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Financial Legislation Amended to widen Permitted Disclosure of Customer’s Account Details to Inland Revenue Board

10 October 2023

Schedule 11 of the Financial Services Act 2013 (“FSA”), Schedule 11 of the Islamic Financial Services Act 2013 (“IFSA”) and the Fourth Schedule of the Development Financial Institutions Act 2002 (‘DFIA’), among other provisions in the respective legislation, set out exceptions to the prohibition on a financial institution and any person having access to any document or information relating to the affairs or account of any customer of a financial institution from disclosing to any other person any document or information relating to the account of the customer.1 However, a person who receives such document or information from a financial institution or any of its directors or officers as permitted under the exceptions provided in the above-referred schedules is prohibited from disclosing such document or information to any other person.2
 
For the purposes of this Alert, a “financial institution” refers to the following: 
  1. 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, as provided in section 131 of the FSA; 

  2. 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, as provided in section 143 of the IFSA; and 

  3. a development financial institution which a prescribed institution under section 2(1) of the DFIA, 
(severally a “financial institution”).
 
Paragraph 11 of Schedule 11 of the FSA, paragraph 10 of Schedule 11 of the IFSA and paragraph 8 of the Fourth Schedule of the DFIA (collectively “Relevant Paragraphs”), inter alia, permit a financial institution or any of its directors or officers to disclose any document or information relating to the affairs or account of its customer required by the Inland Revenue Board of Malaysia (“IRB”) under section 81 of the Income Tax Act 1967 (“ITA”) for the purpose of facilitating exchange of information pursuant to tax arrangements or agreements under section 132, 132A or 132B of the ITA to any officer of the IRB.3
 
The following subsidiary legislation were gazetted on 5 October 2023: 
  1. Financial Services (Amendment of Schedule 11) Order 2023 [P.U.(A)298/2023]; 

  2. Islamic Financial Services (Amendment of Schedule 11) Order 2023 [P.U.(A)299/2023]; and 

  3. Development Financial Institutions (Amendment of Fourth Schedule) Order 2023 [P.U.(A)300/2023], 
(collectively “Amendment Orders”).
 
The Amendment Orders extend the scope of the exceptions under the Relevant Paragraphs in the following respects: 
  1. by permitting the disclosure of documents or information to the IRB for the purposes of filing an application in any court to obtain a garnishee order in accordance with section 106A of the ITA, which empowers the Director General of the IRB to require a financial institution to furnish the Director General with the bank account information of any person against whom a judgment has been obtained in civil proceedings, for the purpose of making an application to court for a garnishee order; and 

  2. in addition to any officer of the IRB, by permitting the documents or information to be disclosed to any persons authorised by the IRB to receive the documents or information on its behalf. 

Alert by Lee Ai Hsian (Partner) of the Banking and Finance Practice of Skrine 
 
1 The general prohibition against disclosure of customer documents and information are set out in sections 133, 145 and 119(3) of the FSA, the IFSA and the DFIA respectively. Refer to sections 133(2) and 134(1)(b), sections 145(2) and 146(1)(b) and sections 119(4) and 120(1)(b) of the FSA, the IFSA and the DFIA respectively for other exceptions to the confidentiality obligations.
2 Refer to section 134(4), section 146(4) and section 120(3) of the FSA, the IFSA and the DFIA respectively.
3 A summary of the provisions of the ITA referred to in this paragraph are as follows: (a) sections 81 empowers the Director General to call for information; (b) section 132 facilitates the exchange of information with the government of any foreign territory under any double taxation agreement; (c) section 132A facilitates the exchange of information with the government of any foreign territory under any mutual exchange of tax information arrangements; and (d) section 132B facilitates the exchange of information with the government of any foreign territory under any mutual administrative assistance arrangements in tax matters.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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