Bank Negara Malaysia (‘BNM’) announced at a media briefing on 7 November 2019 a proposal to introduce a Cash Transaction Limit (‘CTL’) of RM25,000.
 
The CTL is an initiative of the National Coordination Committee to Counter Money Laundering (NCC) and is a further tool to combat money laundering and terrorism financing in Malaysia.
 
Towards this end, BNM has published a brief announcement and a set of Frequently Asked Questions on Proposed Cash Transaction Limit (‘FAQ’) on its website on 9 November 2019.
 
Below is a summary of some of the key questions covered by the FAQs.
 
Q: What is a CTL?
A: It is a limit on the amount that can be paid by physical cash per transaction. Any transaction that exceeds the prescribed amount cannot be paid by physical cash.
 
Q: What is being proposed?
A: A CTL of RM25,000 per transaction is being proposed. Any cash transaction above this limit will have to be paid electronically, by cheque or through financial institutions.
 
The proposal covers all types of physical cash payment transactions, e.g. payment for goods and services, donations or payment between individuals for any purpose whatsoever. In this regard, BNM has said in its media briefing that the CTL applies to payments by business-to-business (B2B), business-to-consumer (B2C) and vice versa, and consumer-to-consumer (C2C).
 
Q: What transactions are exempted from the CTL?
A: Two types of transactions are exempted from the CTL –

It has been reported that during the media briefing, BNM has clarified that payments through traceable channels such as e-payments, credit or debit cards or cheques, fall outside the purview of the CTL.
 
Q: Can I deposit or withdraw RM30,000 in physical cash into/from my bank account?
A: Yes. Physical cash transactions (e.g. deposit, withdrawal, payment or transfer) with or through licensed banks under the Financial Services Act 2013, licensed Islamic banks under the Islamic Financial Services Act 2013, or prescribed financial institutions under the Development Financial Institutions Act 2002 are exempted from the CTL limit.
 
Q:  A second-hand car is put up for sale for RM60,000. This is a transaction between two individuals with no financial institutions involved. Can I pay the seller RM2,000 in physical cash for the next 30 months?
A: Yes, the breaking-up of a transaction into several small amounts for legitimate business purposes is allowed (e.g. cash instalments). However, each instalment payment cannot be more than RM25,000 in physical cash.
 
Q: The price of goods purchased is RM30,000. Can I pay for a portion of it in physical cash (e.g. RM10,000), with the remainder paid electronically, by cheque or through the banking system?
A: Yes, this is because in this single transaction, the physical cash component is below RM25,000.
 
Q: The price of goods purchased is RM27,000. Can I pay for it through three separate physical cash payments of RM9,000 each in the same day?
A: No. A series of physical cash transactions is still considered as a single transaction if it is made to/from the same person, for the same purpose, and within the same day. Splitting the payment of goods and services into several smaller transactions to avoid the application of the limit is prohibited.
 
Q: Can I pay all my employees (assume 20 persons), whose salary is RM20,000 per person in physical cash?
A: Yes, physical cash transactions with multiple different persons are not aggregated for purposes of the cash transaction limit.
 
Q: I have USD10,000 in physical cash. Can I exchange it for ringgit with a licensed money changer over the counter and receive the ringgit in physical cash?
A: Yes, a money-changing transaction with a licensed money changer is not subject to the cash transaction limit.

Q: Can I transfer RM30,000 in physical cash to another person?
A: No. The proposed measure covers individual-to-individual physical cash transactions. So, this is a breach of the limit. A transfer above RM25,000 must be done electronically, by cheque or through the financial institutions.
 
Q: Can I donate RM30,000 in physical cash to a charity or NGO of my choice?
A: No. The proposed measure covers entity-to-entity, and entity-to-individual (vice-versa) cash transactions. So, this is a breach of the limit. Donations above RM25,000 must be done electronically, by cheque or through the financial institutions.
 
If the transaction is under exigent situations such as for humanitarian aid and disaster relief, it will be exempted from the limit subject to approval from the Minister of Finance on the recommendation of Bank Negara Malaysia.
 
Q: My wife and I want to pay the deposit for a condominium amounting to RM30,000 to the developer. Can each of us separately withdraw physical cash from our respective banks and pay the deposit in physical cash to the developer?
A: No. You can only make payment up to RM25,000 in physical cash to the developer and the remaining balance should be paid electronically or by cheque. Alternatively, you and your wife can instruct your banks to directly transfer the amount into the developer’s account without the need for withdrawal of cash.
 
The implementation date for the CTL has yet to be announced. Provisions for implementing the CTL are contained in clause 21 of the Currency Bill 2019 that has been tabled before the Malaysian Parliament. Apart from prohibiting the use of currency in making or receiving in a single transaction of an aggregate amount set out in the Second Schedule (presently stated as ‘nil’), clause 21 of the Bill also makes it an offence for any person to undertake or structure, or assist or participate in the structuring of, any transaction with the intention to avoid the application of the CTL.