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Malaysian Banking Law – Banking Secrecy, Confidentiality and Exceptions to Disclosure
Introduction
Banking secrecy is one of the most important duties owed by a bank to its customers. Customers entrust banks with confidential information relating to their finances, assets, liabilities, transactions and business affairs. The law therefore imposes a duty on banks to preserve the secrecy of such information.
The objectives of banking secrecy are:
1. Restriction on Inquiry into Customer Affairs (Section 132 FSA 2013)
General Rule
Section 132 protects customers from arbitrary investigations into their banking affairs.
Neither:
This provision protects customer privacy and prevents unnecessary governmental interference in the banker-customer relationship.
Exception
BNM may investigate customer accounts where necessary to exercise its powers and functions under:
2. Statutory Duty of Secrecy (Section 133 FSA 2013)
General Rule
Section 133 imposes a strict duty of confidentiality upon:
The duty continues even after employment or office has ended.
Scope of Protection
The protection covers:
Criminal Liability
A person who unlawfully discloses customer information commits an offence punishable by:
Further Disclosure Prohibited
Section 133(3) further prohibits any person from disclosing information that he knows was originally disclosed in breach of section 133.
Thus, liability may extend beyond the original wrongdoer.
3. Exceptions to Banking Secrecy (Section 134 FSA 2013)
Although secrecy is the general rule, section 134 recognises that confidentiality cannot be absolute.
Banks operate within a legal and commercial environment that sometimes requires disclosure.
Accordingly, section 134 permits disclosure:
The 18 Permitted Disclosures under Schedule 11
1. Customer Consent
A bank may disclose information where written consent is given by:
A customer authorises his bank to provide information to another bank when applying for a housing loan.
The disclosure is lawful because the customer has waived confidentiality.
2. Administration of a Deceased Customer’s Estate
Disclosure is permitted in connection with:
3. Bankruptcy and Winding-Up Proceedings
Disclosure is permitted where the customer:
4. Civil or Criminal Proceedings Involving the Bank
Disclosure is permitted where litigation involves:
5. Garnishee Orders
A bank may disclose information necessary to comply with a garnishee order served upon it.
Banker’s Duty
Once a garnishee order is served, the bank must:
6. Court Orders
Disclosure is permitted pursuant to a court order issued by a court not lower than the Sessions Court.
7. Requests by Enforcement Agencies
Disclosure is permitted where required by:
8. Malaysia Deposit Insurance Corporation (PIDM)
Disclosure is permitted for the performance of PIDM’s statutory functions.
9. Securities Commission and Capital Market Authorities
Investment banks may disclose information for purposes connected with:
10. Approved Trade Repositories
Disclosure is permitted for trade repository functions under capital market legislation.
11. Inland Revenue Board (IRB)
Disclosure is permitted where information is required under tax legislation and international tax information exchange arrangements.
12. Credit Reporting Agencies
Banks may disclose credit information to registered credit reporting agencies.
13. Supervisory Authorities
Disclosure is permitted to local or foreign supervisory authorities exercising functions similar to those of BNM.
14. Centralised Group Functions
Disclosure is permitted for group functions such as:
15. Due Diligence Exercises
Disclosure is permitted for:
16. Outsourcing Arrangements
Disclosure is permitted where banking functions have been outsourced.
17. Consultants and Adjusters
Disclosure is permitted to professional advisers engaged by the bank.
18. Suspicion of Criminal Activity
Disclosure is permitted 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 under section 134, customer confidentiality remains protected.
The court may:
Banking Confidentiality under Contract and Equity
Apart from statute, confidentiality is also recognised as:
An Implied Contractual Duty
Every banker-customer relationship contains an implied obligation that customer information will remain confidential.
An Equitable Duty
Equity protects confidential information and provides remedies such as:
Important Cases
Tan Eng Seong v Malayan Banking Bhd
Principle
Disclosure of banking information to a customer’s brother constituted a breach of confidentiality.
