directors, officers and agents.
The protection extends to:
- Account balances;
- Transaction histories;
- Financing facilities;
- Securities holdings;
- Credit information;
- Customer identities; and
- Any information acquired through the banking relationship.
- Imprisonment up to five years;
- A fine up to RM10 million; or
- Both.
2. Banking Confidentiality under Contract and Equity
Apart from statute, confidentiality is also recognised as:
An Implied Contractual Duty
The banker-customer contract contains an implied term that customer information will remain confidential.
An Equitable Obligation
Equity protects confidential information and may grant remedies such as injunctions and damages for misuse of confidential information.
The Malaysian courts have developed these principles through a number of important cases.
Tan Eng Seong v Malayan Banking Bhd
Principle
Disclosure of customer information to the customer’s brother constituted a breach of the implied contractual duty of confidentiality.
The case confirms that:
- Confidentiality is an implied contractual term.
- Family members remain third parties unless authorised.
- Nominal damages may be awarded even where actual loss is minimal.
Wong Yeng Mun v CIMB Bank Berhad
Principle
The bank negligently sent account statements to the wrong address where they were opened by the customer’s wife.
The court held that:
- The privilege of confidentiality belongs to the customer.
- Administrative negligence may amount to a breach of confidentiality.
- Banks must maintain adequate safeguards to protect customer information.
Tan Lay Soon v Kam Mah Theatre Sdn Bhd
Principle
The court held that confidentiality belongs to the customer and may be waived either expressly or impliedly.
Where disclosure is necessary to complete a transaction authorised by the customer, banking secrecy will not prevent such disclosure.
3. Cross-Border Disclosure and Extra-Territorial Effect
Attorney General of Hong Kong v Zauyah Wan Chik & Ors
The Court of Appeal held that section 97 BAFIA was not expressed to have extra-territorial effect.
Accordingly:
- Disclosure in foreign court proceedings does not automatically create criminal liability in Malaysia.
- Witnesses compelled by foreign courts may rely on legal compulsion as a defence.
- Banking secrecy must sometimes yield to the administration of justice.
4. Illegally Obtained Banking Information Remains Admissible
Wako Merchant Bank (Singapore) Ltd v Lim Lean Heng
The defendants argued that banking information obtained in breach of section 97 BAFIA should be inadmissible in support of a Mareva injunction.
The High Court rejected this argument.
Legal Principle
Parliament created criminal offences for unlawful disclosure of banking information but did not provide that such information would become inadmissible in court proceedings.
Accordingly:
- Illegally obtained evidence remains admissible if relevant.
- Criminal liability and evidential admissibility are separate issues.
- The person disclosing the information may face criminal consequences, but the evidence itself may still be used in court.
5. Public Information and Banking Confidentiality
An important limitation on banking secrecy concerns information that is already publicly available.
Confidentiality cannot ordinarily be claimed over facts that have entered the public domain through lawful publication.
This principle was considered in the following case.
Hj Salleh Hj Janan v Financial Information Services Sdn Bhd; Affin-ACF Finance Bhd (Third Party) [2005] 1 CLJ 241
Facts
Financial Information Services Sdn Bhd (FIS) supplied information to Affin-ACF Finance Bhd indicating that the plaintiff had twice been adjudged bankrupt.
The information originated from court records and bankruptcy orders that had previously been published in newspapers and the Government Gazette.
However, FIS failed to mention that the bankruptcy orders had subsequently been rescinded and annulled.
The plaintiff sued FIS for libel, arguing that publication of the information damaged his reputation.
Held
The High Court dismissed the plaintiff’s claim.
The court held that FIS merely reproduced information contained in public court records and publicly available publications.
Since the information related to facts already available to the public, FIS was entitled to repeat or restate those facts.
The defence of justification therefore succeeded.
Judgment of Linton Albert JC
The court adopted the principle that:
A statement that a decree or order has been made by a public court is a public fact which anybody is entitled to state.
