Generally, there are no license to be obtained from BNM to start leasing or factoring

business. Only SSM. However, in the course of the business, leasing or factoring businesses
are required to adhere to AMLA, AML/CFT Policy Document and FSA.

1. ANTI-MONEY LAUNDERING, ANTI-TERRORISM FINANCING AND

PROCEEDS OF UNLAWFUL ACTIVITIES ACT 2001 (AMLA)

Reporting Obligations

Reporting institutions have a duty to adhere to the reporting obligations imposed on them
under the Act and the guidelines provided by the Central Bank of Malaysia for each
respective sector. General reporting obligations are found under Part IV of the Act, while
detailed and specific reporting obligations for each sector are provided in the sectoral
guidelines and/or regulations issued by the Central Bank of Malaysia for the respective
sectors.

“Reporting Institutions” under Anti-Money Laundering, Anti-Terrorism Financing and

Proceeds of Unlawful Activities Act 2001 (AMLA)

Section 3

“Reporting institution” means any person, including branches and subsidiaries outside
Malaysia of that person, who carries on any activity listed in the First Schedule.

First Schedule Part I

21. Activities relating to building credit business, development finance business, factoring
business or leasing business carried out by companies incorporated pursuant to the
Companies Act 1965 and businesses as defined and registered under the Registration of
Businesses Act 1956 [Act 197].

Reporting institutions under the Act are required by law to undertake and/or establish internal
counter-measures for the purposes of preventing their institutions from being taken advantage
of and used as a conduit for money laundering and terrorism financing activities.

General reporting obligations under Part IV of the Act include, but are not limited to, the
following:

i. Conducting customer due diligence;

ii. Keeping a record of any transaction involving the domestic currency or any foreign
currency exceeding an amount specified by the competent authority, i.e. the Central
Bank of Malaysia (“Competent Authority”);
iii. Promptly reporting to the Competent Authority in the event there is a suspicious
transaction, which are essentially unusual and/or illegal transactions;
iv. Promptly reporting to the Competent Authority in the event there is a cash transaction
exceeding RM25,000.00 (or any other amount advised) involving physical currency

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 and bearer negotiable instruments but excluding bank drafts, cheques, electronic
transfers or fixed deposits;
v. Retain any account, record, business correspondence and document relating to an
account, business relationship transaction or activity with a customer for a period of at
least six years from the date the account is closed or the business relationship,
transaction or activity is completed or terminated; and
vi. Implement an internal policy, programme and procedure, such as an internal “red
flag” criterion to prevent and detect any offence listed under.

[kindly refer to Part IV AMLA 2001]

2. AML/CFT POLICIES BY BANK NEGARA MALAYSIA (For Designated Non-

Financial Businesses and Professions and Non-Bank Financial Institutions “DNFBPs
and NBFIs”)

Bank Negara Malaysia (BNM) is the nation’s designated, competent authority and regulator
under the AMLA. Being a powerful piece of statute, AMLA covers very wide range of
serious offences under its Schedule 2. This Act imposes certain obligations on legal entities,
institutions and persons selected from sectors such as banking, financial institutions,
insurance, capital market, money services businesses, electronic money and designated non-
financial businesses and professions (DNFBPs), commonly known as “Reporting
Institutions” to monitor business activities of the reporting institutions, and impose a statutory
duty on the said institutions to report any “suspicious transactions” to BNM with the aim of
curbing such offences.

On 31 December 2019, BNM issued the Policy Document on Anti-Money Laundering,

Countering Financing of Terrorism and Targeted Financial Sanctions for DNFBPs and Non-
Bank Financial Institutions (NBFIs) (“2020 Policy Document”).

Businesses/professions listed under the 1st Schedule of the AMLA are “DNFBPs and NBFIs”
under the AML/CFT and TFS for DNFBPs and NBFIs Policy Document by BNM.

Clause 3.3 of AML/CFT and TFS for DNFBPs and NBFIs Policy Document by BNM

In relation to the AML/CFT and targeted financial sanctions requirements to combat

terrorism financing, proliferation financing and to suppress other forms of armed conflict
related requirements, this policy document is applicable to reporting institutions carrying on
the following activities as listed in the First Schedule and the relevant subsidiary legislations
of the AMLA:

(l) activities relating to building credit business, development finance business, factoring
business or leasing business carried out by companies incorporated pursuant to the
Companies Act 1965 and businesses as defined and registered under the Registration of
Businesses Act 1956;

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Under the 2020 Policy Document, the obligation of a Reporting Institution is now not merely
limited to monitoring and reporting money-laundering and terrorism financing risks, but is
extended to monitoring and supervising the implementation of the obligations and restrictions
stipulated in the Strategic Trade Act 2010 (“STA”), Strategic Trade (Restricted End-Users
and Prohibited End-Users) Order 2010 and the Directive on Implementation of Targeted
Financial Sanctions Relating to Proliferation Financing issued by the Strategic Trade
Controller, Ministry of International Trade and Industry in April 2018.