The case confirms that:
Wong Yeng Mun v CIMB Bank Berhad
Principle
Bank statements sent to the wrong address and opened by the customer’s wife constituted a breach of confidentiality.
The case confirms that:
Tan Lay Soon v Kam Mah Theatre Sdn Bhd
Principle
Confidentiality belongs to the customer and may be waived expressly or impliedly.
Disclosure necessary to complete a customer-authorised transaction is lawful.
Attorney General of Hong Kong v Zauyah Wan Chik
Principle
Banking secrecy legislation does not automatically have extra-territorial effect.
Disclosure compelled by foreign court proceedings may not create criminal liability in Malaysia.
Wako Merchant Bank v Lim Lean Heng
Principle
Information obtained in breach of banking secrecy laws remains admissible if relevant.
Parliament created criminal sanctions for unlawful disclosure but did not render such evidence inadmissible.
The remedy lies in criminal prosecution, injunctions or damages rather than exclusion of evidence.
Hj Salleh Hj Janan v Financial Information Services Sdn Bhd
Principle
Publicly available court records are not confidential.
A person may repeat or republish a public fact without breaching confidentiality.
The defence of justification succeeds where the statement accurately reflects public records.
Case Scenario
Facts
A bank receives a garnishee order attaching RM500,000 standing in a customer’s account.
The customer instructs the bank to transfer the funds elsewhere before the court hearing.
The bank complies and transfers the money.
Legal Consequences
The bank has acted improperly.
Upon service of the garnishee order, the bank owes a duty to preserve the attached funds.
The bank must not release the money unless authorised by the court.
The bank may therefore be liable for breaching its obligations arising from the garnishee proceedings.
Key Examination Principles
Section 132
Conclusion
Malaysian banking secrecy law consists of a comprehensive framework combining statutory protection, contractual obligations and equitable principles. Section 133 establishes the general duty of secrecy, while section 134 recognises carefully defined exceptions necessary for the administration of justice, commercial transactions, regulatory supervision and public interest. The cases of Tan Eng Seong, Wong Yeng Mun, Tan Lay Soon, Zauyah Wan Chik, Wako Merchant Bank, and Hj Salleh Hj Janan demonstrate that confidentiality remains a fundamental customer right, but one that must be balanced against legitimate legal and commercial necessities. Ultimately, banking secrecy protects customer privacy without allowing confidentiality to become an obstacle to justice, regulation or lawful disclosure.
Introduction
Banking secrecy is one of the most important duties owed by a bank to its customers. Customers entrust banks with confidential information relating to their finances, assets, liabilities, transactions and business affairs. The law therefore imposes a duty on banks to preserve the secrecy of such information.
The objectives of banking secrecy are:
- To protect customer privacy;
- To preserve public confidence in the banking system;
- To encourage customers to deal openly with their banks; and
- To ensure that banking information is disclosed only in legally recognised circumstances.
- Section 132 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).
1. Restriction on Inquiry into Customer Affairs (Section 132 FSA 2013)
General Rule
Section 132 protects customers from arbitrary investigations into their banking affairs.
Neither:
- The Minister of Finance; nor
- Bank Negara Malaysia (BNM)
This provision protects customer privacy and prevents unnecessary governmental interference in the banker-customer relationship.
Exception
BNM may investigate customer accounts where necessary to exercise its powers and functions under:
- The Financial Services Act 2013;
- The Islamic Financial Services Act 2013; or
- The Central Bank of Malaysia Act 2009.
2. Statutory Duty of Secrecy (Section 133 FSA 2013)
General Rule
Section 133 imposes a strict duty of confidentiality upon:
- Financial institutions;
- Directors;
- Officers;
- Employees;
- Agents; and
- Former directors, officers and agents.
The duty continues even after employment or office has ended.
Scope of Protection
The protection covers:
- Savings accounts;
- Current accounts;
- Fixed deposits;
- Financing facilities;
- Credit information;
- Securities holdings;
- Customer identities;
- Account balances;
- Transaction histories; and
- All information obtained through the banking relationship.
