Implementation of the Financial Service Act in Business Law

The FSA and IFSA is the summit of endeavours to modernize the laws that administer the lead and supervision of monetary foundations in Malaysia to guarantee that these laws keep on being important and successful to keep up money related security, bolster comprehensive development in the budgetary framework and the economy, just as to give satisfactory assurance to purchasers. The laws likewise give Bank Negara Malaysia the important administrative and supervisory oversight forces to satisfy its wide order inside an increasingly perplexing and interconnected condition, given the territorial and worldwide nature of monetary advancements. This incorporates an expanded spotlight on pre-emptive measures to address issues of worry inside money related organizations that may influence the premiums of contributors and policyholders, and the powerful and effective working of budgetary intermediation.

It is significant that Malaysia's administrative and supervisory framework is satisfactorily prepared to react successfully to new and rising dangers with the goal that trust in the money related framework is saved and that the basic monetary intermediation exercises which are crucial to the economy are not upset. The FSA and IFSA amalgamate a few separate laws to oversee the money related part under a solitary authoritative structure for the customary and Islamic budgetary divisions individually, to be specific, the Banking and Financial Institutions Act 1989 (BAFIA), Islamic Banking Act 1983, Insurance Act 1996 (IA), Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953 which are revoked on a similar date.

Key features of the new legislation include:

Greater clarity and transparency in the implementation and administration of the law. This incorporates plainly characterized administrative goals and responsibility of Bank Negara Malaysia in seeking after its chief item to defend budgetary solidness, straightforward triggers for the activity of Bank Negara Malaysia's forces and capacities under the law, and straightforward appraisal criteria for approving foundations to continue controlled money related business, and for investor appropriateness;

A clear focus on Shariah compliance and governance in the Islamic financial Sector. Specifically, the IFSA gives a complete legitimate structure that is completely reliable with Shariah in all parts of guideline and supervision, from permitting to the ending up of an establishment;

Arrangements for separated administrative prerequisites that mirror the idea of budgetary intermediation exercises and their dangers to the general monetary framework;

Arrangements to control money related holding organizations and non-controlled substances to assess foundational dangers that can rise up out of the communication among directed and unregulated establishments, exercises and markets.

The Minister of Finance may subject a foundation that takes part in money related intermediation exercises to continuous guideline and supervision by Bank Negara Malaysia on the off chance that it presents or is probably going to represent a hazard to in general monetary dependability;

Reinforced business lead and purchaser security necessities to advance customer trust in the utilization of monetary administrations and items;

Fortified arrangements for successful and early authorization and supervisory intercession.

The new laws will put Malaysia's money related segment, incorporating the financial framework, the protection/takaful area, the monetary markets and installment frameworks and other budgetary mediators, on a stage for progressing forward as a sound, dependable and dynamic money related framework. This is particularly imperative to empower the monetary framework to satisfy the new needs for financing related with Malaysia's financial change program both during and past the following decade, the changing socioeconomics of our populace, and the expanding coordination of the Malaysian economy with the locale and the world.

National Anti-Financial Crime Centre

On 8th of October 2019 by Martin Carvalho on The Star News, (Carvalho, 2019) the government had form a National Anti-Financial Crime Centre (NAFCC). This bill was recently table on the parliament to coordinate investigations related to financial crimes. The Prime Minister’s Department Datuk Liew Vui Keong is the one who will be responsible for managing a centralised data system for financial crimes which also the one who had done the NAFCC first reading in the parliament. The NAFCC will also have an executive committee which will be headed by the director-general. Among the functions of the executive committee include determining the operational policies of the NAFCC. The NAFCC's powers to organise integrated operations comes into play when investigations into financial crimes involves not less than two enforcement agencies. The centre will also be empowered to summon any persons to provide relevant information or documents related to its functions. A failure to comply could result in a maximum fine of one million ringgit, a five year jail sentence or both upon conviction.

On 10th of October by Nuradzimmah Daim on the New Straits Times, (Daim, 2019) the Dewan Rakyat had approved the National Anti-Financial Crime Centre (NAFCC) Bill. Datuk Liew Vui Keong said NAFCC would establish, administer, maintain and manage a centralised data system which contains relevant information that it receives or gathers. He said the information gathered by NAFCC and analysed data may be used for the planning and coordination of an integrated operation and prevention of financial crimes and the centre would also look into money-laundering, but would not have the authority to prosecute. The existing enforcement agencies have sufficient powers to do so the thing that needs to be done now is coordination among them, which is where NAFCC comes in. In terms of allocation, a cost-benefit analysis done showed that the setting up of the centre would be cost-efficient as the resources and costs would be shared among the relevant enforcement agencies, while NAFCC’s staffs are loaned from these bodies. This means the government would be able to save cost, in contrast to operations carried out in silo by the agencies. In addition, further discussions would be held with the Finance Ministry on the allocation for the centre.

