LAWS OF MALAYSIA

Act 759

Islamic Financial Services Act 2013

Date of Royal Assent 18 Mar 2013

Date of publication in the Gazette 22 Mar 2013

An Act to provide for the regulation and supervision of Islamic
financial institutions, payment systems and other relevant entities
and the oversight of the Islamic money market and Islamic foreign
exchange market to promote financial stability and compliance with
Shariah and for related, consequential or incidental matters.

[30 June 2013,
except paragraphs 1 to 10 and

paragraphs 13 to 19 of Schedule
9.]

PU(B) 277/2013.

ARRANGEMENT OF SECTIONS

PART I

PRELIMINARY

1. Short title and commencement

2. Interpretation

3. Prescription by Minister of additional business or activity

4. Prescription by Bank of additional agreement, dealing, transaction or
person

5. Classification of, and construction of references to, takaful business

PART II

REGULATORY OBJECTIVES AND POWERS AND FUNCTIONS OF BANK

6. Regulatory objectives

7. Powers and functions of Bank

PART III

AUTHORIZATION

Division 1

Page 1 of 187

Authorized business

8. Authorized business to be carried on by authorized person

9. Application for authorization

10. Grant of licence by Minister

11. Approval by Bank

12. Requirements on minimum capital funds or surplus of assets over
liabilities

13. Additional conditions of licence or approval

14. Persons approved under Financial Services Act 2013 to carry on
Islamic financial business

Division 2

Restriction on dealings of authorized persons

15. Authorized person to carry on authorized business only

16. Licensed takaful operator to carry on family takaful or general
takaful business

Division 3

Representative office

17. Requirements for representative office

Division 4

Revocation, surrender or cessation of business or operations

18. Grounds for revocation of authorization

19. Surrender of licence or notification on cessation of business or
operations

20. Effect of revocation, surrender, notification on cessation of business
or operations, and expiry

Division 5

General matters

21. Form of establishment

22. Establishment or relocation of office of authorized persons

23. Fees

24. Publication of names of authorized persons

25. Holding out as authorized person

26. Acting on behalf of unlicensed person

PART IV

SHARIAH REQUIREMENTS

Division 1

Shariah compliance

27. Interpretation

Page 2 of 187

28. Duty of institution to ensure compliance with Shariah

29. Power of Bank to specify standards on Shariah matters

Division 2

Shariah governance

30. Establishment of Shariah committee

31. Appointment of Shariah committee member

32. Duties of Shariah committee and its members

33. Cessation as member of Shariah committee

34. Notice of cessation as member of Shariah committee

35. Information to be provided to Shariah committee

36. Qualified privilege and duty of confidentiality

Division 3

Audit on Shariah compliance

37. Appointment of person by institution to conduct audit on Shariah
compliance

38. Appointment of person by Bank to conduct audit on Shariah
compliance

PART V

PAYMENT SYSTEMS

Division 1

Designation of payment systems and Islamic payment instruments

39. Designation and revocation of designation of payment systems

40. Operator of designated payment system

41. Designation of Islamic payment instruments

Division 2

Requirements for operation of payment systems and issuance of
designated Islamic payment instruments

42. Application of this Act on payment systems

43. Power of Bank to specify standards for payment systems

44. Direction to participants of designated payment system

45. Operational arrangements

46. Power of Bank to inspect

Division 3

Finality of payment and netting arrangement

47. Interpretation

48. Power of Bank to issue certificate of finality

49. Revocation of certificate of finality

50. Application of this Division

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51. Transfer order made after appointment of insolvency administrator

