Payment and Fintech Regulations in Malaysia: A Comprehensive Overview

In the dynamic financial landscape of Malaysia, regulations play a pivotal role in fostering innovation and maintaining stability. Two key regulatory bodies, the Central Bank of Malaysia (BNM) and the Securities Commission Malaysia (SC), are at the forefront of driving compliance in the banking and financial services sector.

Focus on Payment Systems and Fintech

The Malaysian government recognizes the importance of technology in driving economic growth, particularly in banking and financial services. To facilitate technological advancement and prevent illegal activities, the Financial Services Act (FSA) and Islamic Financial Services Act (IFSA) under BNM’s purview regulate conventional and Islamic financial activities, covering banking, investment banking, insurance, money changing, remittance, and payment systems.

For fintech ventures, obtaining licenses from BNM to engage in activities such as digital banking, e-money issuance, and payment system operation is mandatory. Compliance with BNM guidelines, including capital requirements, governance standards, and consumer protection measures, is a prerequisite for securing these licenses.

Regulators Overseeing the Sector: BNM and the SC

Central Bank of Malaysia (BNM)

BNM holds the primary responsibility for overseeing banking, payment systems, and digital currency activities. With a mission to ensure the stability and integrity of Malaysia’s financial system, BNM issues guidelines, circulars, and standards to promote market integrity and ensure compliance with regulatory requirements.

Securities Commission Malaysia (SC)

The SC is tasked with regulating capital market activities and intermediaries. Through its mandate, the SC strives to develop a vibrant and efficient capital market as well as maintain investor protection and market order.

Both regulators work together to ensure financial stability and innovation in Malaysia. They collaborate on issuing joint guidelines and circulars to promote market integrity and compliance.

Key Laws and Regulated Activities

Financial Services Act 2013 and Islamic Financial Services Act 2013

These acts regulate conventional and Islamic financial activities, covering banking, investment banking, insurance, money changing, remittance, and payment systems.

Capital Markets and Services Act 2007

This act regulates activities in Malaysia’s capital market, including securities trading and intermediaries.

Money Services Business Act 2011 and Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001 (AMLA)

These acts cover specific aspects of financial services. We will discuss them in more detail in the following sections.

Money Services Business Act 2011: Bolstering the Money Services Industry

The Money Services Business Act 2011 (MSBA) regulates the money services business industry in Malaysia. Comprising money changing, remittance, wholesale currency businesses, and related activities, the MSBA aims to modernize and professionalize the money-changing and remittance business while implementing stricter measures against money laundering, terrorist financing, and other illicit activities. Under the MSBA, BNM issues regulations, guidelines, circulars, and standards, ensuring the industry remains compliant with regulatory requirements.

Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001: Combating Financial Crimes

AML/CFT regulations in Malaysia are strict, with the AMLA 2001 serving as the primary legislation. This Act addresses money laundering, terrorism financing, and related offenses. Reporting institutions, including financial institutions and designated non-financial businesses and professions, are mandated to fulfill AML/CFT obligations.

BNM, acting as the competent authority under this Act, oversees the enforcement of these obligations through its Financial Intelligence and Enforcement Department. This body ensures compliance and facilitates enforcement efforts according to the AMLA.

Conclusion: A Balanced Approach to Regulation

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

By maintaining a balance between fostering innovation and maintaining stability, Malaysia remains an attractive destination for financial services and fintech investments.