Malaysian Banking Law – Interference with the Banker-Customer Relationship: Attachment (Garnishee Proceedings), Mareva Injunctions and Freezing Orders
Introduction
The banker-customer relationship is fundamentally contractual and based upon the debtor-creditor principle. However, this relationship is not absolute. In certain circumstances, third parties or governmental authorities may lawfully interfere with a customer’s deposit account through court orders or statutory mechanisms.
Common forms of interference include:

• Attachment (Garnishee Proceedings)
• Mareva Injunctions
• Freezing Orders
• Discovery and Inspection Orders
• Obligations under the Unclaimed Moneys Act 1965

Such measures may temporarily restrict or permanently affect a customer’s ability to access funds held in a bank account. Banks receiving such orders are legally obliged to comply, notwithstanding their ordinary contractual duties to customers.


Part I – Attachment (Garnishee Proceedings)
Meaning of Attachment
Attachment refers to a legal process whereby money belonging to a judgment debtor and held by a third party, such as a bank, is seized to satisfy a judgment debt.
The bank becomes the garnishee, while the account holder becomes the judgment debtor.
The purpose of garnishee proceedings is to enable a judgment creditor to enforce a court judgment by attaching debts owed to the judgment debtor by another party, including funds held in a bank account.


Nature of Garnishee Proceedings
The operation of garnishee proceedings was explained by Lord Denning in Choice Investments Ltd v Jeromnimon.
Where a debtor fails to satisfy a judgment debt, the creditor may discover that the debtor has money deposited in a bank account. The creditor may then apply for a garnishee order requiring the bank to pay part or all of those monies towards satisfaction of the judgment debt.
Accordingly, the bank is compelled by law to use monies standing to the credit of its customer to satisfy the debt owed to the judgment creditor.


Two Stages of Garnishee Proceedings
1. Garnishee Order Nisi
The first stage is known as a Garnishee Order Nisi.
The term nisi means “unless”.
The order requires the bank to pay the specified sum to the judgment creditor unless sufficient reasons exist why the order should not become final.
Upon service of the Garnishee Order Nisi:

• The bank must immediately freeze the affected funds.
• The customer cannot withdraw or transfer the attached amount.
• The bank must preserve the funds pending further court directions.

The order effectively operates as an injunction against the bank.


2. Garnishee Order Absolute
If no valid objection is raised, the court will issue a Garnishee Order Absolute.
The bank is then legally required to:

• Pay the attached monies directly to the judgment creditor; or
• Pay the monies into court.

Upon making payment, the bank receives a valid discharge from its debt to the customer to the extent of the amount paid.
The law treats such payment as though it had been authorised by the customer himself.


Effect on the Banker-Customer Relationship
Normally, the bank must honour its customer’s withdrawal instructions.
However, once a garnishee order is served, the bank’s contractual obligation becomes subordinate to the court order.
The bank must refuse customer instructions relating to the attached funds and comply strictly with the court’s directions.


Malaysian Cases on Garnishee Proceedings
Examples include:

• Nadrah Ayuni Mohd Yusop v Rahman Lapodin
• Affin Bank Bhd v Energypeak Fze
• Bank Kerjasama Rakyat (M) Bhd v Koperasi Serbaguna Iman Malaysia Bhd
• Malaysian International Trading Corp Sdn Bhd v RHB Bank Bhd

Part II – Mareva Injunctions and Freezing Orders
Meaning of a Mareva Injunction
A Mareva injunction is a court order restraining a party from removing assets from the jurisdiction of the court or otherwise dealing with assets located within the jurisdiction.
In limited circumstances, the injunction may also extend to assets located outside the jurisdiction.
Unlike a garnishee order, which is intended to satisfy an existing judgment debt, a Mareva injunction is primarily a preservative remedy. Its purpose is to ensure that assets remain available pending the outcome of legal proceedings.


Purpose of a Mareva Injunction
The principal purpose of a Mareva injunction is to prevent a court judgment from becoming ineffective.
The injunction seeks to prevent:

1. Removal of assets from the jurisdiction;
2. Concealment of assets;
3. Dissipation of assets; and
4. Dealings with assets that would frustrate the enforcement of a future judgment.

The remedy protects the administration of justice by ensuring that a successful litigant is not left with a worthless judgment because the defendant has disposed of his assets before judgment can be enforced.


Effect on Banks
When a bank receives a Mareva injunction or any freezing order, it must strictly comply with the terms of the order.
The bank must:

• Identify the affected accounts;
• Freeze the relevant assets;
• Prevent withdrawals or transfers contrary to the order;
• Maintain the frozen funds until further court directions.

The bank cannot rely upon customer instructions that conflict with the injunction.
Failure to comply may expose the bank to contempt proceedings.
If a bank permits monies subject to a Mareva injunction or freezing order to be withdrawn, transferred or otherwise dissipated, the bank may be held liable for contempt of court.


Difference Between Garnishee Orders and Mareva Injunctions
Garnishee Order
Mareva Injunction

Enforces an existing judgment debt.
Preserves assets pending litigation or enforcement.

Money is paid to the judgment creditor.
Money remains frozen and is not paid out.

Judgment creditor has already succeeded in court.
Claim has usually not yet been finally determined.

Operates as a debt recovery mechanism.
Operates as an asset preservation mechanism.

Results in transfer of funds.
Results in freezing of funds.


Malaysian Cases on Mareva Injunctions
Malaysian courts have frequently granted Mareva injunctions. Examples include:

• Tengku Reza Shah bin Tengku Chaidzir Shah v Bangsar Heights Pavilion Sdn Bhd
• SRC International Sdn Bhd v Dato’ Sri Mohd Najib bin Hj Abd Razak
• Zschimmer & Schwarz GmbH & Co KG Chemische Fabriken v Persons Unknown
• Mepcom Polymer Sdn Bhd v Lee Yoke Ping
• Toyota Tsusho (M) Sdn Bhd v Lau Kum Foon
• Stone Master Corp Bhd v Dato’ Koh Mui Tee
• Top Glove Corp Bhd v Low Chin Guan
• China Ideal Development Ltd v Ooi Kee Liang

These cases illustrate the willingness of Malaysian courts to protect assets from dissipation where there is a genuine risk that enforcement of future judgments may be frustrated.


Freezing Orders Under Anti-Money Laundering Laws
Apart from civil Mareva injunctions, freezing orders may also be issued pursuant to anti-money laundering legislation, particularly under the:
Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA).
Such freezing orders are commonly used where authorities suspect that assets represent proceeds of unlawful activities.
Examples include:

• Public Prosecutor v Sim Sai Hoon
• Public Prosecutor v Pertubuhan Kebangsaan Melayu Bersatu
• Public Prosecutor v Habib Jewels Sdn Bhd
• UMNO Bahagian Pekan v Public Prosecutor
• Lim Hui Jin v CIMB Bank Bhd

CIMB Bank Bhd v Tan Hoo Eng and Another Appeal
In CIMB Bank Bhd v Tan Hoo Eng, the Court of Appeal considered whether contempt proceedings arising from an alleged breach of a freezing order issued under section 44 of AMLATFPUAA constituted criminal contempt.
The court held that a breach of a court order is generally regarded as civil contempt, even if the order originated from criminal proceedings.
The Court of Appeal emphasised that:

• Contempt proceedings are separate from the principal proceedings.
• A contempt action brought by an affected party to enforce compliance with a court order is generally civil in nature.
• Criminal contempt usually involves conduct that interferes directly with the administration of justice or proceedings initiated by the Public Prosecutor.

The decision clarifies that banks breaching freezing orders may face civil contempt proceedings even where the original freezing order arose from criminal investigations.


Case Scenario
Facts
ABC Sdn Bhd files a RM20 million fraud claim against its former director, Mr Tan.
Evidence suggests that Mr Tan intends to transfer his assets overseas and close his Malaysian bank accounts.
ABC Sdn Bhd applies for a Mareva injunction.
The High Court grants the injunction and serves it on several banks holding accounts in Mr Tan’s name.
Upon receiving the order:

• The banks immediately freeze the affected accounts.
• Mr Tan is prohibited from transferring or withdrawing the funds.
• The funds remain preserved pending the outcome of the litigation.

Several months later, ABC Sdn Bhd succeeds in its claim and obtains judgment.
Because the assets were preserved by the Mareva injunction, the judgment can be effectively enforced.


Legal Solution
The Mareva injunction was properly granted because:

• There was a serious issue to be tried.
• Mr Tan possessed assets within the jurisdiction.
• There was a genuine risk that the assets would be dissipated.
• The injunction was necessary to preserve the effectiveness of any future judgment.