Reporting Institutions are now required to conduct client screening processes to cover
persons, legal entities and countries which are restricted under the STA and the relevant
United Nations Security Council Resolutions on Proliferation Financing. Unlike the previous
policy document, Reporting Institutions are also required to obtain the constitution and
corporate documents in order to verify the identities of the directors and shareholders of even
Malaysian government-linked companies and Malaysian state-owned corporations and
companies.

Reporting Institutions must conduct detailed institutional risk assessments (“IRA”) under the
2020 Policy Document of which appropriate steps need to be taken to identify, assess and
understand their money laundering/terrorism financing risks at institutional level, in relation
to their customers, countries or geographical areas, products, services, transactions or
delivery channels, and other relevant risk factors. The IRA is intended to alert Reporting
Institutions of any material and foreseeable anti-money laundering threats and vulnerabilities
which they are exposed to.

The above-mentioned guidelines and the supervisory tools/controls introduced by the BNM,
when effectively implemented, will mitigate the adverse effects of criminal economic
activities, and promote integrity and stability in financial markets

Link to the AML/CFT and TFS for DNFBPs and NBFIs Policy Document by BNM:
https://amlcft.bnm.gov.my/documents/6312201/6321216/PD_DNFBP.pdf/a74ad389-1679-
c40e-14ef-736b467622ea?t=1646233822693

Link to AML/CFT Guide by BNM:

https://amlcft.bnm.gov.my/documents/6312201/6321409/AML-CFT%20Guide%20BI.pdf

3. FINANCIAL SERVICES ACT (Act 758)

The FSA is an act to provide for the regulation and supervision of financial institutions,
payment systems and other relevant entities and the oversight of the money market and
foreign exchange market to promote financial stability and for related, consequential or
incidental matters.

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How will the upcoming Consumer Credit Act affect one of our business lines which is
providing digital factoring businesses?
Enactment of a Consumer Credit Law
Towards promoting a consumer credit ecosystem which garners public trust and confidence,
MOF, BNM and the SC in collaboration with KPDNHEP, KPKT, KUSKOP and SKM are
working towards the consolidation of the credit industry regulatory framework through the
enactment of the Consumer Credit Act (CCA).
The CCA will adopt a federated regulatory approach modelled after the Anti-Money
Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
The CCA aims to:
i. Regulate credit providers and credit service providers;
ii. Encourage proper conduct and responsible lending in the credit industry; and
iii. Promote a fair, efficient, and transparent credit industry.
This new Act will seek to:
i. establish an authorisation framework for non-bank entities carrying on the business of
providing credit and credit services;
ii. provide a comprehensive and consistent framework for credit consumer protection
through the imposition of minimum standards of conduct on credit providers and
credit service providers;
iii. establish an effective surveillance, supervision and enforcement framework to deter
and reprimand unfair, unethical and predatory practices;
iv. ensure effective coordination among RSAs in delivering better consumer outcomes
through the formation of a high-level Council for Consumer Credit Malaysia
(Council); and
v. provide for the collection of data and information on developments in the consumer
credit industry for policy formulation and to establish measures to protect financial
consumers.
The enactment of the CCA aims to reduce harm to credit consumers and promote the orderly
development of the consumer credit landscape by:
i. holding credit providers and credit service providers to consistent and high
professional standards in their dealings with the public;
ii. preventing predatory practices including the offering of consumer credit products
which exploit uninformed and vulnerable credit consumers;
iii. promoting clear, accurate, consistent, and timely disclosures of information to credit
consumers for decision-making;
iv. requiring credit providers to observe responsible lending standards including
performing credit checks and affordability assessments to reduce risks of individuals
falling into financial hardship as a result of excessive and unaffordable debt; and
v. prohibiting practices that are inherently unfair to credit consumers, such as engaging
in deceptive conduct to mislead or adopting abusive practices to intimidate borrowers
when pursuing debt collections.

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The Consumer Credit Act is yet to be enacted. However, based on our review of the
Consultation Paper of the Consumer Credit Act that is soon to be enacted, we wish to
highlight that business entities that are directly providing credit to credit consumers will soon
be regulated.

Authorisation Regime

The CCA’s authorisation regime will be premised on the extent of risk arising from the credit
business. Additionally, it also considers the current industry landscape, potential business
innovations, market readiness and lessons drawn from global best practices.

Entities that are directly providing credit to credit consumers would need to be licensed
under the CCA while those providing services to the credit providers or credit consumers,
would have to be registered. Requirements for such authorisation will take into account the
type of credit activity and business model, and will be proportionate to the extent of risk they
pose to credit consumers.

Entities carrying on the following activities will be licensed and registered by Consumer
Credit Oversight Board (CCOB) under Phase 1 (upon enactment of CCA):

(a) Licensing: Buy Now Pay Later (BNPL), Factoring and Leasing

(b) Registration: ILB and DCA.

As the CCA is not enacted yet, this is the only matter that we are able to review.
Link to CCOB website for further information: https://ccob.my/

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