Financial Crime World

Malaysia’s Robust Regulatory Framework for Banking and Financial Services

Malaysia’s regulatory framework governing banking and financial services is robust and dynamic, reflecting the country’s commitment to fostering innovation and ensuring financial stability. The Central Bank of Malaysia (BNM) and the Securities Commission Malaysia (SC) are key regulatory bodies overseeing this sector, each with distinct roles and responsibilities.

Focus on Payment and Fintech Regulations

The Malaysian government recognizes the importance of fintech innovation and technology advancement in driving economic growth. Both conventional and Islamic financial activities related to banking, investment banking, insurance, money changing, remittance, and payment systems are regulated by BNM under the Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013 (IFSA).

  • Fintech ventures engaging in activities such as banking, investment banking, insurance, or payment services must obtain necessary licenses from BNM.
  • The licensing process entails compliance with BNM guidelines, covering aspects like capital requirements, governance standards, and consumer protection measures.

Who Are the Regulators?

  • BNM is the principal regulator overseeing banking, payment systems, and digital currency activities.
  • SC regulates capital market activities and intermediaries.

Key Laws and Activities Covered

The main laws governing banking and financial services in Malaysia are:

  • Financial Services Act 2013
  • Islamic Financial Services Act 2013
  • Capital Markets and Services Act 2007
  • Money Services Business Act 2011
  • Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613)

These laws cover a wide range of activities, including:

  • Banking operations
  • Investment activities
  • Insurance
  • Payment systems
  • Digital currency transactions

Money Services Business Act 2011

The Money Services Business Act 2011 (MSBA) governs the licensing, regulation, and supervision of the money services business industry in Malaysia. This industry encompasses:

  • Money changing
  • Remittance
  • Wholesale currency businesses
  • Related activities

The MSBA aims to modernize and enhance the money- changing and remittance business, making it more competitive and professional while bolstering measures against:

  • Money laundering
  • Terrorist financing
  • Other illicit activities

Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613)

Anti-money laundering and counter-financing of terrorism (AML/CFT) measures are stringent in Malaysia. The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) serves as the primary legislation.

  • AMLA 2001 addresses money laundering, terrorism financing, and related offences.
  • It outlines measures for prevention, investigation powers, and forfeiture of assets involved in these crimes.
  • Reporting institutions, including financial institutions and designated non-financial businesses and professions, are mandated to fulfill obligations to prevent money laundering and terrorism financing.

Malaysia’s Banking and Financial Services Regulations

Malaysia’s banking and financial services regulations prioritize innovation, financial stability, and consumer protection. With a clear regulatory framework, comprehensive licensing requirements, and robust AML/CFT measures, Malaysia offers a conducive environment for fintech growth while ensuring the integrity and security of its financial system.