KUALA LUMPUR (July 30): Malaysia's central bank said on Wednesday it has fined three lenders, including Bank Islam Malaysia Bhd (KL:BIMB), a total of RM7.29 million for non-compliance with financial services laws and regulations.
Bank Islam was penalised RM3.45 million for prolonged service disruption and for failing to comply with sanctions screening requirements, Bank Negara Malaysia (BNM) said in a statement. Bank Islam paid the penalty in May and June, the central bank noted.
“BNM will not hesitate to take appropriate supervisory and enforcement actions when financial institutions fall short of regulatory expectations,” the central bank said.
Financial institutions must ensure their critical systems are designed for high availability, meaning that the cumulative unplanned downtime that affects users must not exceed more than four hours on a rolling 12-month basis with maximum tolerable interruption of 120 minutes per incident.
However, Bank Islam suffered multiple outages that caused prolonged disruptions to its banking services, such as internet banking channels, debit card system and online payment transactions between June 1, 2023 and Dec 31, 2024.
BNM said it expects all financial institutions to maintain a high level of technology resilience against operational disruptions to ensure the continuous availability of essential financial services.
The central bank also ordered Bank Kerjasama Rakyat Malaysia Bhd to pay RM2.85 million and Bank Simpanan Nasional to cough up RM995,000 for multiple prolonged system disruptions, which both paid up in June.
The disruption from lapses in executing the response and recovery process to restore the systems promptly even affected both banks' automated teller machines, including debit and credit card systems over the course of 2023 and 2024.
Sanctions screening
Further, Bank Islam also failed to adhere to the Islamic Financial Services Act 2013 as well as the policy on anti-money laundering countering financing of terrorism and targeted financial sanctions for financial institutions, BNM said.
In one instance, BNM found the breach during an on-site examination, which revealed gaps in Bank Islam’s sanctions screening process and system.
In another, Bank Islam failed to timely screen its entire customer database against the ‘Domestic List’ — a list of names and entities designated under the law on anti-money laundering, anti-terrorism financing and proceeds of unlawful activities.
Bank Islam also delayed submission of a report to BNM that it was in possession of or in control of funds or properties of one entity in the list. BNM blamed Bank Islam’s ineffective sanctions management, inadequate training and employee oversight of compliance obligations for the breach.
“BNM takes the breach seriously,” the central bank warned, “as transactions were facilitated for the specified entities during the period before the identification and confirmation of positive name matches against the Domestic List.”