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Financial Legislation Amended to Allow Additional Disclosures of Details of Customer’s Accounts

16 February 2021

Several additions were made to the list of permitted disclosures set out in the Financial Services Act 2013 (‘FSA’), the Islamic Financial Services Act 2013 (‘IFSA’) and the Development and Financial Institutions Act 2002 (‘DFIA’) under the following subsidiary legislation gazetted on 10 February 2021:
 
  1. Financial Services (Amendment of Schedule 11) Order 2021;
  1. Islamic Financial Services (Amendment of Schedule 11) Order 2021; and
  1. Development Financial Institutions (Amendment of Fourth Schedule) Order 2021,
(collectively ‘Amendment Orders’).
 
Schedule 11 to the FSA and IFSA and the Fourth Schedule to the DFIA (collectively ‘Relevant Schedules’) set out disclosures that a financial institution1 is permitted to make in relation to the affairs or account of its customer.
 
The Amendment Orders amend the Relevant Schedules as follows –
 
  1. Paragraph 5 of the Relevant Schedules which permits a financial institution which has been served with a garnishee order to comply with such order and to disclose documents and information to all persons to whom the disclosure is required to be made under the garnishee order has been extended to include compliance with and disclosure under a ‘hiwalah order’, that is the transfer of debt due or accruing from one party (the transferor or muhal ‘alaih) to a judgment debtor to the benefit and order of the judgment creditor2;
  1. Paragraph 6 of the Relevant Schedules which permits a financial institution to comply with a court order made by a court not lower than a Sessions Court and to disclose documents and information to all persons to whom the disclosure is required to be made under the court order has been extended to include compliance with and disclosure under a court order made by a Syariah Subordinate Court, a Syariah High Court or a Syariah Appeal Court;
  1. The relevant paragraph3 of the Relevant Schedules which permits a financial institution to disclose documents and information required by the Inland Revenue Board of Malaysia pursuant to sections 81 (power of Director General to call for information), 132 (information to facilitate the exchange of information with the government of any foreign territory under any double taxation agreement) and 132A (information to facilitate the exchange of information with the government of any foreign territory in relation to the administration, assessment, collection or enforcement of the taxes under written law in Malaysia and any foreign tax of that territory) of the Income Tax Act 1967 to any officer of the Inland Revenue Board of Malaysia authorised to receive the information has been extended to include disclosure under section 132B (information under any arrangement with the government of any foreign territory for mutual administrative assistance in tax matters, including simultaneous tax examinations, automatic exchange of information or tax administrations abroad) of the Income Tax Act 1967;
  1. The persons to whom a financial institution may disclose documents or information under the relevant paragraph4 of the Relevant Schedules when a financial institution has reason to suspect that an offence under any written law has been, is being or may be committed has been amended; disclosure and documents may now be made to an officer of:
  1. a financial institution under the FSA and its association;
  1. an Islamic financial institution under the IFSA and its association; and
  1. a prescribed institution under the DFIA or its association,
who may receive the documents or information.
 
Comments
 
The amendments under the Amendment Orders are timely as they clarify certain existing gaps in the Relevant Schedules.
 
Alert prepared by Lee Ai Hsian (Partner) of the Banking and Finance Practice of Skrine
 
1 The paragraphs of the Relevant Schedules that have been amended under the Amendment Orders apply to (a) the following entities under the FSA: a licensed bank, a licensed investment bank, an approved operator of a payment system, a registered operator of a payment system, an operator of a designated payment system or an approved issuer of a designated payment instrument; (b) the following entities under the IFSA: a licensed Islamic bank, a licensed international Islamic bank, an approved operator of a payment system, an operator of a designated payment system or an approved issuer of a designated Islamic payment instrument; and (c) a prescribed institution under the DFIA; except for paragraph 5 of the Relevant Schedules which only applies to a licensed bank or a licensed investment bank under the FSA, a licensed Islamic bank under the IFSA and a prescribed institution under the DFIA.
2 For example, see section 161 (Hiwalah) of the Syariah Court Civil Procedure (Federal Territories) Act 1998.
3 See paragraph 11 of Schedule 11 to the FSA, paragraph 10 of Schedule 11 to the IFSA and paragraph 8 of the Fourth Schedule to the DFIA.
4 See paragraph 18 of Schedule 11 to the FSA, paragraph 17 of Schedule 11 to the IFSA and paragraph 12 of the Fourth Schedule to the DFIA.

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