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Malaysian Banking Law – Banking Secrecy, Confidentiality, Permitted Disclosures and Personal Data Protection
Introduction
Banking secrecy is one of the most important obligations imposed upon banks and financial institutions. It requires banks to keep confidential all information relating to their customers’ accounts and affairs.
The duty serves several purposes:
PART I: BANKING SECRECY UNDER THE FINANCIAL SERVICES ACT 2013
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 safeguard customer privacy and confidence in the banking system.
Exception
BNM may investigate customer affairs where necessary for exercising its powers under:
Section 133 FSA 2013 – Duty of Secrecy
General Rule
Section 133 imposes a statutory duty of confidentiality on:
The duty survives termination of employment.
Scope of Protection
The protection extends to:
Exceptions under Section 133(2)
The secrecy obligation does not apply where the information:
(a) Is disclosed to BNM
For the purpose of exercising statutory powers and functions.
(b) Is disclosed in summary form
Provided no particular customer can be identified.
(c) Is already public information
Where the information has already been lawfully made available to the public from a source other than the financial institution.
Further Disclosure Prohibited
A person who knowingly receives information disclosed in breach of section 133 cannot further disclose it.
Penalty
Contravention may result in:
Section 134 FSA 2013 – Permitted Disclosures
Section 134 provides the statutory exceptions to confidentiality.
A financial institution may disclose customer information:
The court may also order proceedings to be held in camera and prohibit publication of information identifying the parties.
PART II: BANKING SECRECY UNDER THE ISLAMIC FINANCIAL SERVICES ACT 2013
The Islamic Financial Services Act 2013 contains provisions almost identical to those found in the Financial Services Act 2013.
The objective is likewise to preserve customer confidentiality within Islamic financial institutions.
Section 145 IFSA 2013 – Secrecy
General Rule
Section 145 prohibits disclosure of information relating to the affairs or account of a customer of an Islamic financial institution.
The duty applies to:
Exceptions under Section 145(2)
The secrecy obligation does not apply where information:
(a) Is disclosed to BNM
For purposes connected with the exercise of BNM’s statutory powers.
(b) Is disclosed in summary or aggregated form
Provided no particular customer can be identified.
(c) Has already entered the public domain
Through lawful publication from another source.
Further Disclosure
A person who knowingly receives information disclosed in breach of section 145 cannot further disclose it.
Penalty
Contravention may result in:
Section 146 IFSA 2013 – Permitted Disclosures
An Islamic financial institution may disclose customer information:
Recipients are prohibited from making further disclosure.
The court may:
Schedule 11 IFSA 2013 – Permitted Disclosures
The Schedule operates through two columns:
First Column
The purpose or circumstance under which disclosure is permitted.
Second Column
The persons to whom disclosure may be made.
1. Customer’s Written Consent
First Column
Documents or information disclosed with written permission from:
Disclosure may be made to:
2. Deceased Customer’s Estate
First Column
Disclosure connected with:
Disclosure may be made to:
Any person whom the Islamic financial institution genuinely believes is entitled to obtain:
3. Bankruptcy, Winding-Up or Dissolution
First Column
Where the customer:
Second Column
Disclosure may be made to:
All persons to whom disclosure is necessary in connection with:
4. Civil or Criminal Proceedings
First Column
Proceedings involving the Islamic financial institution and:
Disclosure may be made to:
All persons to whom disclosure is necessary for the purpose of those proceedings.
5. Garnishee Orders
First Column
Compliance with a garnishee order attaching money in a customer’s account.
Second Column
Disclosure may be made to:
All persons to whom disclosure is required under the garnishee order.
6. Court Orders
First Column
Compliance with an order made by a court not lower than the Sessions Court.
Second Column
Disclosure may be made to:
All persons to whom disclosure is required under the court order.
7. Requests by Enforcement Agencies
First Column
Compliance with requests or orders made by enforcement agencies under written law for investigation or prosecution purposes.
Second Column
Disclosure may be made to:
8. Functions of Malaysia Deposit Insurance Corporation (PIDM)
First Column
Performance of PIDM’s statutory functions.