The banks acted correctly by freezing the accounts and refusing customer instructions inconsistent with the court order.


Critical Analysis
Advantages of Mareva Injunctions and Freezing Orders
Preservation of Assets
The remedy prevents defendants from hiding or dissipating assets before judgment can be enforced.
Protection of Judicial Process
It ensures that court judgments remain meaningful and enforceable.
Deterrence Against Fraud
The possibility of asset freezing discourages dishonest defendants from attempting to evade legal liability.
Protection of Public Interest
AMLA freezing orders assist authorities in preventing suspected proceeds of crime from being transferred or concealed.


Challenges and Concerns
Severe Impact on Defendants
A freezing order may significantly restrict a person’s ability to conduct business and manage personal finances.
Risk of Abuse
Applicants may seek freezing orders strategically to exert pressure on defendants.
Compliance Burden on Banks
Banks must carefully monitor affected accounts and ensure complete compliance with court orders.
Contempt Liability
Even inadvertent non-compliance may expose banks to contempt proceedings and reputational damage.


Conclusion
Mareva injunctions, freezing orders and garnishee proceedings represent important legal mechanisms through which courts may interfere with the banker-customer relationship. While garnishee proceedings facilitate the enforcement of existing judgments by directing banks to pay creditors from customers’ accounts, Mareva injunctions and freezing orders serve a preventative function by preserving assets pending litigation or investigation. Once such orders are served, a bank’s ordinary contractual obligations to its customer become subordinate to the court’s directions. Failure to comply may expose the bank to contempt proceedings and significant legal consequences. These remedies therefore reflect the balance struck by the law between protecting customer banking rights and ensuring the effective administration of justice, enforcement of judgments and prevention of asset dissipation or unlawful activities.

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Malaysian Banking Law – Unclaimed Moneys under the Unclaimed Moneys Act 1965
Introduction
The Unclaimed Moneys Act 1965 (Act 370) applies throughout Malaysia and regulates the handling of money that remains unclaimed by its rightful owner. In the banking context, the Act is particularly important because customers may leave funds in savings, current, fixed deposit, or other accounts without operating them for long periods. Such accounts may eventually become dormant and the funds may be classified as unclaimed moneys.
The Act requires banks to identify, register, report, and transfer unclaimed moneys to the government. Failure to comply may expose the bank to statutory penalties.


Statutory Definition of Unclaimed Moneys (Section 8)
Section 8 of the Unclaimed Moneys Act 1965 classifies unclaimed moneys into three categories:
Section 8(a)
Money legally payable to the owner but remaining unpaid for at least one year after it becomes payable.
Examples:

• Dividend payments.
• Insurance proceeds.
• Matured fixed deposits not collected by customers.
• Refunds payable by banks.

Section 8(b)
Money standing to the credit of an account that has not been operated by the owner for at least seven years.
Examples:

• Dormant savings accounts.
• Dormant current accounts.
• Unused deposit accounts.

Section 8(c)
Money standing to the credit of a trade account that has remained dormant for at least two years.
Examples:

• Supplier accounts.
• Corporate trade balances.
• Business credit balances.

Scenario 1 – Section 8(a): Money Payable but Unpaid for More Than One Year
Facts
Mr. Ahmad placed RM100,000 in a fixed deposit with Bank A for a period of one year.
Upon maturity, the fixed deposit became payable on 1 January 2024.
Mr. Ahmad migrated overseas and failed to claim the proceeds.
As of 1 January 2025, the money had remained unpaid for more than one year after becoming payable.


Legal Position
The matured fixed deposit proceeds fall within Section 8(a) because:

1. The money is legally payable to Mr. Ahmad.
2. It has remained unpaid for more than one year after becoming payable.

The bank must therefore classify the money as unclaimed money.


Banking Law Issue
Can the bank continue holding the money indefinitely?
Answer: No.
The bank must comply with the statutory requirements under the Act by registering and reporting the money.


Practical Solution
Bank A should:

• Record the money in the Unclaimed Moneys Register.
• Attempt to contact Mr. Ahmad.
• Submit the details to the Registrar.
• Transfer the money according to statutory procedures.

Critical Analysis
The one-year period under Section 8(a) is relatively short.
Advantages:

• Prevents indefinite retention of customer funds.
• Encourages proper record-keeping.
• Protects owners’ interests.

Disadvantages:

• Customers who travel abroad or lose contact may be unaware.
• Banks incur administrative costs in tracing owners.

A practical improvement would be requiring banks to issue multiple electronic notifications before classifying funds as unclaimed.


Scenario 2 – Section 8(b): Dormant Bank Account for More Than Seven Years
Facts
Ms. Lim opened a savings account in 2015 with RM3,500.
After depositing the money, she never made:

• withdrawals,
• deposits,
• transfers, or
• inquiries.

By 2023, the account had not been operated for more than seven years.


Legal Position
The account falls within Section 8(b) because:

1. There is money standing to the credit of the account.
2. The account has not been operated by the owner for at least seven years.

The money becomes unclaimed money.


Banking Law Issue
Can the bank permanently retain the RM3,500?
Answer: No.
The bank becomes a statutory custodian and must transfer the funds according to the Act.


Practical Solution
The bank should:

• Flag the account as dormant.
• Conduct customer tracing exercises.
• Send notices via registered mail, email, and SMS.
• Report the account in the annual return.

Critical Analysis
The seven-year dormancy period strikes a reasonable balance.
Advantages:

• Gives customers ample time to reactivate accounts.
• Reduces administrative burden.

Weaknesses:

• Many customers change addresses without informing banks.
• Elderly customers may forget dormant accounts.

Modern banking systems should integrate:

• National identity verification.
• E-mail alerts.
• Mobile banking notifications.

This would significantly reduce dormant account problems.


Scenario 3 – Section 8(c): Dormant Trade Account for More Than Two Years
Facts
ABC Sdn Bhd supplied office equipment to XYZ Bank.
Due to accounting adjustments, XYZ Bank owed ABC Sdn Bhd RM15,000.
The amount remained in a trade account and was never claimed.
Two years passed without activity.


Legal Position
The RM15,000 constitutes unclaimed money under Section 8(c) because:

1. It is a trade account balance.
2. It has remained dormant for more than two years.

Banking Law Issue
Why is the dormancy period only two years?
Trade accounts generally involve active commercial entities that are expected to monitor their receivables regularly.


Practical Solution
Businesses should:

• Conduct annual reconciliations.
• Review outstanding receivables.
• Monitor supplier and customer balances.

Banks should:

• Send reminders before the two-year period expires.
• Maintain updated corporate contact information.

Critical Analysis
The shorter two-year period is commercially justified.
Advantages:

• Promotes business efficiency.
• Prevents accumulation of forgotten commercial balances.

Disadvantages:

• Corporate restructuring or mergers may cause legitimate delays.
• Companies may overlook small balances.

Greater digital reporting would improve compliance.


Bank’s Duty Under Section 10
Where unclaimed moneys exist, the bank must:
1. Maintain a Register
The bank must enter all unclaimed moneys into a statutory register.
2. Annual Submission
The bank must submit a copy of the register annually for publication in the Government Gazette.
3. Transfer of Funds
The funds must be transferred to the Registrar in accordance with the Act.


Scenario – Failure by Bank to Comply with Section 10
Facts
Bank B discovered RM5 million worth of dormant accounts but failed to:

• maintain a proper register,
• submit annual returns, and
• transfer the funds.

Legal Consequences
The bank commits an offence under the Act.
Penalty:

• Fine up to RM20,000.
• Additional fine up to RM1,000 per day for a continuing offence.

Practical Compliance Measures
Banks should implement:

• Automated dormant account monitoring.
• Annual compliance audits.
• Dedicated unclaimed monies units.
• Internal reporting to senior management.

Customer’s Right to Search for Unclaimed Moneys (Section 10B)
A person may:

1. Make inquiries with the Registrar.
2. Pay the prescribed fee.
3. Verify whether any unclaimed money belongs to him.

Scenario
Mr. Raj discovers that a savings account he opened twenty years ago has disappeared from his records.
He applies to the Registrar and discovers that RM8,000 had previously been transferred as unclaimed money.
The Registrar verifies ownership and authorises payment.


Practical Significance
Section 10B protects customers by ensuring that ownership rights survive even after funds have been transferred to the government.


Transfer to Consolidated Trust Account
Once received by the Registrar, the money is credited into the:
Consolidated Trust Account
The government merely holds the money as custodian until the rightful owner claims it.


