Bank Negara

Malaysia & AMLA

Introduction and Definition of Bank Negara
Malaysia (BNM)
 INTRODUCTION OF BNM
- Was established on Jan 26, 1959
- Was set up due to the need for the management of the country’s money and credit
situation.
- BNM also as the controller and supervisor pf the institutions under the banking system.

OBJECTIVE OF BNM
- To issue currency and keep reserves in safeguarding the value of money
- To act as a banker and fin advisor/agent to government
- To promote monetary stability and sound financial structure
- To influence credit situation to the advantage of the country
LEGISLATION OF BNM
Central Bank of Malaysia Act 2009
An Act to provide for the continued existence of the Central Bank of Malaysia and for the
administration, objects, functions and powers of the Bank, for consequential or incidental
matters.

Financial Services Act 2013

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.
Islamic Financial Services Act 2013
An Act to provide for the regulation and supervision of Islamic financial institutions, payment
systems and other relevant entities and the oversight of the Islamic money market and
Islamic foreign exchange market to promote financial stability and compliance with Shariah
and for related, consequential or incidental matters.

Insurance Act 1996

An Act to provide new laws for the licensing and regulation of insurance business, insurance
broking business, adjusting business and financial advisory business and for other related
purposes.
Money Services Business Act 2011
- The Money Services Business Act 2011 (MSBA) came into force on 1 December 2011 and
provides for the licensing, regulation and supervision of the money services business
 industry which comprises of the comprising money changing, remittance and wholesale
currency businesses and other related matters.

- The MSBA was enacted with the aims to modernize and elevate the status of the money-
changing and remittance business into a more dynamic, competitive and professional
industry, while strengthening safeguards against the threats of money laundering, terrorist
financing and other illegal activities.

Currency Act 2020

An Act to provide for the management of currency of Malaysia, regulation of currency
processing business, and currency processing activities, and for related matters.
Function of Bank Negara
Malaysia (BNM)
 Government Banker for
Banker to the bank
Banker and advisor currency issue

Keeper for
Responsible for
International
monetary policies
Reserves
Requirement For
Financial Reporting

 General Requirement

 Specific Requirement
 General Requirement
 Financial Institution shall ensure that it prepares its financial statements in
accordance with the MFRS subject in the specific requirements.
 Ensuring that the financial statements are drawn up so as to give a true and fair view
of the state of affairs and of the results of the business of the financial institution
 Financial institution shall ensure that sound risk management and control processes
around their measurement are in place
 Ensure that sound methodologies for assessing credit risk and measuring the level
of loss allowance are in place.
 Specific Requirement
 For capital requirement on disclosure on non-compliance, the relevant capital
requirement shall refer to:-
i) minimum capital adequacy ratios
ii) supervisory target capital level as set out in Risk-Based Capital Framework
for Insurers and Risk-Based Capital Framework for Takaful Operators

 Financial institution shall not account for the investments in associates and joint
ventures using the equity method described in MFRS 128 (Investments in
Associates and Joint Ventures) in the preparation of its separate financial
statements
 Banking institution must maintain the loss allowance for non-credit-impaired
exposures and regulatory reserves of no less than 1% of total credit exposures.

 A banking institution shall classify a credit facility as credit-impaired–

(a) where the principal or interest is past due for more than 90 days or 3 months;
(b) the outstanding amount has remained in excess of the limit for more than 90
days or 3 months;
(c) as soon as a default occurs where the principal or interest/profit repayments
are scheduled on 3 months or longer.
.
 A banking institution shall classify a credit facility as credit-impaired (with certain
conditions applied) where a credit-impaired facility is rescheduled and restructured
 01
AMLA???
The Anti-Money Laundering, Anti-
Terrorism Financing and Proceeds
of Unlawful Activities Act 2001
 AMLA
The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds
of Unlawful Activities Act 2001

*Provides for the offence of money laundering and terrorism financing

*The measures to be undertaken for the prevention of money laundering and

terrorism financing offence.