Financial Technology (FINTECH)

On October 8 2019 by New Straits Times News, (NST, Malaysia Fintech HelloGold Making Country Proud on International Stage, 2019) a local company is making Malaysia proud as it was the only fintech from this country selected to present its unique gold saving mobile application to a high profile audience in New York. Malaysia’s HelloGold was invited to present at the United Nation Secretary General Task Force's inaugural event, titled 'Good Servant, Poor Master: Capturing the Promise and Managing the Risk of Financial Technology for a Sustainable World'. The aim of the presentation which took place last week was to bring together forward-looking businesses and world leaders to share in the possibilities offered by financial technologies towards digital financial inclusion. In a press statement, HelloGold Malaysia's country head Juita Jalaluddin remarked that it was an honour to have been at the prestigious summit on financial inclusion. “A major challenge in emerging markets is access to financial products and services where the most vulnerable among us have no option but to save in cash, with many exposed to currency fluctuation and inflation. As prices go up, the majority are slowly but surely being excluded from building, much less, sustaining their wealth for the future,' Juita said. Gold is the safest way to protect the hard-earned savings of the unbanked and the underserved is to provide universal and easy access to the world’s oldest store of wealth anytime and from anywhere. By democratising gold savings, those in needs to save today for a better tomorrow cam be help by this fintech HelloGold.

On October 2016 2019 by Amir Hisyam Rasid on the News Straits Times, (Rasid, 2019) the government had announces a new measures to boost digital economy. Malaysia is looking to accelerate the country’s journey towards becoming a digital economy, with several initiatives being announced including making the country a global test bed for emerging technologies and innovation. Prime Minister Tun Dr Mahathir Mohamad said the digital economy, which had been growing faster than the overall economy, was key to building income for the people. Dr Mahathir said Malaysia, being a global test bed for artificial intelligence, data analytics and augmented reality, would be fuelled by a powerful talent pipeline, comprising educators, industry and government. The Malaysia Digital Economy Corporation (MDEC), which will lead the implementation of the initiatives, said the global test bed initiative was aimed at attracting next-generation emerging technologies to innovate in Malaysia. MDEC will accelerate development in the fintech, block chain, and drone sectors by attracting global digital talents and interest from investors. Dr Mahathir said the government had proposed to set up the National Digital Inclusion Council to focus on creating digital economy income opportunities for the people. The council will be headed by Dr Mahathir and consist of representatives from more than 11 ministries. On October 17 2019 by Nur Zarina Othman on New Straits Times, (Othman, 2019) a Mobylize application was invented to monitors credit score and finds matching financial products. As the founder of founder and CEO of Moby Fintech Sdn Bhd, Rian Philip is determined to spread credit financial awareness through Mobylize, a financial decision-making application. Mobylize’s main objective is to demystify credit. With the app, Malaysians can get the matching financial products and services that suit their credit score. It demystifies credit by providing a simple and easy analysis of a user’s credit score. The app allows individuals to access their credit scores in real time and match them with the right financial products and services which they have a higher chance of obtaining approval. The application includes Credit Bureau Malaysia’ credit score (provided free by Mobylize) credit analysis and financial decision-making tools to help consumers maintain a positive credit health.

Money Laundering

October 23, 2019 by Tasnim Lokman on New Straits Times. (Lokman, 2019) A 33-year-old man who is a driving school owner had loses RM12,890 in Macau scam by a man impersonating as a Malaysian Anti-Corruption Commission (MACC) officer. Pahang Commercial Criminal Investigation Department Chief, Superintendent Mohd Wazir Mohd Yusof said the incident took place around 3pm on Monday. The scammer, claiming to be 'Tuan Ismail' from the MACC in Putrajaya, called the victim on his phone to inform his company had not been paying taxes. The call was then transferred to the 'Terengganu Police Contingent Headquarters', where he was accused of being involved in money-laundering activities. The victim was then given a link via WhatsApp, which had words 'gov', 'bnm' and 'jpjk', and was asked to send his ATM card and online banking details. Then, the victim checked his accounts and found out there had been four money transactions amounting to RM12,890. Realising he had been scammed, he lodged a police report.