Fifteen-Year Rule (Section 11(2))
If the money remains unclaimed for fifteen years after being credited to the Consolidated Trust Account:

• The money is transferred to the Consolidated Revenue Account.

However:

• The owner’s right to claim is not extinguished.

The claimant may still recover an equivalent amount upon proving ownership.


Scenario
In 2005, RM20,000 was transferred into the Consolidated Trust Account.
By 2020, fifteen years had elapsed.
The money was transferred to the Consolidated Revenue Account.
In 2025, the rightful owner appeared with proof of ownership.
The Minister may direct payment of an equivalent amount from the Consolidated Revenue Account.


Critical Analysis
This provision balances:
Public Interest

• Prevents indefinite accumulation of dormant funds.
• Allows efficient government financial management.

Private Interest

• Preserves ownership rights indefinitely.

The provision therefore reflects a fair compromise between state administration and private property rights.


No Interest Payable
The Act expressly provides that:

• No interest is payable on money held in the Consolidated Trust Account.
• No interest is payable on money held in the Consolidated Revenue Account.

Critical Analysis
Advantages:

• Simplifies administration.
• Prevents uncertainty in calculating accumulated interest.

Disadvantages:

• Owners lose the opportunity cost of money.
• Inflation may significantly reduce real value.

A reform proposal could allow modest statutory interest for long-held claims.


Competing Claims (Section 13(2))
Scenario
A dormant account containing RM50,000 is mistakenly paid to Person A after he provides supporting documents.
Subsequently, Person B proves that he is the true owner.


Legal Position
Under Section 13(2):

• Person B cannot claim payment from the Registrar.
• Person B must sue Person A directly.

Practical Solution
The Registrar should:

• Conduct rigorous identity verification.
• Require documentary evidence.
• Implement biometric and digital verification systems.

Critical Analysis
Advantages:

• Provides certainty and finality to government payments.
• Protects the Registrar from multiple liabilities.

Disadvantages:

• Places litigation burden on the true owner.
• Recovery may be difficult if the recipient is insolvent.

Stronger verification procedures are therefore essential.


Case Example (Banking Context)
Although Malaysian courts have relatively few reported cases directly interpreting Section 8 of the Unclaimed Moneys Act 1965 in the banking context, a common practical example involves:
Dormant Savings Accounts
A customer opens a savings account, ceases all transactions for more than seven years, and subsequently loses contact with the bank. The bank classifies the account as unclaimed money, records it in the register, and transfers the funds to the Registrar. Years later, the customer successfully proves ownership and recovers the funds through the statutory claim process.
This reflects the practical operation of Sections 8, 10, 10B, 11, and 13 of the Act.


Conclusion
The Unclaimed Moneys Act 1965 establishes a comprehensive statutory framework for dealing with dormant and unclaimed funds held by banks. Section 8 identifies three categories of unclaimed money: (a) money payable but unpaid for one year, (b) dormant account balances for seven years, and (c) dormant trade account balances for two years. Banks are required to register, report, and transfer such funds to the Registrar, failing which they may face statutory penalties. The Act simultaneously protects the public interest by ensuring proper administration of dormant funds and safeguards private ownership rights by allowing rightful owners to reclaim their money even after transfer to government accounts. From a banking law perspective, strict compliance, effective customer notification systems, and robust verification procedures are essential to minimise disputes and regulatory risks.

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Malaysian Banking Law – Customers’ Rights and Duties in the Banker-Customer Relationship
Case Scenario
Mr. Lim maintains a current account with a bank. While issuing several cheques, he carelessly leaves large blank spaces before and after the amount written on the cheques. An employee subsequently alters one of the cheques from RM1,000 to RM11,000 and successfully cashes it.
A few months later, Mr. Lim discovers that several cheques bearing forged signatures have also been paid from his account. Although he notices the irregularities in his bank statements, he delays informing the bank for several months. During that period, additional forged cheques are honoured by the bank.
Mr. Lim demands reimbursement from the bank for all losses arising from the altered and forged cheques. The bank argues that Mr. Lim breached his duties as a customer by failing to exercise reasonable care when drawing the cheques and by not promptly reporting the forged signatures once he became aware of them.
The dispute concerns both the rights and duties arising under the banker-customer relationship.


Customers’ Rights
The rights of a bank customer generally consist of three principal rights:
1. Right to Repayment
A fundamental right of every customer is the right to repayment of money deposited with the bank. The banker-customer relationship is primarily one of debtor and creditor, whereby the bank becomes indebted to the customer for the amount deposited.
An implied term of the banking contract is that the bank undertakes to repay the customer an amount equivalent to the sum deposited. In the case of a current account, repayment is generally payable upon demand by the customer.
Accordingly, a customer is entitled to recover funds standing to the credit of his account and may seek legal remedies if the bank wrongfully refuses repayment.


2. Right to Draw Cheques
A customer who has sufficient funds in a current account possesses an implied contractual right to issue cheques against the available credit balance.
Correspondingly, the bank owes a duty to honour properly drawn cheques provided that:

• sufficient funds are available;
• the cheque is valid and regular;
• there are no legal restrictions preventing payment; and
• the account remains operational.

A customer cannot require the bank to honour cheques exceeding the available balance unless an overdraft facility or other financing arrangement has been agreed upon.
Where a bank wrongfully dishonours a cheque despite sufficient funds being available, it may be liable for breach of contract and any resulting loss suffered by the customer.


3. Right to Interest
Customers holding savings or deposit accounts are generally entitled to receive interest or returns in accordance with the contractual terms governing the account.
The applicable rate may fluctuate according to market conditions and bank policies. By contrast, customers maintaining ordinary current accounts are generally not entitled to interest unless specifically provided by contract.
Therefore, the customer’s entitlement to interest depends upon the nature of the account and the agreed contractual terms.


Customers’ Duties
While customers enjoy important contractual rights, they also owe certain duties to their bankers. These duties are intended to protect the integrity of banking transactions and minimise the risk of fraud.
The two principal duties are:
1. Duty to Exercise Reasonable Care When Drawing Cheques
A customer has an implied duty to exercise reasonable care when preparing and signing cheques so as not to mislead the bank or facilitate fraud or forgery.
In Joachimson v Swiss Bank Corporation, it was recognised that a customer must take reasonable care in executing written instructions to prevent the bank from being misled or exposed to forgery.
Similarly, in London Joint Stock Bank v Macmillan and Arthur, Lord Haldane stated that customers are expected to draw cheques in a manner that is clear, complete, and free from ambiguity so that the bank can properly discharge its obligations.
This duty requires customers to:

• write amounts clearly;
• avoid leaving blank spaces that may facilitate alteration;
• complete all relevant particulars before signing;
• safeguard cheque books; and
• exercise reasonable caution when issuing payment instructions.

Failure to do so may reduce or eliminate the customer’s ability to recover losses resulting from subsequent alterations or fraud.


2. Duty to Notify the Bank of Forgery
A customer also owes a duty to notify the bank promptly if he discovers that cheques purportedly signed by him have been forged.
In Greenwood v Martins Bank, the court held that once a customer becomes aware of forged cheques, he must inform the bank without undue delay.
The rationale is straightforward. Prompt notification allows the bank to:

• investigate suspicious transactions;
• prevent further fraudulent withdrawals;
• freeze suspicious activities; and
• minimise losses suffered by both parties.

If the customer remains silent after discovering a forgery and the bank continues to honour forged cheques, the customer may be prevented from recovering losses that could have been avoided through timely notification.


Critical Analysis
The banker-customer relationship operates on mutual obligations rather than one-sided rights.
Customers are entitled to repayment, payment of valid cheques, and interest where contractually agreed. These rights are essential for maintaining confidence in the banking system and facilitating commercial transactions.
However, customers are also expected to act responsibly. Modern banking transactions involve substantial reliance on customer instructions. If customers fail to exercise reasonable care in preparing cheques or neglect to report known forgeries, banks may be exposed to avoidable losses.
The law therefore seeks to strike a balance between:

• protecting customers from wrongful conduct by banks; and
• ensuring customers do not contribute to losses through their own negligence.

The duties imposed on customers reflect principles of fairness and risk allocation within the banking system.


Solution to the Case Scenario
Liability for the Altered Cheque
Mr. Lim left substantial blank spaces on the cheque, making alteration relatively easy.
This conduct may amount to a breach of his duty to exercise reasonable care when drawing cheques. The bank could argue that the alteration was facilitated by Mr. Lim’s negligence.
Consequently, Mr. Lim may be unable to recover the full amount of the loss attributable to the alteration.