*The AMLA provides wide-ranging investigation powers including

powers to freeze and seize properties suspected to be involved in money
laundering.
 Enforced by various agencies depending
on the nature of the crime under their
respective views.
 Bank Negara Malaysia is only empowered
to investigate money laundering cases
relating to laws administered by Bank
Negara Malaysia:

• Financial Services Act 2013

• Islamic Financial Services Act 2013
• Money Services Business Act 2011
• Development Financial Institutions Act
2002 (Act 618)
 Reporting Obligations Under AMLATFA

01. Obligation to report cash 04. Keep records

02. Suspicious transactions Establish AML

05. compliance
program
Identify and verify
03. customers
1. Obligation to report cash
Section 14 requires the banks to submit two types of
reports.

• Cash Transaction Report (CTR).

 Refers to cash transactions exceeding RM50,000 (or
any other amount advised)

 Applicable to single or multiple cash transactions

within the same amount specified in a day. Where
there are deposit and withdrawal transactions, the
amount must be aggregated

Eg : A deposit of RM40,000 and a withdrawal RM20,000

must be aggregated to the amount of RM60,000 and
hence, must be reported if it exceeds the specified
2. Suspicious transaction
Suspicious transaction refers to any transaction (including
attempted or proposed), regardless of the amount that:

 Appears unusual
 Has no clear economic purpose
 Appears illegal
 Does not commensurate with the customer’s profile or
business activities
 Involves proceeds from an unlawful activity; or
 Indicates that the customer is involved in money
laundering or terrorism financing activities.
1. Suspicious transaction
What to report
To facilitate quality analysis of STR submitted, the reporting
institutions are required to provide the following information
in the STR:

 Information on the person conducting the transaction

 Details of the transaction, such as the type of products or
services and the amount involved
 A description of the suspicious transaction or its
circumstances
 Any other relevant information that may assist the
Financial Intelligence and Enforcement Department
Form of STR
 3. Identify and verify customers

Section 16(1) requires the banks to maintain accounts in the name of accounts holders
and prohibits the opening of anonymous accounts or accounts which are in a fictitious,
false or incorrect name.

Sub-section (2) requires the banks to verify the identity of the account holder, the identity
of the person in whose name the transaction is conducted as well as the identity of the
beneficiary of the transaction.
Section 5(1) specifies that customer due diligence measures must be conducted when
there is a suspicion of money laundering or when there is a doubt about the veracity or
adequacy of information on the identity of the account holder which it has obtained
previously

Section 5(2) (b) requires the banks to identify and verify the identity of the beneficial
owner of its customer

This view has been proven correct when it was reported in 2006 that failure to identify and
verify a customer can result in the dismissal of staff by a bank.
 4. Keep records

Section 13(1) requires banks to keep a record of any

transaction involving domestic currency, or any foreign
currency, exceeding the amount specified by BNM

Section 17(1), banks are obliged to maintain all

records for a period of not less than six years from the
date an account has been closed or the transaction has
been completed or terminated.
 5. Establish AML compliance program

The compliance program must:

• Establish procedures to ensure high standards of integrity of its employees.
• Establish on-going employee training programs and instruct employees on their
responsibilities.
• Develop an independent audit function to check and test the effectiveness of the
compliance program (s19(2))
AMLA
PENALTIES
 AMLA Penalties

 Any person who engages in or Fine not exceeding

attempt to engage in the RM5 million
commission of money or
laundering Imprisonment not
exceeding 5 years or
** to help or encourage BOTH
someone to do something
wrong or illegal
AMLA Penalties

Fine not exceeding

Failure to retain records for
RM1 million
minimum 6 years from date
or
account closed or transaction
Imprisonment not
has been completed/ terminated
exceeding 1 year
or
or
Tipping off to any other person
BOTH
of an investigation that is likely
to prejudice the investigation
BANKS
PENALIZED
UNDER AMLA
 1

Financial Services Authority UK fine

•Royal Bank of Scotland GBP 5.6 million
Turkish Bank fined GBP294k 
-did not perform sufficient control and - fail to keep proper
not consistently monitored PEP client
record

*PEP- Political Exposed Person

 Conclusion

1. Money Laundering has major impact on banks

2. Non compliance to AMLA requirement leads to heavy

penalty

3. Banks must establish good monitoring system and

guidelines to meet reporting requirement
THANK YOU