October 22, 2019 by New Straits Times. (NST, We are coming for you next, IGP warn loans sharks, 2019) Police will launch a major crackdown on loan shark syndicates soon as part of an effort to curb loan-related scams. In a Bernama report today, Inspector-General of Police Tan Sri Abdul Hamid Bador warned that those involved in such activities will be arrested and prosecuted. They will launch a major operation on ‘Ah Long’ (loan sharks) syndicates which they will be detained and charged in court. Those loan shark will face action under Anti-Money Laundering, Terrorism Financing and Proceeds of Unlawful Activities Act (AMLA). The move came following numerous reports of aggresive methods applied by loan sharks to secure payment from loan defaulters. It was reported that some of them even pasted photographs of loan defaulters at residential areas in order to shame them. On another matter, Abdul Hamid said the Criminal Investigations Department and Commercial Crimes Investigation Department were working on various methods and approaches to combat illegal gambling activities in Kuala Lumpur. Other information in regards to the Financial Services Act 2013.

On 30 June 2013, the Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013 (IFSA) have come into effect by substituting and repealing the Banking and Financial Institutions Act 1989, the Insurance Act 1996, the Payment Systems Act 2003, the Exchange Control Act 1953, the Islamic Banking Act 1983 and the Takaful Act 1984. The objectives of the Acts are to provide Bank Negara Malaysia/ Central Bank of Malaysia (BNM) with greater powers to counter future risks to financial stability in the financial sector, increase consumer protection, promote competition in the broader financial services sector and step forwards towards global trends in financial regulations (Azmi, 2014).

The Acts have broadened some scope and ambit mainly in the definitions of authorised person and registered person. These Acts further outline another category, which is financial intermediation. The activities of financial intermediation are listed under Section 211 of the FSA and Section 222 of the IFSA. All persons undertaking banking business, investment banking or insurance business are required to hold valid licenses granted by Minister of Finance. Businesses such as financial advisory, money-broking and insurance broking will only need to obtain approvals from BNM. Every authorized person is required to maintain at all times a minimum capital of funds or a surplus of assets over liabilities during the course of carrying on its authorized business.

The Acts allow a person holding existing interest in a licensed person to increase its shareholding in that licensed person without having to seek prior approval if such increase does not exceed a multiple of 5% and together not exceeding the aggregate of 10% (Lutfi, 2014). As for disposing of shares, the requirement to seek approval of the Minister or BNM no longer applies, except in cases where the shareholder proposes to dispose shares which results in the shareholder ceasing to have control over the licensed person.

Any company must first obtain a written approval of the Minister and require an approval by BNM if the company intends to become a Financial Holding Company (FHC) which holds more than 50% shares in a licensed person. FHC of a licensed person is not allowed to operate any business except financial services or other services relating to financial services and must abide by all Prudential Requirements set out under Part V of the FSA and Part VI of the IFSA. A key difference between the FSA and the IFSA is the introduction of a new Part IV of the IFSA to strengthen Sharia governance whereby Islamic financial institutions shall ensure end to end sharia compliance with regards their policies, procedures and operations.

A licensed person is required to obtain the approval of BNM for the appointment, election, reappointment and re-election of the chairman, director, chief executive officer or a senior officer, and a notification to BNM of the appointment, election, reappointment and re-election of the chairman, director, chief executive officer or a senior officer is sufficient in the case of an approved person or an operator of a designated payment systems. The Acts enhance the duties of directors and place more stringent requirements on transparency on the part of directors of licensed persons and the holding companies.

Under the FSA, insurers who hold composite licenses are prohibited from operating both general and life insurance businesses. Similarly under the IFSA, the takaful operators who hold composite licenses are prohibited from operating both general and family takaful business. However, licensed professional reinsurers/retakaful operators are exempted from this prohibition. BNM has granted a grace period (of up to 5 years or as will be specified by the Minister, on recommendation by BNM) for composite insurers/takaful operators to de-merge into separate entities. The Acts streamline the regulations and supervisions of licensed and approved persons, thus the criteria by which any application to carry on payment systems business would be assessed similarly as an application to carry on licensed business (Abbad, 2014). An applicant would be assessed upon the factors listed in Schedule 5 in the Acts.

According to the Acts, no person shall undertake or engage in any transaction set out in Schedule 14, unless he has obtained a written approval from BNM. This will include any proposed transaction falling within borrowing or lending of Ringgit Malaysia between non-residents, retaining or using Ringgit Malaysia by a non-resident, giving or obtaining any guarantee in respect of any debt or liability, importing into or exporting from Malaysia in Ringgit Malaysia, foreign currency, gold or other precious metals. Under the Acts, BNM is empowered to assume control over the whole or part of business, affairs or property of the financial institution, to manage it or appoint any person to manage it on behalf of BNM and to designate a bridge institution when certain circumstances arise.