Criminal Liability
A person who unlawfully discloses customer information commits an offence punishable by:
- Imprisonment up to five years;
- Fine up to RM10 million; or
- Both.
Further Disclosure Prohibited
Section 133(3) further prohibits any person from disclosing information that he knows was originally disclosed in breach of section 133.
Thus, liability may extend beyond the original wrongdoer.
3. Exceptions to Banking Secrecy (Section 134 FSA 2013)
Although secrecy is the general rule, section 134 recognises that confidentiality cannot be absolute.
Banks operate within a legal and commercial environment that sometimes requires disclosure.
Accordingly, section 134 permits disclosure:
- Under the circumstances listed in Schedule 11; or
- With the written approval of Bank Negara Malaysia.
The 18 Permitted Disclosures under Schedule 11
1. Customer Consent
A bank may disclose information where written consent is given by:
- The customer;
- The customer’s executor or administrator; or
- The legal representative of an incapacitated customer.
A customer authorises his bank to provide information to another bank when applying for a housing loan.
The disclosure is lawful because the customer has waived confidentiality.
2. Administration of a Deceased Customer’s Estate
Disclosure is permitted in connection with:
- Probate proceedings;
- Letters of administration;
- Faraid certificates; and
- Distribution orders.
3. Bankruptcy and Winding-Up Proceedings
Disclosure is permitted where the customer:
- Has been declared bankrupt;
- Is being wound up; or
- Has been dissolved.
4. Civil or Criminal Proceedings Involving the Bank
Disclosure is permitted where litigation involves:
- The bank and its customer;
- A guarantor or surety;
- Competing claimants to funds; or
- Property in which the bank has an interest.
5. Garnishee Orders
A bank may disclose information necessary to comply with a garnishee order served upon it.
Banker’s Duty
Once a garnishee order is served, the bank must:
- Freeze the attached funds; and
- Refrain from releasing those funds until directed by the court.
6. Court Orders
Disclosure is permitted pursuant to a court order issued by a court not lower than the Sessions Court.
7. Requests by Enforcement Agencies
Disclosure is permitted where required by:
- Police investigations;
- MACC investigations;
- Anti-money laundering investigations; or
- Other enforcement agencies acting under written law.
8. Malaysia Deposit Insurance Corporation (PIDM)
Disclosure is permitted for the performance of PIDM’s statutory functions.
9. Securities Commission and Capital Market Authorities
Investment banks may disclose information for purposes connected with:
- The Securities Commission;
- Stock exchanges;
- Derivatives exchanges;
- Clearing houses; and
- Central depositories.
10. Approved Trade Repositories
Disclosure is permitted for trade repository functions under capital market legislation.
11. Inland Revenue Board (IRB)
Disclosure is permitted where information is required under tax legislation and international tax information exchange arrangements.
12. Credit Reporting Agencies
Banks may disclose credit information to registered credit reporting agencies.
13. Supervisory Authorities
Disclosure is permitted to local or foreign supervisory authorities exercising functions similar to those of BNM.
14. Centralised Group Functions
Disclosure is permitted for group functions such as:
- Internal audit;
- Risk management;
- Information technology;
- Finance; and
- Compliance.
15. Due Diligence Exercises
Disclosure is permitted for:
- Mergers and acquisitions;
- Capital raising exercises; and
- Sale of business assets.
16. Outsourcing Arrangements
Disclosure is permitted where banking functions have been outsourced.
17. Consultants and Adjusters
Disclosure is permitted to professional advisers engaged by the bank.
18. Suspicion of Criminal Activity
Disclosure is permitted 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 under section 134, customer confidentiality remains protected.
The court may:
- Conduct proceedings in camera;
- Restrict access to confidential information;
- Prohibit publication of identifying information; and
- Make further confidentiality orders.
