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Malaysian Banking Law – Offences Relating to Entries in Documents (Section 248 Financial Services Act 2013)
Introduction
Apart from maintaining customer confidentiality and complying with regulatory requirements, banking institutions must ensure that all records, books, documents, and reports are accurate, complete, and truthful. The integrity of banking records is essential because regulators, customers, auditors, and financial institutions rely on these documents to assess the financial condition and operations of a bank.
To safeguard the reliability of such records, section 248 of the Financial Services Act 2013 (FSA 2013) creates criminal offences relating to false entries, omissions, alterations, concealment, destruction, or forgery of banking documents and records. The provision also criminalises attempts to circumvent the requirements of the FSA 2013 through manipulation or tampering of documents.
Purpose of Section 248 FSA 2013
Section 248 seeks to preserve the integrity and accuracy of records relating to:
Prohibited Conduct Under Section 248(1)
Section 248(1) prohibits any person from:
(a) Making False Entries
A person must not create or cause another person to create false information in any book, record, report, statement, slip, or document relating to a financial institution’s operations or accounts.
Examples:
(b) Omitting Required Entries
It is also an offence to intentionally fail to record information that ought to be entered into banking records.
Examples:
(c) Altering, Extracting, Concealing, or Destroying Entries
The law further prohibits any person from altering, removing, concealing, or destroying information contained in banking records.
Examples:
Evasion of the Financial Services Act 2013
Section 248(2) extends beyond entries in records and prohibits any attempt to evade the FSA 2013 by:
Penalties
A person who contravenes section 248(1) or section 248(2) commits a criminal offence.
Upon conviction, the offender may be punished with:
Importance of Accurate Banking Records
Accurate record-keeping is fundamental to the banking system because:
Practical Applications During the Banker–Customer Relationship
Employees of financial institutions must avoid manipulating documents or records at any stage of the banker-customer relationship.
Examples of prohibited conduct include:
Scope of the Provision
An important feature of section 248 is its broad application.
The section states that “No person shall” engage in the prohibited conduct. Consequently, liability is not limited to:
Examples include:
Case Law: Hock Hua Bank (Sabah) Bhd v Lam Tat Ming & Ors
Facts
A current account officer employed by the bank made false entries in vouchers by debiting amounts to a suspense account. His actions constituted both falsification of banking records and dishonest conduct against the bank.
As a result, criminal proceedings were initiated against him.
Decision
The officer was found guilty of:
Punishment
The offender received:
Critical Analysis
Section 248 plays a crucial role in maintaining trust and confidence in Malaysia’s banking system. Banking operations depend heavily on documentary records, and any falsification may affect customers, regulators, shareholders, and the public at large.
The broad wording of the provision is particularly significant because it captures not only internal misconduct by bank employees but also external fraud committed by customers and third parties. This wider scope enhances the effectiveness of the law in combating financial crime.
The severe penalties imposed under the section further reflect the seriousness with which the law treats document manipulation and record falsification. In modern banking, where lending decisions, regulatory compliance, risk management, and customer transactions depend on documentary evidence, inaccurate records can undermine the stability and integrity of the entire financial system.
Key Takeaway
Section 248 FSA 2013 criminalises any falsification, omission, alteration, concealment, destruction, or forgery of banking records and related documents. The provision applies broadly to any person, including bank employees and external parties. Violations may result in imprisonment of up to eight years, a fine of up to RM25 million, or both. The objective is to ensure the accuracy, reliability, and integrity of banking records, which are essential to maintaining confidence in Malaysia’s financial system.
Introduction
Apart from maintaining customer confidentiality and complying with regulatory requirements, banking institutions must ensure that all records, books, documents, and reports are accurate, complete, and truthful. The integrity of banking records is essential because regulators, customers, auditors, and financial institutions rely on these documents to assess the financial condition and operations of a bank.
To safeguard the reliability of such records, section 248 of the Financial Services Act 2013 (FSA 2013) creates criminal offences relating to false entries, omissions, alterations, concealment, destruction, or forgery of banking documents and records. The provision also criminalises attempts to circumvent the requirements of the FSA 2013 through manipulation or tampering of documents.
Purpose of Section 248 FSA 2013
Section 248 seeks to preserve the integrity and accuracy of records relating to:
- The business and affairs of financial institutions;
- Banking transactions;
- Financial condition and operations of institutions;
- Assets and liabilities;
- Customer accounts and records; and
- Documents relating to authorised persons, registered persons, and operators of designated payment systems.