Liability for the Forged Cheques
Once Mr. Lim discovered the forged signatures, he was under a duty to notify the bank promptly.
His failure to do so for several months enabled additional forged cheques to be processed.
Applying the principle established in Greenwood v Martins Bank, Mr. Lim may be prevented from recovering losses arising from forged cheques paid after he became aware of the forgery and failed to notify the bank.
However, he may still recover losses relating to forged cheques paid before he had knowledge of the fraud.


Customer’s Remaining Rights
Despite breaching certain duties, Mr. Lim retains his contractual rights regarding:

• repayment of money standing to his credit;
• proper execution of legitimate payment instructions; and
• payment of interest where contractually provided.

The existence of customer duties does not extinguish these rights but may affect liability for particular losses.


Practical Application
For Customers
Customers should:

• write cheques clearly and completely;
• avoid leaving blank spaces on cheques;
• protect cheque books and banking credentials;
• review bank statements regularly;
• immediately report suspected forgeries or unauthorised transactions; and
• maintain proper records of banking transactions.

For Banks
Banks should:

• verify signatures and payment instructions carefully;
• implement fraud detection mechanisms;
• investigate suspicious transactions promptly;
• educate customers regarding cheque security; and
• maintain effective internal controls to minimise fraud risks.

Conclusion
Under Malaysian banking law, the banker-customer relationship imposes both rights and duties upon customers. Customers possess important rights, including the right to repayment of deposited funds, the right to draw cheques against available balances, and the right to receive interest where contractually agreed. At the same time, customers must exercise reasonable care when drawing cheques and must promptly notify the bank upon discovering forged signatures or fraudulent transactions. These duties complement the customer’s rights and ensure that both parties contribute to the security and reliability of the banking system. Where a customer’s negligence facilitates fraud or increases losses, the law may restrict the customer’s ability to recover those losses from the bank.

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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:

• 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.

In Malaysia, banking secrecy is principally governed by:

• 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.

These statutory provisions are supplemented by contractual obligations, equitable principles and common law duties of care.


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)

may ordinarily inquire specifically into the affairs or account of a particular customer.
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.

Thus, confidentiality cannot be used to obstruct lawful regulatory investigations.


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.

These persons must not disclose any information or document relating to a customer’s affairs or account.
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.

5. Garnishee Orders
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.

11. Inland Revenue Board
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.

15. Due Diligence Exercises
Disclosure relating to:

• Mergers;
• Acquisitions;
• Capital raising; and
• Sale of business assets.

16. Outsourcing Arrangements
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.

Disclosure necessary to complete a customer-authorised transaction is lawful.


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.

The two are separate issues.


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

may be restated without breaching confidentiality.


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.

The plaintiff sued the bank for:

1. Breach of contract; and
2. 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.

A bank is not immune from negligence simply because a contractual relationship exists.
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.

As a banking professional, the bank had a duty to advise the customer regarding the proper procedure.


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.

Section 133 FSA 2013

• Creates statutory secrecy obligations.
• Covers all customer information.
• Breach attracts criminal sanctions.

Section 134 FSA 2013

• Creates exceptions to secrecy.
• Contains 18 permitted disclosures.
• Allows court protection of confidentiality.

Tan Eng Seong

• Confidentiality is contractual.
• Disclosure to relatives may be a breach.

Wong Yeng Mun

• Confidentiality belongs to the customer.
• Negligent disclosure creates liability.

Tan Lay Soon

• Confidentiality may be waived.
• Consent may be implied.

Zauyah Wan Chik

• No automatic extra-territorial application.

Wako Merchant Bank

• Illegally obtained information may still be admissible.

Hj Salleh Hj Janan

• Public facts are not confidential.

Bank Utama v Insan Budi

• 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.

​

Malaysian Banking Law – Banking Secrecy, Confidentiality, Personal Data Protection and Banker’s Duties
Introduction
Banking secrecy is one of the most fundamental obligations imposed upon banks and financial institutions. It protects confidential information entrusted by customers to banks and forms a cornerstone of the banker-customer relationship.
The duty serves several important purposes:

• Protecting customer privacy;
• Preserving confidence in the banking system;
• Promoting trust in financial institutions;
• Protecting sensitive commercial information; and
• Ensuring disclosure only where authorised by law.

In Malaysia, banking secrecy is governed primarily by:

• Section 132 Financial Services Act 2013 (FSA 2013) – Restriction on inquiry into customer affairs;
• Section 133 FSA 2013 – Statutory duty of secrecy;
• Section 134 FSA 2013 – Permitted disclosures and exceptions; and
• Personal Data Protection Act 2010 (PDPA) – Protection of personal data handled by commercial organisations, including banks.

These statutory duties are supplemented by:

• Contract law;
• Tort law;
• Equity; and
• Regulatory obligations.

As a result, a bank may incur:

• Criminal liability;
• Civil liability;
• Regulatory sanctions; and
• Equitable remedies

for improper disclosure or misuse of customer information.


PART I – STATUTORY FRAMEWORK UNDER THE FSA 2013
Section 132 FSA 2013 – Restriction on Inquiry into Customer Affairs
General Rule
Section 132 protects customers from arbitrary governmental interference.
Neither:

• The Minister of Finance; nor
• Bank Negara Malaysia (BNM)

may ordinarily direct an inquiry into the affairs or account of a particular customer.
The purpose is to safeguard banking privacy and prevent unjustified investigations.


Exception
BNM may inquire into customer affairs where necessary to exercise its statutory functions under:

• The Financial Services Act 2013;
• The Islamic Financial Services Act 2013; or
• The Central Bank of Malaysia Act 2009.

Thus, banking secrecy cannot be used to obstruct legitimate regulatory investigations.


Case Scenario
Facts
A customer receives several unexplained overseas transfers amounting to RM20 million.
BNM suspects money laundering and requests the customer’s account records from the bank.
The customer argues that disclosure breaches banking secrecy.
Solution
The argument fails.
Section 132(2) expressly permits BNM to obtain such information when exercising regulatory powers.
Critical Analysis
The provision balances:

• Customer privacy; and
• Financial system integrity.

Without such powers, regulators would be unable to investigate fraud, money laundering and terrorism financing.


Section 133 FSA 2013 – Statutory Duty of Secrecy
General Rule
Section 133 imposes a strict statutory duty of confidentiality upon:

• Banks;
• Financial institutions;
• Directors;
• Officers;
• Employees;
• Agents; and
• Former employees and agents.

No such person may disclose information relating to a customer’s affairs or account.
The obligation continues indefinitely, including after employment ends.


Scope of Protection
The duty covers:

• Savings accounts;
• Current accounts;
• Fixed deposits;
• Financing facilities;
• Investment accounts;
• Credit information;
• Transaction histories;
• Customer identities;
• Financial standing; and
• Any information acquired through the banker-customer relationship.

The protection extends beyond account balances and includes all information concerning the customer’s affairs.


Public Information Exception
The secrecy obligation does not apply where information:

• Has already become lawfully available to the public;
• Is disclosed to BNM for statutory purposes; or
• Is disclosed in anonymous or aggregated form.

Criminal Liability
A person who breaches section 133 commits an offence punishable by:

• Imprisonment up to 5 years;
• Fine up to RM10 million; or
• Both.

Further Disclosure Prohibited
Section 133(3) prohibits a person who knowingly receives unlawfully disclosed information from making any further disclosure.
Thus liability may extend beyond the original wrongdoer.


Section 134 FSA 2013 – Permitted Disclosures
Although secrecy is the general rule, section 134 recognises that confidentiality cannot be absolute.
A bank may disclose information:

• Under Schedule 11; 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, administration and faraid purposes.
3. Bankruptcy and Winding-Up
Disclosure involving bankrupt individuals and insolvent companies.
4. Litigation Involving the Bank
Disclosure in civil or criminal proceedings involving:

• Customers;
• Guarantors;
• Sureties; and
• Competing claimants.

5. Garnishee Orders
Disclosure necessary to comply with garnishee proceedings.
6. Court Orders
Disclosure pursuant to orders of courts not lower than the Sessions Court.
7. Enforcement Agencies
Disclosure for investigations conducted under written law.
8. PIDM
Disclosure for performance of statutory functions by PIDM.
9–10. Capital Market Authorities
Disclosure involving:

• Securities Commission;
• Stock exchanges;
• Clearing houses; and
• Trade repositories.

11. Inland Revenue Board
Disclosure for tax administration and international information exchange.
12. Credit Reporting Agencies
Disclosure to registered credit reporting agencies.
13. Supervisory Authorities
Disclosure to local and foreign regulators performing supervisory functions.
14. Centralised Group Functions
Disclosure for:

• Audit;
• Risk management;
• Compliance;
• Finance; and
• Information technology.

