KUALA LUMPUR (May 28): Malaysia’s central bank said on Wednesday it has imposed fines totalling nearly RM5 million on four lenders for failing to comply with financial services laws.

HSBC and its Islamic arm were together fined RM3.26 million, while Malayan Banking Bhd’s (KL:MAYBANK) unit Maybank Islamic Bhd was fined RM1.2 million, Bank Negara Malaysia (BNM) said in a statement. A penalty of RM493,500 was also levied on Bank Pembangunan Malaysia Bhd.

All four banks paid their fines between March and April this year. 

HSBC did not comply with customer due diligence requirements, which BNM said was found during an on-site examination. “The examination revealed a lack of understanding” of the requirements for identifying beneficial ownership, the central bank noted.

Banks are required to identify and take reasonable measures to verify beneficial owners, which would allow an assessment of their exposures to money laundering or terrorism financing risks and take appropriate mitigation measures.

In addition, the measures aim to prevent individuals from misusing corporate vehicles to conceal illegal assets by maintaining a legitimate front in the financial system.

HSBC also found lapses in sanctions screening requirements during its own review in 2023. “It was discovered that customers were onboarded without proper sanctions screening due to staff oversight, ineffective maker-checker functions, and inadequate system capabilities,” BNM said.

Bank Pembangunan was also found to be in non-compliance with customer due diligence and sanctions screening requirements.

“It was caused by the staff’s inadequate understanding of the specific requirements” related to beneficial ownerships and gaps in its sanctions screening process, “which led to the failure to conduct sanctions screening on its existing customers without delay”, BNM said.

Maybank Islamic, meanwhile, breached a law on submission of information to the Central Credit Reference Information System more commonly known as CCRIS. The lender did not properly submit information on three customers, which later affected the borrowers’ credit records, BNM said.

Banks are required to submit timely, accurate and complete information in the CCRIS. “Accurate reporting in the CCRIS by financial institutions is critical to enable fair credit assessment by lenders on prospective borrowers,” BNM stressed.