Prohibited Conduct Under Section 248(1)
Section 248(1) prohibits any person from:
(a) Making False Entries
A person must not create or cause another person to create false information in any book, record, report, statement, slip, or document relating to a financial institution’s operations or accounts.
Examples:
- Recording fictitious deposits or withdrawals.
- Entering incorrect loan repayment information.
- Creating false accounting records to conceal losses.
- Recording transactions that never occurred.
(b) Omitting Required Entries
It is also an offence to intentionally fail to record information that ought to be entered into banking records.
Examples:
- Failing to record a customer’s outstanding liability.
- Omitting details of non-performing loans.
- Excluding material transactions from official records.
- Concealing financial losses by not entering them into the accounting system.
(c) Altering, Extracting, Concealing, or Destroying Entries
The law further prohibits any person from altering, removing, concealing, or destroying information contained in banking records.
Examples:
- Changing figures in loan documents.
- Removing evidence of unauthorised transactions.
- Concealing entries showing customer defaults.
- Destroying records to prevent regulatory detection.
Evasion of the Financial Services Act 2013
Section 248(2) extends beyond entries in records and prohibits any attempt to evade the FSA 2013 by:
- Altering documents;
- Forging documents;
- Destroying documents;
- Mutilating documents;
- Defacing documents;
- Concealing documents; or
- Removing documents.
Penalties
A person who contravenes section 248(1) or section 248(2) commits a criminal offence.
Upon conviction, the offender may be punished with:
- Imprisonment for a term not exceeding eight years; or
- A fine not exceeding RM25 million; or
- Both imprisonment and a fine.
Importance of Accurate Banking Records
Accurate record-keeping is fundamental to the banking system because:
- Regulators depend on accurate records for supervision and enforcement.
- Auditors rely on records to verify the financial position of institutions.
- Customers expect their accounts and transactions to be correctly recorded.
- Investors and stakeholders require truthful information regarding the institution’s financial health.
- Courts frequently rely on banking records as evidence in legal proceedings.
Practical Applications During the Banker–Customer Relationship
Employees of financial institutions must avoid manipulating documents or records at any stage of the banker-customer relationship.
Examples of prohibited conduct include:
- Altering customer documents to secure approval of a financing facility.
- Modifying information to facilitate the completion of a sale or transaction.
- Submitting forged supporting documents.
- Manipulating marketing materials to exaggerate performance.
- Altering financial statistics or operational reports.
- Concealing information that should be disclosed to management or regulators.
Scope of the Provision
An important feature of section 248 is its broad application.
The section states that “No person shall” engage in the prohibited conduct. Consequently, liability is not limited to:
- Directors;
- Officers; or
- Employees of financial institutions.
- Customers;
- Borrowers;
- Consultants;
- Agents;
- Third parties; and
- External fraudsters.
Examples include:
- Altered bank statements.
- Forged salary slips.
- Fabricated financial statements.
- Manipulated credit reports.
- Falsified supporting documents for loan applications.
Case Law: Hock Hua Bank (Sabah) Bhd v Lam Tat Ming & Ors
Facts
A current account officer employed by the bank made false entries in vouchers by debiting amounts to a suspense account. His actions constituted both falsification of banking records and dishonest conduct against the bank.
As a result, criminal proceedings were initiated against him.
Decision
The officer was found guilty of:
- An offence under section 105 of the Banking and Financial Institutions Act 1989 (BAFIA), the predecessor provision to section 248 FSA 2013; and
- Section 420 of the Penal Code for cheating.
Punishment
The offender received:
- A term of imprisonment;
- A monetary fine; and
- Two strokes of whipping.
Critical Analysis
Section 248 plays a crucial role in maintaining trust and confidence in Malaysia’s banking system. Banking operations depend heavily on documentary records, and any falsification may affect customers, regulators, shareholders, and the public at large.
The broad wording of the provision is particularly significant because it captures not only internal misconduct by bank employees but also external fraud committed by customers and third parties. This wider scope enhances the effectiveness of the law in combating financial crime.
The severe penalties imposed under the section further reflect the seriousness with which the law treats document manipulation and record falsification. In modern banking, where lending decisions, regulatory compliance, risk management, and customer transactions depend on documentary evidence, inaccurate records can undermine the stability and integrity of the entire financial system.
Key Takeaway
Section 248 FSA 2013 criminalises any falsification, omission, alteration, concealment, destruction, or forgery of banking records and related documents. The provision applies broadly to any person, including bank employees and external parties. Violations may result in imprisonment of up to eight years, a fine of up to RM25 million, or both. The objective is to ensure the accuracy, reliability, and integrity of banking records, which are essential to maintaining confidence in Malaysia’s financial system.
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