15. Due Diligence Exercises
Disclosure relating to:

• Mergers;
• Acquisitions;
• Capital raising; and
• Disposal of business assets.

16. Outsourcing Arrangements
Disclosure to outsourced service providers.
17. Consultants and Adjusters
Disclosure to professional advisers engaged by the bank.
18. Suspicion of Criminal Activity
Disclosure where the bank reasonably suspects that an offence has been, is being or may be committed.


Confidentiality During Court Proceedings
Even when disclosure is permitted, the court may:

• Conduct proceedings in camera;
• Restrict access to documents;
• Prohibit publication; and
• Make confidentiality orders.

The objective is to minimise unnecessary disclosure.


PART II – CONFIDENTIALITY UNDER CONTRACT AND EQUITY
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.
Significance

• Confidentiality is an implied contractual term.
• Relatives remain third parties.
• Nominal damages may be awarded.

Wong Yeng Mun v CIMB Bank Berhad
Principle
The bank negligently sent account statements to the wrong address.
The statements were opened by the customer’s wife.
Significance

• Confidentiality belongs to the customer.
• Negligent disclosure may create liability.
• Banks must maintain proper safeguards.

Tan Lay Soon v Kam Mah Theatre Sdn Bhd
Principle
Confidentiality belongs to the customer.
Consent to disclosure may be:

• Express; or
• Implied.

Disclosure necessary to implement a customer-authorised transaction is lawful.


PART III – EXTRA-TERRITORIAL DISCLOSURE
Attorney General of Hong Kong v Zauyah Wan Chik
Principle
Banking secrecy legislation does not automatically operate outside Malaysia.
Disclosure compelled by foreign court proceedings may not create criminal liability in Malaysia.
Significance
The administration of justice may justify disclosure.


PART IV – ILLEGALLY OBTAINED INFORMATION
Wako Merchant Bank v Lim Lean Heng
Principle
Information obtained in breach of banking secrecy provisions remains admissible if relevant.
Significance
The law distinguishes between:

• Criminal liability for disclosure; and
• Admissibility of evidence.

The evidence remains admissible despite unlawful disclosure.


PART V – PUBLIC INFORMATION
Hj Salleh Hj Janan v Financial Information Services Sdn Bhd
Principle
Publicly available court records are not confidential.
Information published in:

• Court records;
• Newspapers; or
• The Gazette

may be restated without liability.
Significance
Banking secrecy protects confidential information, not information already in the public domain.


PART VI – BANKER’S PROFESSIONAL DUTY
Bank Utama (M) Bhd v Insan Budi Sdn Bhd
Facts
The plaintiff obtained an international trade facility to finance the importation and sale of raw sugar.
The plaintiff instructed the bank to issue a confirmed irrevocable transferable SWIFT Telegraphic Transfer.
The bank used the wrong transmission procedure and attempted to send the SWIFT instruction by facsimile.
As a result:

• The overseas bank could not process the transaction;
• The supplier terminated the contract;
• The downstream sale failed; and
• The plaintiff suffered losses.

The plaintiff sued for:

• Breach of contract; and
• Negligence.

Held
The Court of Appeal held the bank liable.
Principle 1 – Concurrent Liability
A professional adviser may be liable simultaneously:

• In contract; and
• In negligence.

Principle 2 – Duty to Advise
The bank possessed specialist knowledge regarding SWIFT procedures.
The customer could not reasonably be expected to understand technical banking processes.
The bank therefore had a duty to advise the customer that SWIFT transfers cannot be transmitted by facsimile.
Significance
Modern banks are not merely executors of instructions.
They are professional service providers expected to exercise reasonable care and expertise.


PART VII – BANKING SECRECY AND THE PERSONAL DATA PROTECTION ACT 2010 (PDPA)
Relationship Between Banking Secrecy and Personal Data Protection
Banking secrecy and personal data protection operate alongside one another.
While the FSA 2013 protects confidential banking information, the Personal Data Protection Act 2010 (PDPA) protects personal data handled by commercial organisations, including banks.
The PDPA makes it unlawful for commercial organisations to:

• Sell personal information;
• Misuse personal data; or
• Permit unauthorised third parties to access such information.

The legislation is particularly important in relation to:

• Retail banking customers;
• Consumer financing;
• Guarantors;
• Corporate borrowers; and
• Credit facilities.

Criminal Penalties under the PDPA
Depending on the nature of the offence, penalties may include:
Section 141(2)

• Fine up to RM100,000;
• Imprisonment up to 1 year; or
• Both.

Section 130(7)

• Fine up to RM500,000;
• Imprisonment up to 3 years; or
• Both.

Non-compliance with the data protection principles may constitute a criminal offence.


The Seven Personal Data Protection Principles
Banks must comply with seven statutory principles.


1. General Principle (Section 6)
Personal data must:

• Be processed lawfully;
• Be necessary for the intended purpose; and
• Generally be processed with the customer’s consent.

The information collected must also be adequate and not excessive.


2. Notice and Choice Principle (Section 7)
Customers must be informed:

• Why data is collected;
• How it will be used; and
• Their rights regarding the data.

Customers should be given choices regarding certain uses of their personal information.


3. Disclosure Principle (Section 8)
Personal data must not be disclosed without consent unless authorised by law.
This principle closely complements banking secrecy obligations under section 133 FSA 2013.


4. Security Principle (Section 9)
Banks must implement appropriate security measures to protect data.
Examples include:

• Password protection;
• Encryption;
• Secure databases;
• Restricted access systems; and
• Workplace security controls.

5. Retention Principle (Section 10)
Personal data must not be retained longer than necessary.
Once the purpose has been fulfilled, unnecessary data should be destroyed or anonymised.


6. Data Integrity Principle (Section 11)
Personal data must remain:

• Accurate;
• Complete;
• Current; and
• Up to date.

7. Access Principle (Section 12)
Customers must generally be allowed to:

• Access their personal data; and
• Request corrections where information is inaccurate.

Alliance Bank v AmBank Dispute (2018)
Facts
Alliance Bank commenced legal proceedings against AmBank alleging misappropriation of sensitive information.
The dispute involved former Alliance Bank employees who had joined AmBank.
Alliance Bank alleged that electronic records showed confidential internal information being transferred to a former employee after his departure.
The information allegedly reached senior personnel within the competing bank.
The dispute was subsequently resolved amicably.


Significance
The case illustrates that confidentiality obligations extend beyond customer information.
Banks must also protect:

• Internal business information;
• Commercial strategies;
• Trade secrets; and
• Sensitive operational data.

Chia Sun Huat v United Overseas Bank (Malaysia) Bhd
Facts
A purchaser agreed to buy property from a vendor whose property was charged to UOB.
To complete the purchase, the purchaser requested a redemption statement from UOB.
The vendor could not be contacted.
Although a purported letter of authority existed, the bank could not verify its authenticity.
UOB refused to release the redemption statement.
The purchaser sued.


Held
The High Court held that UOB was not liable.
The bank was bound by its duty of secrecy and could not release confidential information without proper authority.


Legal Principle
A bank is entitled to refuse disclosure where:

• Authority cannot be verified; and
• Disclosure would reveal confidential customer information.

The duty of secrecy prevails unless a recognised exception applies.


Comprehensive Case Scenario
Facts
A purchaser requests a redemption statement from a bank concerning a property owner who cannot be contacted.
The purchaser presents an unsigned authority letter and insists that the transaction cannot proceed without disclosure.
The bank refuses.
The purchaser alleges obstruction and negligence.


Solution
Applying Chia Sun Huat v UOB:
The bank is entitled to refuse disclosure.
The redemption statement contains confidential customer information.
Without verified authority or a statutory exception under section 134 FSA 2013, disclosure would breach banking secrecy.


Critical Analysis
The decision demonstrates the strict nature of banking confidentiality.
Commercial convenience cannot override a bank’s legal obligations.
Banks must verify authority before releasing customer information, even where refusal may delay a transaction.


Key Examination Principles
Section 132 FSA 2013

• Restricts arbitrary inquiries.
• Allows BNM investigations.

Section 133 FSA 2013

• Creates the statutory duty of secrecy.
• Covers all customer information.
• Continues after employment ends.
• Breach attracts criminal sanctions.

Section 134 FSA 2013

• Creates exceptions to secrecy.
• Contains 18 permitted disclosures.
• Allows disclosure with BNM approval.

PDPA 2010

• Protects personal data.
• Imposes seven statutory principles.
• Creates additional criminal liability for misuse of personal information.