52. Finality of payment and netting arrangement

53. Preservation of rights

54. Non-recognition of insolvency order by foreign court

55. Requirement to notify in event of insolvency, etc.

PART VI

PRUDENTIAL REQUIREMENTS

56. Interpretation

Division 1

Standards on prudential matters

57. Power of Bank to specify standards on prudential matters

58. Institution, director and officer to comply with standards

59. Single counterparty exposure limit for licensed person

60. Restrictions on payment of dividend by licensed person

61. Maintenance of assets in Malaysia by licensed person

Division 2

Corporate governance

62. Interpretation

63. Chairman, directors and chief executive officer of institution

64. Requirements to be chairman, director, chief executive officer or
senior officer

65. Functions and duties of board of directors

66. Duties of directors

67. Duty to disclose interests in material transaction or material
arrangement

68. Disqualifications

69. Fit and proper requirements

70. Cessation from office

71. Notice of cessation from office

Division 3

Transparency requirements

72. Interpretation

73. Maintenance of accounting records and information

74. Compliance with approved accounting standards

75. Publication of financial statements

Division 4

Auditors

76. Appointment of auditor by institution

Page 4 of 187

77. Appointment of auditor by Bank

78. Duties of auditor

79. Notice of cessation as auditor

80. Information to be provided to auditor

81. Reporting obligations of auditor

82. Qualified privilege and duty of confidentiality

Division 5

Appointed actuaries

83. Appointment of actuary by licensed takaful operator

84. Appointment of actuary by Bank

85. Duties of appointed actuary

86. Cessation as appointed actuary

87. Notice of cessation as appointed actuary

88. Information to be provided to appointed actuary

89. Qualified privilege and duty of confidentiality

Division 6

Takaful funds and shareholders’ fund

90. Establishment and maintenance of takaful funds

91. Takaful funds to be separate from shareholders’ fund

92. Requirements relating to takaful funds

93. Requirements relating to shareholders’ fund in respect of takaful
funds

94. Withdrawal from takaful funds

95. Deficiency of takaful funds

96. Assumption of risk

Division 7

Subsidiaries

97. Establishment or acquisition of subsidiaries and acquisition or
holding of material interest in corporation

PART VII

OWNERSHIP, CONTROL AND TRANSFER OF BUSINESS

98. Application and non-application

Division 1

Interest in shares of licensed person

99. Acquisition of interest in shares requiring approval

100. Control over licensed person prohibited in some cases

101. Disposal of interest in shares requiring approval

102. Application procedures for section 99, 100 or 101

Page 5 of 187

103. Power of Bank to specify standards on shareholder suitability

104. Maximum permissible holdings

105. Notification on acquisition or disposal of interest in shares of
licensed person

Division 2

Action by Bank in event of breach

106. Order against defaulting persons

107. Additional provisions relating to order under subparagraph 106(2)(a)
(v)

Division 3

Interest in shares of approved person

108. Interpretation

109. Acquisition of interest in shares of approved person

Division 4

Transfer of business, reconstruction or amalgamation of licensed
person

110. Interpretation

111. Approval required for reconstruction or amalgamation of licensed
person

112. Approval required for business transfer scheme

113. Notification of business transfer scheme

114. Application to High Court for confirmation of business transfer
scheme

115. Bank to be party to proceedings

116. Orders sought by transferor and transferee

117. Publication of court order under section 114

118. Reimbursement of Bank’s expenses

119. Prohibition of payment out of takaful fund

PART VIII

FINANCIAL GROUPS

120. Purpose of this Part

121. Disapplication of sections 122 and 123 to licensed persons, and
licensed persons and financial holding companies under Financial
Services Act 2013

122. Application to be financial holding company

123. Power of Bank to require submission of application

124. Approval of application as financial holding company under section
122 or 123

125. Bank may approve more than one financial holding company

126. Business of financial holding company

Page 6 of 187

127. Prudential requirements on financial holding company and
subsidiaries

128. Power to issue directions to financial holding company and
subsidiaries

129. General provisions dealing with directions

130. Consequences for failing to comply with directions

131. Additional provisions relating to paragraph 128(3)(e)

132. Power to remove director or chief executive officer of financial
holding company

PART IX

BUSINESS CONDUCT AND CONSUMER PROTECTION

Division 1

Interpretation

133. Interpretation

Division 2

Business conduct, complaints, disputes, etc.

134. Application

135. Standards on business conduct

136. Prohibited business conduct

137. Approved takaful broker, approved Islamic financial adviser and
approved issuer of designated Islamic payment instrument to
establish customer account

138. Financial ombudsman scheme

Division 3

Takaful issues

139. Obtaining takaful outside Malaysia

140. Provisions relating to takaful certificates

141. Pre-contractual disclosure and representations, and remedies for
misrepresentations

142. Payment of takaful benefits under family takaful certificate and
personal accident takaful certificate

Division 4

Information and secrecy

143. Interpretation

144. Restriction on inquiring specifically into affairs of particular
customer

145. Secrecy

146. Permitted disclosures

Division 5

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Restrictions relating to consumer protection

