Money Services Business Act 2011
A revamp of the money services business industry
In 2009, Bank Negara Malaysia (“BNM”) initiated a review of the legal and regulatory framework for the remittance, money changing, and wholesale currency businesses (collectively described as the “money services business”) in Malaysia, with a view of modernizing the landscape of these businesses on par with international standards, and enhancing the integrity of the industry. The review culminated in the passing of the Money Services Business Act 2011 (the “Act”) this year which came into force on 1 December 2011.
The Act provides for the licensing, regulation and supervision by BNM of the money services business under a single, uniform and dedicated regulatory framework. These businesses were previously governed under three (3) separate laws, namely the Money Changing Act 1998, the Payments Systems Act 2003 and the Exchange Control Act 1953. With the enactment of the Act, the Money Changing Act 1998 is repealed and the regulation of all existing money services business fall under the purview of the Act. Existing licensees are required to migrate and apply for a new license under the Act within the prescribed timelines set out in the Act. All other persons intending to provide money services business must apply for a license under the Act using the standard form provided by BNM. Authorised dealers who are licensed banks and licensed Islamic banks and regulated under the Banking and Financial Institutions Act 1989 and the Islamic Banking Act 1983 respectively are not subject to the Act.
Key features of the Act
According to BNM, the move to the new Act is to support the development of a more dynamic, competitive and professional money services business industry while strengthening safeguards against money laundering, terrorist, financing and illegal activities. There are generally three (3) main thrusts to the Act as compared with the previous frameworks:
- Stronger prudential requirements
The Act introduces tougher prudential requirements for the money services business. For example, the minimum capital requirement is now increased from RM100,000 previously to RM300,000 (where the annual turnover is less than RM30 million), RM500,000 (where the annual turnover is more than RM30 million but less than RM100 million) and RM2 million (where the annual turnover exceeds RM100 million). Licensees with a paid -up capital of RM300,000 or below are not allowed to set up branches. License applications must be enclosed with additional information pertaining to the applicants‟ financial information (including loan/mortgage details), a business plan, company and board structures, and details of directors and management personnel. In addition, the shareholders, directors, chief executive officer or managers of an applicant is also required to fulfill a „fit and proper‟ criteria determined by BNM. An applicant must also show that it has effective governance, operational and control for the sound conduct of the intended money services business in compliance with the specific obligations under the Act, including, appropriate risk management, accounting and security measures to ensure the safety and integrity of its business as well as adequate procedures to comply with the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (“AML”).
- Enhancing customer protection
The Act promotes greater transparency in dealings with customers for example, the requirement to provide adequate disclosure of product and services and other information as may be prescribed by BNM, and to maintain clear accounts, and records for each transaction. The Act also increases protection afforded over customers‟ funds by providing BNM with wider enforcement powers to take early action against non-compliances or breaches of regulatory requirements under the Act. Generally, a breach of the Act attracts a fine of up to RM5 million and/or imprisonment of up to 10 years. In addition, BNM also reserves the right to revoke a license in the event of a breach by a licensee of its license conditions or specified provisions of the Act, failure to comply with any minimum prudential requirements or contravention of the AML or other legislation administered by BNM, or the Companies Act 1965, or any offenses involving fraud, dishonesty, or corruption.
- Enabling business expansion
For licensees who meet the necessary requirements, the Act allows such licensees to provide the full suite of money services business under the Act. In addition, the Act also allows the appointment of money services business agents to undertake services on behalf of a licensee, subject to the Act. These enabling provisions allow licensees to expand their scope of activities and provide a wider range of services to increase their revenue base.
The efforts of the Government and BNM to revamp the regulatory framework for the money services business and introduce the Act must be lauded as the Act effectively provides a more robust and responsive regulatory and supervisory framework that will safeguard the integrity of the country‟s money services business industry, while providing a more vibrant landscape and improving the efficiency and quality of services provided to the public at large. The move to the new Act will pave the way for an orderly growth and development of the industry in tandem with the demand for such services in Malaysia.
This article was written by Kuok Yew Chen & Sharmitha Visvalingam of Christopher Lee & Co. (www.christopherleeco.com).
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Date : [●] December 2011
Contact : Kuok Yew Chen
03 7958 8310
017 2111 320