Important Case Principles
Tan Eng Seong

• Confidentiality is an implied contractual duty.

Wong Yeng Mun

• Negligent disclosure creates liability.

Tan Lay Soon

• Confidentiality belongs to the customer.
• Consent may be implied.

Zauyah Wan Chik

• No automatic extra-territorial effect.

Wako Merchant Bank

• Illegally obtained evidence remains admissible.

Hj Salleh Hj Janan

• Public facts are not confidential.

Bank Utama

• Banks may be liable concurrently in contract and negligence.
• Professional duty may include a duty to advise.

Chia Sun Huat

• Banks may refuse disclosure where authority is uncertain.
• Confidentiality overrides commercial convenience.

Conclusion
Malaysian banking secrecy law is built upon a comprehensive framework comprising sections 132–134 FSA 2013, the Personal Data Protection Act 2010, contractual obligations, equitable principles and tortious duties. The law protects customer information not only from unauthorised disclosure but also from misuse, mishandling and improper processing. The various cases demonstrate that confidentiality belongs to the customer, extends beyond account balances to all customer affairs, survives termination of employment, and remains enforceable through criminal, civil and equitable remedies. At the same time, carefully defined statutory exceptions ensure that secrecy does not obstruct justice, regulatory supervision, legitimate commercial transactions or the public interest.

​

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:

• 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.

In Malaysia, banking secrecy is governed primarily by:

• 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.

The general rule is confidentiality. Disclosure is the exception.


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)

may ordinarily inquire specifically into the affairs or account of a particular customer.
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.

Thus, confidentiality cannot be used to obstruct legitimate regulatory investigations.


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.

These persons must not disclose any information relating to a customer’s affairs or account.
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 recipient of such information must not further disclose it.
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.

BNM may impose conditions upon disclosure.
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.

Second Column
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.

Second Column
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,

whether in Malaysia or elsewhere.
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.

Second Column
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.

Second Column
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.

Second Column
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.

The objective of both statutes is the same:
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.

​

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:

• 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.

The provision aims to ensure that information maintained by financial institutions remains reliable and free from fraud, manipulation, or misrepresentation.


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.

This provision targets conduct designed to obstruct regulators, auditors, investigators, or law enforcement authorities from obtaining accurate information.


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.

The severe penalties demonstrate Parliament’s intention to deter fraud and manipulation within the banking industry.


Importance of Accurate Banking Records
Accurate record-keeping is fundamental to the banking system because:

1. Regulators depend on accurate records for supervision and enforcement.
2. Auditors rely on records to verify the financial position of institutions.
3. Customers expect their accounts and transactions to be correctly recorded.
4. Investors and stakeholders require truthful information regarding the institution’s financial health.
5. Courts frequently rely on banking records as evidence in legal proceedings.

To preserve public confidence in the financial system, banking records must remain complete, truthful, and untampered with.


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.

Even where the intention is to assist a customer or achieve business targets, such conduct may constitute a criminal offence under section 248.


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.

The provision may also apply to:

• Customers;
• Borrowers;
• Consultants;
• Agents;
• Third parties; and
• External fraudsters.

Accordingly, anyone who submits forged or altered documents to a financial institution may be prosecuted under this provision.
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:

1. An offence under section 105 of the Banking and Financial Institutions Act 1989 (BAFIA), the predecessor provision to section 248 FSA 2013; and
2. 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.

​

Malaysian Banking Law – Code of Conduct in the Wholesale Financial Market and Prohibited Conduct
Introduction
To strengthen consumer protection, market integrity, and confidence in the financial system, the Financial Services Act 2013 (FSA 2013) prohibits certain forms of improper business conduct. Section 124 of the FSA 2013 provides that financial institutions must not engage in prohibited business conduct as prescribed under Schedule 7 of the Act.
In furtherance of these objectives, Bank Negara Malaysia (BNM) issued the Code of Conduct for Malaysia Wholesale Financial Markets, which governs the conduct of participants operating in Malaysia’s wholesale financial markets. The Code applies to a wide range of market participants, including banks, investment banks, Islamic banks, development financial institutions, insurers, takaful operators, money brokers, operators of electronic trading or broking platforms, corporations, and investment institutions.
Part C of the Code highlights several serious forms of misconduct that are strictly prohibited under both the Financial Services Act 2013 and the Islamic Financial Services Act 2013 (IFSA 2013).


Definition of Wholesale Financial Market
A Wholesale Financial Market refers to a financial market where large-scale financial transactions are conducted between institutional participants rather than retail customers or members of the general public.
The market typically involves transactions among:

• Banks;
• Investment banks;
• Islamic banks;
• Development financial institutions;
• Insurance companies;
• Takaful operators;
• Pension funds;
• Asset management companies;
• Corporations;
• Government agencies; and
• Other institutional investors.

Transactions in the wholesale financial market generally involve substantial sums of money and include dealings in:

• Foreign exchange (FX);
• Money market instruments;
• Government securities;
• Corporate bonds;
• Sukuk;
• Interest rate products;
• Islamic financial instruments;
• Derivatives; and
• Other capital market products.

Unlike retail banking, where services are provided directly to individual customers, wholesale financial markets facilitate the movement of large amounts of funds between institutions and play a crucial role in maintaining liquidity, price discovery, and overall financial stability.
Because these markets significantly influence the economy and the financial system, participants are expected to adhere to the highest standards of professionalism, integrity, transparency, and ethical conduct.


Case Scenario
ABC Bank Berhad is actively involved in Malaysia’s wholesale financial market. A senior treasury dealer employed by the bank becomes aware that a large institutional client intends to purchase a substantial amount of government securities the following day.
Before the transaction takes place, the dealer secretly purchases similar securities for his personal account, anticipating that prices will rise once the institutional order is executed.
At the same time, the dealer circulates false information among market participants, claiming that the government is planning to issue a large volume of new securities, knowing that this information is untrue. The false rumour causes temporary market uncertainty and affects trading decisions.
In addition, the dealer executes several artificial transactions designed to create the appearance of active market demand for certain securities, thereby misleading other participants regarding the true market conditions.
Subsequently, Bank Negara Malaysia discovers the dealer’s activities during a market surveillance review.


Legal Principles
1. Code of Conduct for Malaysia Wholesale Financial Markets
The Code of Conduct establishes standards of professionalism, integrity, transparency, and ethical behaviour expected from all participants in the wholesale financial market.
The Code aims to ensure that market participants:

• Act honestly and fairly;
• Maintain market integrity;
• Avoid conflicts of interest;
• Conduct transactions in a transparent manner;
• Protect market confidence;
• Promote fair dealing; and
• Comply with applicable laws and regulatory requirements.

Failure to comply with these standards may expose both the individual and the financial institution to regulatory action.


2. Prohibited Conduct
Part C of the Code identifies three major categories of prohibited conduct under the FSA 2013 and IFSA 2013.
(A) Market Manipulation
Market manipulation occurs when a person deliberately interferes with the normal operation of a financial market to create a false or misleading impression regarding:

• Market activity;
• Supply and demand;
• Trading volume;
• Market prices; or
• The true state of the market.

Examples include:

• Artificial trading activities;
• Wash trades;
• Creating false market demand;
• Manipulating benchmark rates;
• Manipulating prices of financial instruments; or
• Conduct intended to distort market prices.

Such conduct undermines market efficiency and investor confidence.


(B) Misinformation and Rumour
Misinformation and rumour involve the dissemination of false, misleading, inaccurate, or deceptive information that may influence market behaviour.
This may include:

• Spreading false market reports;
• Publishing inaccurate financial information;
• Circulating unverified rumours;
• Making misleading statements regarding financial instruments;
• Disseminating false information concerning financial institutions; or
• Creating market panic through fabricated information.

The prohibition seeks to ensure that market participants make decisions based on accurate and reliable information rather than fabricated or misleading reports.


(C) Insider Dealing
Insider dealing occurs when a person trades or procures trading based on confidential, non-public, price-sensitive information obtained through their position, employment, or relationship.
Such information may relate to:

• Future transactions;
• Corporate actions;
• Government decisions;
• Financial results;
• Market-sensitive developments;
• Merger activities; or
• Significant investment decisions.

The prohibition aims to ensure fairness by preventing individuals from gaining an unfair advantage over other market participants.