Second Column
Disclosure may be made to:
9. Approved Trade Repository Functions
First Column
Disclosure by a licensed Islamic bank for the performance of approved trade repository functions under the Capital Markets and Services Act 2007.
Second Column
Disclosure may be made to:
Officers of the approved trade repository authorised to receive the information.
10. Inland Revenue Board (IRB)
First Column
Information required by the Inland Revenue Board under section 81 of the Income Tax Act 1967 for tax information exchange purposes.
Second Column
Disclosure may be made to:
Officers of the Inland Revenue Board authorised to receive the information.
11. Credit Reporting Agencies
First Column
Disclosure of customer credit information for credit reporting business.
Second Column
Disclosure may be made to:
Officers of registered credit reporting agencies authorised to receive the information.
12. Supervisory Authorities Outside Malaysia
First Column
Performance of supervisory functions by foreign authorities exercising functions similar to BNM.
Second Column
Disclosure may be made to:
Authorised officers of the relevant supervisory authority.
13. Centralised Functions within a Financial Group
First Column
Conduct of centralised functions including:
Disclosure may be made to:
14. Due Diligence Exercises
First Column
Board-approved due diligence exercises relating to:
Disclosure may be made to:
Any person participating in or involved in the due diligence exercise.
15. Outsourced Functions
First Column
Performance of outsourced functions of the Islamic financial institution.
Second Column
Disclosure may be made to:
Persons engaged by the institution to perform the outsourced function.
16. Consultants and Adjusters
First Column
Disclosure to consultants or adjusters engaged by the Islamic financial institution.
Second Column
Disclosure may be made to:
The consultant or adjuster engaged by the institution.
17. Suspicion of Criminal Activity
First Column
Where the Islamic financial institution has reason to suspect that an offence under any written law has been, is being or may be committed.
Second Column
Disclosure may be made to:
Key Difference Between Sections 145–146 IFSA and Sections 133–134 FSA
In substance, both regimes provide nearly identical protection.
Both:
To preserve public confidence in the financial system by ensuring that customer information remains confidential unless disclosure is authorised by law.
Summary
Under Malaysian Banking Law, banking secrecy applies to both conventional and Islamic financial institutions. Sections 133–134 FSA 2013 and sections 145–146 IFSA 2013 establish comprehensive confidentiality regimes. Customer information remains protected indefinitely and may only be disclosed in carefully defined circumstances. Schedule 11 IFSA 2013 specifically links each permitted purpose of disclosure (First Column) with the persons entitled to receive the information (Second Column), ensuring that disclosure remains limited, controlled and consistent with the objective of protecting customer confidentiality.
Introduction
Banking secrecy is one of the most important obligations imposed upon banks and financial institutions. It requires banks to keep confidential all information relating to their customers’ accounts and affairs.
The duty serves several purposes:
- Protecting customer privacy;
- Preserving confidence in the banking system;
- Protecting sensitive financial and commercial information;
- Encouraging customers to deal openly with banks; and
- Ensuring disclosure occurs only where authorised by law.
- Sections 132, 133 and 134 Financial Services Act 2013 (FSA 2013);
- Sections 145 and 146 Islamic Financial Services Act 2013 (IFSA 2013);
- Personal Data Protection Act 2010 (PDPA);
- Contract law;
- Equity; and
- Tort law.
PART I: BANKING SECRECY UNDER THE FINANCIAL SERVICES ACT 2013
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 safeguard customer privacy and confidence in the banking system.
Exception
BNM may investigate customer affairs where necessary for exercising its powers under:
- The Financial Services Act 2013;
- The Islamic Financial Services Act 2013; or
- The Central Bank of Malaysia Act 2009.
Section 133 FSA 2013 – Duty of Secrecy
General Rule
Section 133 imposes a statutory duty of confidentiality on:
- Financial institutions;
- Directors;
- Officers;
- Employees;
- Agents; and
- Former directors, officers and agents.
The duty survives termination of employment.
Scope of Protection
The protection extends to:
- Savings accounts;
- Current accounts;
- Fixed deposits;
- Financing facilities;
- Investment accounts;
- Credit information;
- Customer identities;
- Financial standing;
- Transaction records; and
- Any information acquired through the banker-customer relationship.