The court emphasised that information already appearing in court records, newspapers or the Gazette loses its confidential character because it has entered the public domain.
Legal Principle
The case establishes that:
Public Facts Are Not Confidential
Information contained in public court records is no longer confidential.
A person who merely repeats or republishes such information is generally not liable for disclosing confidential information.
Repetition of Public Information Is Not a Breach of Banking Secrecy
Banking secrecy protects confidential information.
It does not protect information that has already become publicly available through lawful means.
Defence of Justification
Where a statement accurately reflects a public court record, the defence of justification may defeat a defamation claim.
Significance
This case demonstrates an important limitation on banking confidentiality.
While banking secrecy protects private customer information, it cannot be used to conceal information that has already become part of the public record through judicial proceedings.
The law protects secrecy, not secrecy that has already ceased to exist.
Case Scenario: Public Bankruptcy Record
Facts
A finance company receives information from a credit reporting agency indicating that Ahmad was adjudged bankrupt five years ago.
The information was obtained from court records published in the Gazette.
Ahmad sues, alleging breach of confidentiality and defamation.
Solution
Applying Hj Salleh Hj Janan:
- The information originated from public court records.
- The information was already publicly available.
- The agency merely repeated a public fact.
- Confidentiality cannot attach to information already in the public domain.
Critical Analysis
The decision strikes a balance between:
Privacy Rights
Individuals deserve protection against unauthorised disclosure of genuinely confidential information.
Public Interest
Court orders, bankruptcy proceedings and other judicial records are matters of public record.
Allowing persons to claim confidentiality over publicly available information would undermine legal certainty and commercial decision-making.
The court therefore distinguished between:
- Confidential banking information; and
- Publicly available legal facts.
6. Banker’s Duty Regarding Garnishee Orders
A bank may receive a garnishee order from a customer’s creditor.
Once served with the order, the bank owes a duty to the court not to release the attached funds unless authorised by the court.
The bank must preserve the funds pending further directions.
Failure to comply may expose the bank to liability.
Bank Utama (M) Bhd v Insan Budi Sdn Bhd
Principle
The Court of Appeal recognised that banks may owe duties not only under contract but also in tort.
Where a bank acting in its professional capacity fails to follow proper procedures in handling a credit facility, the bank may incur concurrent liability in:
- Contract; and
- Negligence.
Significance
The case demonstrates that a bank’s responsibilities extend beyond merely keeping customer information confidential.
Banks are professional financial institutions expected to exercise reasonable skill, care and competence when performing banking functions.
A failure to do so may result in liability under multiple legal principles.
Key Examination Principles
Banking Secrecy
- Governed principally by sections 132–134 FSA 2013.
- Protects information relating to customer affairs and accounts.
- Confidentiality is an implied contractual duty.
- Disclosure to relatives may constitute breach.
- Confidentiality belongs to the customer.
- Negligent disclosure may create liability.
- Confidentiality belongs to the customer.
- Consent may be express or implied.
- Banking secrecy laws are not automatically extra-territorial.
- Disclosure under legal compulsion may be justified.
- Information obtained in breach of banking secrecy laws remains admissible if relevant.
- Criminal liability and admissibility are separate issues.
- Publicly available court records are not confidential.
- A public fact may be repeated or restated.
- Banking secrecy does not protect information already in the public domain.
- Banks may owe concurrent duties in contract and tort.
- Failure to exercise proper professional care may create liability.
Conclusion
Malaysian banking secrecy law protects customer information through statutory provisions, contractual obligations and equitable principles. However, confidentiality is not absolute. The courts have recognised several important limitations, including customer consent, legal compulsion, public court records, admissibility of relevant evidence, and the practical requirements of commerce and justice. Cases such as Tan Eng Seong, Wong Yeng Mun, Tan Lay Soon, Zauyah Wan Chik, Wako Merchant Bank, and Hj Salleh Hj Janan collectively demonstrate that while customer privacy remains a fundamental concern, banking secrecy must be balanced against broader legal, commercial and public interests.
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