Application to the Case Scenario
In the present case, the treasury dealer committed multiple prohibited acts.
First, the dealer used confidential information concerning the institutional client’s planned purchase of government securities to conduct personal trading before the information became public. This constitutes insider dealing because the dealer exploited non-public, price-sensitive information for personal gain.
Second, the dealer intentionally spread false information regarding a purported government securities issuance. This amounts to misinformation and rumour, as the information was knowingly false and capable of influencing market participants’ decisions.
Third, the dealer carried out artificial transactions intended to create a misleading appearance of market demand. Such conduct constitutes market manipulation, as it distorted the true state of the market and misled other participants.
Accordingly, the dealer breached the Code of Conduct and violated the prohibitions contained in the FSA 2013 and IFSA 2013.


Solution to the Case Scenario
ABC Bank Berhad’s treasury dealer engaged in three distinct forms of prohibited conduct within the wholesale financial market.
The dealer committed insider dealing by purchasing securities using confidential information regarding the institutional client’s forthcoming transaction before the information became publicly available.
The dealer committed misinformation and rumour offences by deliberately spreading false information concerning an alleged government securities issuance in order to influence market sentiment.
The dealer also committed market manipulation by carrying out artificial trades designed to create a false impression of demand and market activity.
These actions undermine market integrity, distort price discovery, and create an unfair trading environment for other participants.
Consequently, Bank Negara Malaysia may initiate:

• Criminal proceedings;
• Civil enforcement actions; and/or
• Administrative enforcement measures

against the dealer.
Depending on the circumstances, enforcement action may also be taken against ABC Bank Berhad if deficiencies in governance, supervision, compliance controls, risk management systems, or internal monitoring contributed to the misconduct.


Practical Application
The prohibitions on market manipulation, misinformation, and insider dealing are highly relevant to the daily operations of financial institutions, particularly within:

• Treasury departments;
• Foreign exchange trading desks;
• Money market operations;
• Government securities trading;
• Bond and sukuk trading activities;
• Investment banking divisions;
• Corporate finance departments;
• Islamic capital market operations; and
• Financial market dealing rooms.

To ensure compliance, banks should:

• Establish comprehensive compliance frameworks;
• Maintain effective information barriers (“Chinese Walls”);
• Monitor employee trading activities;
• Conduct regular ethics and compliance training;
• Implement whistleblowing mechanisms;
• Perform transaction surveillance and market monitoring;
• Maintain proper record-keeping systems; and
• Promptly report suspicious activities to regulators where required.

Strong internal controls protect customers, institutions, and the integrity of Malaysia’s financial markets.


Critical Analysis
The prohibition of market manipulation, misinformation, and insider dealing reflects the regulatory objective of maintaining a fair, orderly, transparent, and efficient financial market.
Wholesale financial markets form the backbone of the financial system because they facilitate the movement of large volumes of funds between institutions. Any misconduct within these markets can have significant consequences for financial stability, investor confidence, and economic growth.
Without these prohibitions, individuals possessing confidential information could exploit their positions for personal gain, while false information could distort market prices and influence investment decisions unfairly. Market manipulation can further undermine confidence by creating artificial market conditions that do not reflect genuine supply and demand.
The Code of Conduct complements the statutory provisions of the FSA 2013 and IFSA 2013. While legislation establishes legal obligations and penalties, the Code provides practical guidance on the standards of behaviour expected from market participants.
Nevertheless, enforcement remains challenging due to increasingly sophisticated trading strategies, technological developments, algorithmic trading systems, and cross-border financial transactions. Effective surveillance technology, strong compliance cultures, and active regulatory oversight are therefore essential to detect and prevent misconduct.
The combination of statutory regulation, ethical standards, and supervisory enforcement is necessary to preserve the integrity and stability of Malaysia’s wholesale financial markets.


Conclusion
Section 124 of the Financial Services Act 2013, together with the Code of Conduct for Malaysia Wholesale Financial Markets issued by Bank Negara Malaysia, seeks to ensure that participants in Malaysia’s wholesale financial markets conduct themselves with honesty, integrity, professionalism, and transparency.
A wholesale financial market is a market where large-scale financial transactions are conducted between institutional participants such as banks, financial institutions, corporations, insurers, and investment entities rather than individual retail customers.
Three major forms of prohibited conduct are specifically identified:

1. Market Manipulation;
2. Misinformation and Rumour; and
3. Insider Dealing.

Any person who engages in such conduct may be subject to criminal, civil, or administrative action. These prohibitions are fundamental to maintaining fair and transparent markets, protecting investors and consumers, preserving financial stability, and sustaining public confidence in Malaysia’s financial system.

​

Malaysian Banking Law – Customers’ Rights Against the Bank
Case Scenario
Mr. Ahmad maintains both a current account and a fixed deposit account with a bank. He has RM20,000 standing to the credit of his current account and RM100,000 in a fixed deposit account. Mr. Ahmad issues a cheque for RM15,000 to a supplier, but the bank refuses payment despite sufficient funds being available in his account. He also discovers that the bank has delayed repayment of his deposit upon maturity and has failed to credit interest on his fixed deposit account.
Mr. Ahmad contends that the bank has breached its obligations as a banker and seeks to enforce his rights as a customer.


Customers’ Rights
The rights of a bank customer generally fall into three principal categories:
1. Right to Repayment
One of the most fundamental rights of a customer is the right to repayment of money deposited with the bank. The banker-customer relationship is essentially that of debtor and creditor, where the bank becomes indebted to the customer for the amount deposited.
An implied term of the banking contract is that the bank undertakes to repay the customer an equivalent amount to the money deposited. In the case of a current account, repayment is generally made upon demand by the customer. Once a valid demand is made, the bank is under a contractual obligation to honour it, subject to any legal restrictions or contractual limitations.
Accordingly, a customer is entitled to recover the balance standing to the credit of his account and may take legal action if the bank wrongfully refuses repayment.


2. Right to Draw Cheques
A customer who maintains sufficient funds in a current account possesses an implied contractual right to draw cheques against the credit balance available in that account.
Correspondingly, the bank owes an implied duty to honour cheques that are properly drawn and presented for payment, provided that:

• the customer has sufficient funds in the account;
• the cheque is valid and regular on its face;
• there are no legal impediments preventing payment; and
• the account has not been frozen, closed, or otherwise restricted.

However, a customer cannot insist that the bank honour a cheque exceeding the available credit balance unless an overdraft facility or other financing arrangement has been previously agreed upon between the parties.
Where a bank wrongfully dishonours a customer’s cheque despite sufficient funds being available, the customer may be entitled to damages for breach of contract. In certain circumstances, damages may extend to injury to reputation, particularly where the customer is engaged in business.


3. Right to Interest
Customers who maintain deposit accounts, such as savings accounts or fixed deposit accounts, are generally entitled to receive interest or returns on their deposited funds in accordance with the terms of the account.
The applicable interest rate is not fixed permanently and may vary according to prevailing market conditions, regulatory requirements, and the bank’s policies.
In contrast, customers holding ordinary current accounts are generally not entitled to receive interest on positive balances unless the account specifically provides otherwise.
Therefore, a depositor is entitled to receive interest or returns where such payment forms part of the contractual arrangement governing the deposit account.


Critical Analysis
The three rights collectively ensure fairness and confidence in the banking system.
The right to repayment safeguards customer ownership of deposited funds and reinforces the bank’s contractual obligation as debtor. Without this right, public confidence in banking institutions would be significantly undermined.
The right to draw cheques facilitates commercial transactions and enables customers to use banking services effectively. A wrongful refusal to honour cheques may damage a customer’s business reputation and disrupt commercial dealings.
The right to interest reflects the economic benefit that customers receive for allowing the bank to utilise deposited funds. It also promotes savings and investment activities within the financial system.
Nevertheless, these rights are not absolute. Banks may lawfully refuse payment where there are insufficient funds, legal restrictions, court orders, anti-money laundering concerns, or contractual limitations. Similarly, entitlement to interest depends entirely on the terms governing the particular account.


Solution to the Case Scenario
Mr. Ahmad would likely succeed in his claim against the bank for the following reasons:

1. Wrongful Dishonour of Cheque
   • Since RM20,000 was available in his current account and the cheque amounted to only RM15,000, the bank was under a contractual duty to honour the cheque.
   • The refusal to pay constitutes a breach of the banker-customer contract.
2. Failure to Repay Deposit
   • Upon maturity of the fixed deposit and a valid demand by the customer, the bank is obliged to repay the deposited amount.
   • Any unjustified refusal or delay may amount to a breach of contract.
3. Failure to Credit Interest
   • If the fixed deposit agreement provides for interest payments, the bank must pay such interest according to the agreed terms.
   • Failure to do so entitles the customer to claim the unpaid amount.

Mr. Ahmad may therefore seek repayment of his deposit, recovery of unpaid interest, and damages arising from the wrongful dishonour of the cheque.