Banking Confidentiality under Contract and Equity
Apart from statute, confidentiality is also recognised as:
An Implied Contractual Duty
Every banker-customer relationship contains an implied obligation that customer information will remain confidential.
An Equitable Duty
Equity protects confidential information and provides remedies such as:
- Injunctions;
- Damages; and
- Other equitable relief.
Important Cases
Tan Eng Seong v Malayan Banking Bhd
Principle
Disclosure of banking information to a customer’s brother constituted a breach of confidentiality.
The case confirms that:
- Confidentiality is an implied contractual term.
- Family members remain third parties unless authorised.
- Nominal damages may be awarded.
Wong Yeng Mun v CIMB Bank Berhad
Principle
Bank statements sent to the wrong address and opened by the customer’s wife constituted a breach of confidentiality.
The case confirms that:
- Confidentiality belongs to the customer.
- Administrative negligence may create liability.
- Banks must maintain proper safeguards.
Tan Lay Soon v Kam Mah Theatre Sdn Bhd
Principle
Confidentiality belongs to the customer and may be waived expressly or impliedly.
Disclosure necessary to complete a customer-authorised transaction is lawful.
Attorney General of Hong Kong v Zauyah Wan Chik
Principle
Banking secrecy legislation does not automatically have extra-territorial effect.
Disclosure compelled by foreign court proceedings may not create criminal liability in Malaysia.
Wako Merchant Bank v Lim Lean Heng
Principle
Information obtained in breach of banking secrecy laws remains admissible if relevant.
Parliament created criminal sanctions for unlawful disclosure but did not render such evidence inadmissible.
The remedy lies in criminal prosecution, injunctions or damages rather than exclusion of evidence.
Hj Salleh Hj Janan v Financial Information Services Sdn Bhd
Principle
Publicly available court records are not confidential.
A person may repeat or republish a public fact without breaching confidentiality.
The defence of justification succeeds where the statement accurately reflects public records.
Case Scenario
Facts
A bank receives a garnishee order attaching RM500,000 standing in a customer’s account.
The customer instructs the bank to transfer the funds elsewhere before the court hearing.
The bank complies and transfers the money.
Legal Consequences
The bank has acted improperly.
Upon service of the garnishee order, the bank owes a duty to preserve the attached funds.
The bank must not release the money unless authorised by the court.
The bank may therefore be liable for breaching its obligations arising from the garnishee proceedings.
Key Examination Principles
Section 132
- Restricts arbitrary inquiries into customer affairs.
- Protects customer privacy.
- Allows BNM investigations for statutory purposes.
- Creates a statutory duty of secrecy.
- Applies to banks and banking personnel.
- Covers all customer information.
- Continues after employment ends.
- Breach attracts criminal sanctions.
- Creates exceptions to confidentiality.
- Contains 18 permitted disclosures in Schedule 11.
- Allows disclosure with BNM approval.
- Preserves confidentiality through in-camera proceedings and confidentiality orders.
- Confidentiality belongs to the customer.
- Confidentiality may be waived expressly or impliedly.
- Confidentiality is protected by contract and equity.
- Public facts are not confidential.
- Illegally obtained information may still be admissible if relevant.
- Banking secrecy does not automatically operate outside Malaysia.
Conclusion
Malaysian banking secrecy law consists of a comprehensive framework combining statutory protection, contractual obligations and equitable principles. Section 133 establishes the general duty of secrecy, while section 134 recognises carefully defined exceptions necessary for the administration of justice, commercial transactions, regulatory supervision and public interest. The cases of Tan Eng Seong, Wong Yeng Mun, Tan Lay Soon, Zauyah Wan Chik, Wako Merchant Bank, and Hj Salleh Hj Janan demonstrate that confidentiality remains a fundamental customer right, but one that must be balanced against legitimate legal and commercial necessities. Ultimately, banking secrecy protects customer privacy without allowing confidentiality to become an obstacle to justice, regulation or lawful disclosure.
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