Exceptions under Section 133(2)
The secrecy obligation does not apply where the information:
(a) Is disclosed to BNM
For the purpose of exercising statutory powers and functions.
(b) Is disclosed in summary form
Provided no particular customer can be identified.
(c) Is already public information
Where the information has already been lawfully made available to the public from a source other than the financial institution.
Further Disclosure Prohibited
A person who knowingly receives information disclosed in breach of section 133 cannot further disclose it.
Penalty
Contravention may result in:
- Imprisonment up to 5 years;
- Fine up to RM10 million; or
- Both.
Section 134 FSA 2013 – Permitted Disclosures
Section 134 provides the statutory exceptions to confidentiality.
A financial institution may disclose customer information:
- Under Schedule 11; or
- With written approval from BNM.
The court may also order proceedings to be held in camera and prohibit publication of information identifying the parties.
PART II: BANKING SECRECY UNDER THE ISLAMIC FINANCIAL SERVICES ACT 2013
The Islamic Financial Services Act 2013 contains provisions almost identical to those found in the Financial Services Act 2013.
The objective is likewise to preserve customer confidentiality within Islamic financial institutions.
Section 145 IFSA 2013 – Secrecy
General Rule
Section 145 prohibits disclosure of information relating to the affairs or account of a customer of an Islamic financial institution.
The duty applies to:
- The Islamic financial institution;
- Directors;
- Officers;
- Agents; and
- Former directors, officers and agents.
Exceptions under Section 145(2)
The secrecy obligation does not apply where information:
(a) Is disclosed to BNM
For purposes connected with the exercise of BNM’s statutory powers.
(b) Is disclosed in summary or aggregated form
Provided no particular customer can be identified.
(c) Has already entered the public domain
Through lawful publication from another source.
Further Disclosure
A person who knowingly receives information disclosed in breach of section 145 cannot further disclose it.
Penalty
Contravention may result in:
- Imprisonment up to 5 years;
- Fine up to RM10 million; or
- Both.
Section 146 IFSA 2013 – Permitted Disclosures
An Islamic financial institution may disclose customer information:
- In the circumstances listed in Schedule 11; or
- With written approval from BNM.
Recipients are prohibited from making further disclosure.
The court may:
- Hold proceedings in camera;
- Restrict access to documents;
- Prevent publication of identifying information; and
- Make confidentiality orders.
Schedule 11 IFSA 2013 – Permitted Disclosures
The Schedule operates through two columns:
First Column
The purpose or circumstance under which disclosure is permitted.
Second Column
The persons to whom disclosure may be made.
1. Customer’s Written Consent
First Column
Documents or information disclosed with written permission from:
- The customer;
- Executor;
- Administrator; or
- Legal personal representative.
Disclosure may be made to:
- Any person authorised by the customer;
- Executor;
- Administrator; or
- Legal personal representative.
2. Deceased Customer’s Estate
First Column
Disclosure connected with:
- Faraid certificate applications;
- Probate applications;
- Letters of administration; or
- Distribution orders under the Small Estates (Distribution) Act 1955.
Disclosure may be made to:
Any person whom the Islamic financial institution genuinely believes is entitled to obtain:
- The faraid certificate;
- Grant of probate;
- Letters of administration; or
- Distribution order.
3. Bankruptcy, Winding-Up or Dissolution
First Column
Where the customer:
- Has been declared bankrupt;
- Is being wound up; or
- Has been dissolved,
Second Column
Disclosure may be made to:
All persons to whom disclosure is necessary in connection with:
- Bankruptcy;
- Winding-up; or
- Dissolution proceedings.
4. Civil or Criminal Proceedings
First Column
Proceedings involving the Islamic financial institution and:
- Its customer;
- Surety;
- Guarantor;
- Competing claimants to money in the account; or
- Persons claiming rights over property in which the institution has an interest.
Disclosure may be made to:
All persons to whom disclosure is necessary for the purpose of those proceedings.