Practical Application
In practice, customers should:

• Monitor account balances regularly.
• Ensure sufficient funds are available before issuing cheques.
• Review deposit account terms relating to interest payments.
• Retain account statements and transaction records as evidence.
• Promptly notify the bank of any wrongful refusal to honour payment instructions.

Banks, on the other hand, should:

• Honour valid payment instructions where sufficient funds exist.
• Process repayment requests promptly.
• Accurately calculate and credit interest according to contractual terms.
• Maintain efficient internal controls to avoid wrongful dishonour claims.

Conclusion
Under Malaysian banking law, customers enjoy three essential contractual rights: the right to repayment of deposited funds, the right to draw cheques against available credit balances, and the right to receive interest where contractually provided. These rights arise from the implied terms of the banker-customer relationship and form the foundation of modern banking operations. A bank that unjustifiably refuses repayment, wrongfully dishonours a cheque, or fails to pay agreed interest may be liable for breach of contract and the resulting losses suffered by the customer.

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​Malaysian Banking Law – Whistleblowing in Relation to Market Misconduct


Introduction


The integrity and stability of Malaysia’s financial system depend not only on laws prohibiting misconduct but also on the willingness of individuals to report wrongdoing when it occurs.


Recognising that regulators may not always be able to detect misconduct immediately, the Financial Services Act 2013 (FSA 2013) and the Islamic Financial Services Act 2013 (IFSA 2013) encourage persons with knowledge of illegal activities to come forward and report such conduct to Bank Negara Malaysia (BNM).


This process is known as whistleblowing.


Under section 256 of the Financial Services Act 2013 and section 267 of the Islamic Financial Services Act 2013, market participants may report information to BNM in good faith where they have knowledge or information that a contravention of financial services laws or regulatory requirements has been committed or is about to be committed.


⸻


Definition of Whistleblowing


Whistleblowing refers to the act of reporting suspected wrongdoing, misconduct, illegal activity, or regulatory breaches to the appropriate authority.


In the context of Malaysian banking law, whistleblowing occurs when a person informs Bank Negara Malaysia that:

• A contravention has occurred;

• A contravention is currently occurring; or

• A contravention is likely to occur in the future.

The report must be made:

• Honestly;

• In good faith; and

• Based on information or knowledge reasonably believed to be true.

⸻


The Simplest Meaning of Whistleblowing


Whistleblowing simply means:


“If you know someone in the financial market is breaking the law, report it to Bank Negara Malaysia.”


The purpose is to prevent harm before it becomes widespread.


⸻


Who Can Be a Whistleblower?


A whistleblower may be:

• A bank employee;

• A treasury dealer;

• A compliance officer;

• A risk management officer;

• A trader;

• A broker;

• An auditor;

• A director;

• A customer; or

• Any person who possesses relevant information.

The person does not need to be directly involved in the misconduct.


⸻


What Can Be Reported?


Market participants may report information relating to prohibited conduct under the FSA 2013 and IFSA 2013.


Examples include:


Market Manipulation

• Wash trades;

• Spoofing;

• Benchmark manipulation;

• Price flashing;

• Artificial market activity.

Misinformation and Rumour

• Spreading false market information;

• Circulating misleading statements;

• Disseminating unverified rumours that affect markets.

Insider Dealing

• Trading based on confidential information;

• Sharing insider information with others;

• Profiting from non-public information.

Other Regulatory Breaches

• Fraud;

• False reporting;

• Misconduct by financial institutions;

• Breaches of regulatory requirements.

⸻


Case Scenario


Suspicious Treasury Trading


A treasury executive at ABC Bank Berhad notices unusual trading activity by a senior foreign exchange dealer.


The executive observes that:

• Large buy and sell orders are repeatedly entered into the trading platform.

• The orders are cancelled moments later.

• The dealer appears to benefit from the resulting price movements.

The executive suspects that the dealer is engaging in spoofing, a form of market manipulation.


A few weeks later, the executive also learns that the same dealer has been sharing confidential market-sensitive information with an external acquaintance before major transactions occur.


The executive believes that the dealer may be involved in:

• Market manipulation; and

• Insider dealing.

Concerned about the integrity of the market, the executive reports the information to Bank Negara Malaysia.


BNM commences an investigation.


The investigation subsequently confirms that the dealer had engaged in spoofing and insider dealing.


⸻


Application to the Case Scenario


The treasury executive possessed information suggesting that serious regulatory breaches had occurred.


The suspected conduct involved:


Market Manipulation


The repeated placement and cancellation of orders suggested spoofing.


Insider Dealing


The disclosure of confidential information to external parties suggested insider dealing.


Rather than ignoring the misconduct, the executive reported the information to Bank Negara Malaysia in good faith.


The executive therefore acted as a whistleblower under section 256 FSA 2013 and section 267 IFSA 2013.


⸻


Solution to the Case Scenario


The treasury executive observed conduct that reasonably appeared to constitute market manipulation and insider dealing.


The executive:

• Gathered relevant information;

• Acted honestly;

• Reported the matter in good faith; and

• Alerted Bank Negara Malaysia to potential regulatory breaches.

The subsequent investigation confirmed the misconduct.


Accordingly:


The Executive

• Performed a legitimate whistleblowing function.

• Assisted regulatory enforcement.

• Helped protect market integrity.

The Dealer


May face:

• Criminal prosecution;

• Civil enforcement proceedings;

• Administrative penalties;

• Regulatory sanctions; and

• Internal disciplinary action.

The whistleblowing report enabled BNM to detect and stop unlawful conduct that might otherwise have continued.


⸻


Why Is Whistleblowing Important?


Many financial crimes occur behind closed doors.


Regulators cannot observe every transaction in real time.


Employees and insiders often become aware of misconduct before regulators do.


Whistleblowing therefore helps:

• Detect misconduct early;

• Prevent further harm;

• Protect investors;

• Protect financial institutions;

• Preserve market confidence;

• Support regulatory enforcement; and

• Maintain financial stability.

⸻


Simple Example


Imagine a school examination.


A student discovers that another student has secretly obtained the examination paper before the exam.


The student reports the misconduct to the teacher.


The teacher investigates and discovers cheating.


The reporting student is the whistleblower.


The same principle applies in banking.


A person who becomes aware of market misconduct reports it to Bank Negara Malaysia so that appropriate action can be taken.


⸻


Difference Between a Whistleblower and an Offender


Whistleblower

• Reports wrongdoing.

• Acts honestly.

• Cooperates with regulators.

• Helps prevent misconduct.

• Protects market integrity.

Offender

• Commits misconduct.

• Conceals wrongdoing.

• Misleads market participants.

• Breaches financial laws.

• Undermines market confidence.

⸻


Practical Application


Whistleblowing is particularly important in:

• Treasury departments;

• Foreign exchange trading desks;

• Money market operations;

• Investment banking divisions;

• Compliance departments;

• Risk management units; and

• Financial market dealing rooms.

Employees should report suspicious conduct such as:

• Spoofing;

• Wash trades;

• Insider dealing;

• False market rumours;

• Unusual trading activity; and

• Regulatory breaches.

Early reporting can prevent substantial financial harm.


⸻


Critical Analysis


Whistleblowing plays a crucial role in modern financial regulation because regulators frequently depend upon information from insiders to detect misconduct.


Market manipulation, misinformation, and insider dealing are often deliberately concealed and may be difficult to identify through surveillance systems alone. Employees working within financial institutions are often the first to observe suspicious conduct.


The whistleblowing provisions under the FSA 2013 and IFSA 2013 therefore serve as an important enforcement mechanism by encouraging individuals to report wrongdoing before it causes widespread damage.


However, whistleblowing must be carried out responsibly. Reports should be made honestly and based on genuine concerns rather than personal grievances or malicious motives. The requirement that disclosures be made in good faith helps ensure that the system is not abused.


Overall, whistleblowing strengthens accountability, transparency, and market integrity within Malaysia’s financial system.


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Conclusion


Under section 256 of the Financial Services Act 2013 and section 267 of the Islamic Financial Services Act 2013, market participants may report suspected misconduct to Bank Negara Malaysia in good faith.


Whistleblowing may relate to offences such as:

• Market manipulation;

• Misinformation and rumour;

• Insider dealing; and

• Other regulatory breaches.

A whistleblower is not the wrongdoer. Rather, the whistleblower assists regulators by reporting suspected misconduct so that appropriate enforcement action can be taken.


By encouraging the reporting of unlawful conduct, whistleblowing helps preserve market integrity, protect investors, support regulatory enforcement, and maintain confidence in Malaysia’s financial markets.