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LEGISLATION ADMINISTERED AND ENFORCED BY BANK NEGARA MALAYSIA AND SECURITY COMMISSION

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Date added: 17-06-26


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The Act provides for the administration, objectives of the Central Bank. It also enumerates the powers and the duties of the Central Bank in relation to issuance of currency, maintenance of external reserve, authorized business of the bank, specific powers to deal with ailing institutions, its relationship with the Government and financial institutions. The Act also contains general provisions on the Bank's accounts, powers to compound etc. 2. Banking and Financial Institutions Act 1989 (BAFIA) The BAFIA which came into force on October 1, 1989 provides for the licensing and regulation of institutions carrying on banking, finance company, merchant banking, discount house and money-broking businesses. It also provides for the regulation of institutions carrying on scheduled business comprising non-bank sources of credit and finance, such as credit and charge card companies, building societies, factoring, leasing companies and development finance institutions. Non-scheduled institutions which are engaged in the provision of finance may be subject to Part X and XI of the BAFIA as the Minister of Finance may decide. 3. Exchange Control Act 1953 Exchange Control Notices (ECM) - ECM 1 to 16 The Act restricts dealings in gold and foreign currencies, payments to and from residents, issuance of securities outside Malaysia, imports and exports and settlements. The Act also empowers the Controller for Foreign Exchange to grant permissions and consent on the foregoing and to enforce the provisions of the Act. The Act is supplemented by the Exchange Control Notices (ECM). ECM is issued by the Controller which embodies the general permission and directions of the Controller. 4. Islamic Banking Act 1983 An Act to provide for the licensing and regulation of Islamic banking business. The Act inter alia has provisions on the financial requirements and duties of an Islamic Bank, ownership, control and management of Islamic banks, restrictions on its business, powers of supervision and control over Islamic bank and other general provisions such as penalties etc. 5. Insurance Act 1996 The provisions of the Act deal with the licensing of insurers, insurance brokers adjusters and reinsurers. It also deals with setting up of subsidiary and offices, establishment of insurance fund, direction and control of defaulting insurers, the control on management of licensee, accounts of licensee, examination and investigation powers of the Central Bank, winding-up, transfer of business of licensee. The Act also provides for matters relating to policies, insurance guarantee scheme fund, enforcement powers of the Central Bank, offenses and other general provisions. 6. Takaful Act 1984 An Act to provide for the registration and regulation of takaful business in Malaysia and for other purposes relating to or connected with takaful. "Takaful"in this context means a scheme based on brotherhood, solidarity and mutual assistance which provides for mutual financial aid and assistance to the participants in case of need whereby the participants mutually agree to contribute for that purpose. 7. Government Investment Act 1983 An Act to confer on the Minister power to receive investments of moneys for a fixed period and to pay dividend thereon. The Act amongst other things appoints the Central Bank as the agent of the Government and allows the issue of the investment by way of book-entry i.e. scripless. 8. Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLA) Since 2000, Malaysia has made significant progress in constructing a comprehensive anti-money laundering regime. Malaysia's National Coordination Committee to Counter Money Laundering (NCC), comprised of members from 13 government agencies, oversaw the drafting of Malaysia's Anti-Money Laundering Act 2001 (AMLA) and coordinates government-wide anti-money laundering efforts. The AMLA, enacted in January 2002, criminalized money laundering and lifted bank secrecy provisions for criminal investigations involving more than 150 predicate offenses. The law also created a financial intelligence unit (FIU) located in the Central Bank, Bank Negara Malaysia (BNM). The FIU is tasked with receiving and analyzing information, and sharing financial intelligence with the appropriate enforcement agencies for further investigations. The Malaysian FIU works with more than twelve other agencies to identify and investigate suspicious transactions. 9. Uniform Customs and Practice for Documentary Credits (UCP 600) Not a legislation but a trade finance practices The Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules on the issuance and use of letters of credit. The UCP is utilised by bankers and commercial parties in more than 175 countries in trade finance. UCP 600 came into effect on 1 July 2007. It is the sixth revision of the rules since they were first promulgated in 1933. UCP defines rights and obligations of the various parties in a documentary credit transaction, it is not law and any given documentary credit is subject to the UCP only to the extent indicated in the documentary credit itself. 10. Capital Markets and Services Act 2007 (CMSA) The CMSA prescribes the laws among others, to regulate and to provide for matters relating to the activities, markets and intermediaries in the capital markets. CMSA largely consolidates the Securities Industry Act 1983 (SIA), the Futures Industry Act 1993 (FIA) and Part IV of the Securities Commission Act 1993 (SCA), makes some changes to the regulatory structure of stock markets and futures markets, revamps the securities and futures industry licensing framework, adds new provisions to help promote Malaysia's development as a global Islamic financial hub, improves and modernises the regulatory framework, fund raising activities and investor protection and introduces provisions for self-regulatory organizations. 11. Labuan Financial Services and Securities Act 2010 (LFSSA) This Act provides the framework on the licensing and regulation of financial services and securities in Labuan. With the enactment of the Labuan Financial Services and Securities Act 2010, the following Acts are repealed:- o Labuan Trust Companies Act 1990; o Offshore Banking Act 1990; o Offshore Insurance Act 1990; and o Labuan Offshore Securities Industry Act 1998. 12. Labuan Islamic Financial Services and Securities Act 2010 The Act sets the licensing and regulatory framework for Islamic financial services and securities in Labuan and provides for the establishment of Islamic banking and Takaful business including captive Takaful business plus Labuan Islamic trusts, foundations, limited partnerships and limited liability partnerships. 13. Labuan Financial Services Authority Act 1996 This Act described and governed the roles and powers of Labuan FSA. Under this legislation, Labuan FSA is allowed and given the power to administer, carry out and enforce the Labuan legislation to all industry players in this jurisdiction. 14. Malaysia Deposit Insurance Corporation Act 2011 The Act sets adequate powers to the Malaysia Deposit Insurance Corporation (PIDM) to manage troubled financial institutions (member institutions) effectively. Provides PIDM powers to improve consumer protection in terms of finance. The scope of protection for deposits has been raised from RM60,000 to RM250,000.

Exchange Control Notices (ECM) - ECM 1 to 16

Bank Negara Malaysia, as agent of the Government on exchange control matters, administers the Exchange Control Act 1953 since August 1, 1960, with the Governor as the Controller of Foreign Exchange. To complement the Act, the Controller issues exchange control notices and various circulars from time to time. Currently, there are sixteen ECM notices: ECM No. & Contents 1 Definitions 2 Dealings in Gold and Foreign Currency 3 External Accounts 4 General Payments 5 Export of Goods 6 Credit Facilities to Non-Residents 7 Foreign Currency Accounts 8 Domestic Credit Facilities to Non-Resident Controlled Companies - This notice was revoked on April 1, 2005. 9 Investments Abroad 10 Foreign Currency Credit Facilities and Ringgit Credit Facilities From Non-Residents 11 Inter-Company Accounts 12 Securities 13 Import and Export of Currency Notes, Bills of Exchange, Assurance Policies, etc. 14 Dealings with Specified Persons and in Restricted Currencies 15 Labuan International Offshore Financial Centre 16 Approved Operational Headquarters
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