5. Garnishee Orders
First Column
Compliance with a garnishee order attaching money in a customer’s account.
Second Column
Disclosure may be made to:
All persons to whom disclosure is required under the garnishee order.
6. Court Orders
First Column
Compliance with an order made by a court not lower than the Sessions Court.
Second Column
Disclosure may be made to:
All persons to whom disclosure is required under the court order.
7. Requests by Enforcement Agencies
First Column
Compliance with requests or orders made by enforcement agencies under written law for investigation or prosecution purposes.
Second Column
Disclosure may be made to:
- Investigating officers authorised under written law;
- Prosecuting officers; or
- The court.
8. Functions of Malaysia Deposit Insurance Corporation (PIDM)
First Column
Performance of PIDM’s statutory functions.
Second Column
Disclosure may be made to:
- Directors;
- Officers of PIDM; or
- Persons authorised by PIDM to receive the information.
9. Approved Trade Repository Functions
First Column
Disclosure by a licensed Islamic bank for the performance of approved trade repository functions under the Capital Markets and Services Act 2007.
Second Column
Disclosure may be made to:
Officers of the approved trade repository authorised to receive the information.
10. Inland Revenue Board (IRB)
First Column
Information required by the Inland Revenue Board under section 81 of the Income Tax Act 1967 for tax information exchange purposes.
Second Column
Disclosure may be made to:
Officers of the Inland Revenue Board authorised to receive the information.
11. Credit Reporting Agencies
First Column
Disclosure of customer credit information for credit reporting business.
Second Column
Disclosure may be made to:
Officers of registered credit reporting agencies authorised to receive the information.
12. Supervisory Authorities Outside Malaysia
First Column
Performance of supervisory functions by foreign authorities exercising functions similar to BNM.
Second Column
Disclosure may be made to:
Authorised officers of the relevant supervisory authority.
13. Centralised Functions within a Financial Group
First Column
Conduct of centralised functions including:
- Audit;
- Risk management;
- Finance;
- Information technology; and
- Other centralised functions.
Disclosure may be made to:
- Head office;
- Holding company;
- Persons designated by the head office; or
- Persons designated by the holding company to perform those functions.
14. Due Diligence Exercises
First Column
Board-approved due diligence exercises relating to:
- Mergers and acquisitions;
- Capital raising exercises; or
- Sale of assets, business or part of the business.
Disclosure may be made to:
Any person participating in or involved in the due diligence exercise.
15. Outsourced Functions
First Column
Performance of outsourced functions of the Islamic financial institution.
Second Column
Disclosure may be made to:
Persons engaged by the institution to perform the outsourced function.
16. Consultants and Adjusters
First Column
Disclosure to consultants or adjusters engaged by the Islamic financial institution.
Second Column
Disclosure may be made to:
The consultant or adjuster engaged by the institution.
17. Suspicion of Criminal Activity
First Column
Where the Islamic financial institution has reason to suspect that an offence under any written law has been, is being or may be committed.
Second Column
Disclosure may be made to:
- Officers of another Islamic financial institution; or
- Relevant associations of Islamic financial institutions authorised to receive the information.
Key Difference Between Sections 145–146 IFSA and Sections 133–134 FSA
In substance, both regimes provide nearly identical protection.
Both:
- Impose a strict duty of secrecy;
- Cover all customer affairs and account information;
- Continue after employment ends;
- Permit disclosures only under specified exceptions;
- Provide criminal sanctions of up to RM10 million fine and/or 5 years imprisonment.
To preserve public confidence in the financial system by ensuring that customer information remains confidential unless disclosure is authorised by law.
Summary
Under Malaysian Banking Law, banking secrecy applies to both conventional and Islamic financial institutions. Sections 133–134 FSA 2013 and sections 145–146 IFSA 2013 establish comprehensive confidentiality regimes. Customer information remains protected indefinitely and may only be disclosed in carefully defined circumstances. Schedule 11 IFSA 2013 specifically links each permitted purpose of disclosure (First Column) with the persons entitled to receive the information (Second Column), ensuring that disclosure remains limited, controlled and consistent with the objective of protecting customer confidentiality.
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