147. Application of this Division

148. Islamic deposit

149. Restriction on accepting Islamic deposits

150. Advertisements for Islamic deposits

151. Restriction on use of certain words

PART X

ISLAMIC MONEY MARKET AND ISLAMIC FOREIGN EXCHANGE
MARKET

152. Power of Bank to specify standards or issue codes

153. Prohibited conduct in Islamic money market and Islamic foreign
exchange market

154. Arrangement with relevant supervisory authority

PART XI

SUBMISSION OF DOCUMENT OR INFORMATION

155. Submission of document or information to Bank

156. Submission of statistical information, etc.

157. Secrecy requirements under sections 155 and 156 not to apply

PART XII

EXAMINATION

158. Examination of authorized person, etc.

159. Duty to provide access to, and produce documents, information, etc.

160. Examination of other persons

161. Appearance before Bank

162. Examination or assessment by auditor or actuary, etc.

163. Confidential information

164. Examination by relevant overseas supervisory authority

165. Disclosure of information by Bank to relevant overseas supervisory
authority

PART XIII

DIRECTIONS OF COMPLIANCE

166. Interpretation

167. Circumstances for exercising power to issue directions

168. Power to issue directions to institution

169. General provisions dealing with directions

170. Consequences of failing to comply with directions

171. Additional provisions relating to paragraph 168(2)(b)

PART XIV

Page 8 of 187

INTERVENTION AND REMEDIAL ACTION

172. Application of this Part to member institution

Division 1

Removal of director, chief executive officer or senior officer

173. Interpretation

174. Power to remove director, chief executive officer or senior officer

175. Provisions relating to removal

Division 2

Power to take intervention and remedial action

Subdivision 1 - Circumstances for exercising intervention and
remedial action

176. Interpretation

177. Circumstances for exercise of Bank’s power

Subdivision 2 - Assumption of control

178. Interpretation

179. Power to assume control

180. Effect of assumption of control

181. Information and facilities

182. Additional provisions relating to assumption of control

Subdivision 3 - Power to appoint receiver and manager

183. Interpretation

184. Appointment of receiver and manager by Bank

185. Appointment of receiver and manager by persons other than Bank

186. Provisions in relation to appointment of receiver and manager

Subdivision 4 - Compulsory transfer of business, assets or liabilities

187. Interpretation

188. Order for compulsory transfer of business, assets or liabilities

189. Additional provisions relating to compulsory transfer

190. Continuity obligations

Subdivision 5 - Provisions relating to bridge institution

191. Designation of bridge institution

192. Publication of notice

193. Bridge institution authorized to carry on business

194. Bridge institution not liable for past obligations in respect of officers

195. Stay in respect of bridge institution

196. Financial assistance to bridge institution

Subdivision 6 - Restructuring of share capital

197. Interpretation

Page 9 of 187

198. Power to reduce share capital of institution

Subdivision 7 - Financial assistance

199. Interpretation

200. Liquidity or financial assistance to institution

Subdivision 8 - Moratorium

201. Interpretation

202. Application for moratorium

Division 3

Winding up

Subdivision 1 - General provisions on winding up

203. Interpretation

204. Application of Companies Act 1965 in relation to winding up of
institution

205. Bank to apply for winding up

206. Restriction on voluntary winding up

207. Winding up by High Court on application by persons other than
Bank

208. Appointment and remuneration of liquidator

209. Control of liquidator

210. Statement of affairs

211. Offences by officers of institution

Subdivision 2 - Provisions specific to licensed takaful operators

212. Valuation of assets and liabilities

213. Termination of takaful certificate

214. Waiver of strict proof of debt

215. Prohibition against issuance of takaful certificate

216. Continuation of family takaful business

Subdivision 3 - Priority of payments in winding up

217. Priority of payments in winding up of licensed Islamic bank

218. Priority of payments in winding up of licensed takaful operator

Division 4

General provisions in relation to actions taken by Bank

219. Power of Bank to take action under this Part

220. Qualified financial agreement

221. Assessor Committee

PART XV

OTHER POWERS OF BANK

Division 1

Page 10 of 187

Regulation of prescribed Islamic financial institutions

222. Interpretation

223. Power of Minister to prescribe Islamic financial institutions

Division 2

International and domestic transactions

224. Interpretation

225. Measures relating to international and domestic transactions

226. Power of Bank to impose levies or charges

227. Power of Bank, with approval of Minister, to issue directions

Division 3

Holiday for licensed person

228. Power of Minister to declare holiday for licensed person

PART XVI

ENFORCEMENT AND PENALTIES

Division 1

Investigation powers

229. Investigation by Bank

230. Appointment of investigating officer

231. Powers of investigating officer

232. Powers of entry, search and seizure with warrant

233. Powers of entry, search and seizure without warrant

234. List of seized property, etc.

235. Release of seized property, etc.

236. Search of person

237. Obstruction to exercise of powers by investigating officer

238. Requirement to provide translation

239. Power to examine persons

240. Service of orders or notices generally, etc.

241. Surrender of travel documents

242. Agent provocateur

243. Assistance to police or other public officer

244. Investigating officer deemed to be public servant and public officer

Division 2

Administrative actions

245. Power of Bank to take action

246. Lodgment of amount not distributed with Registrar of Unclaimed
Moneys

Page 11 of 187

247. Power of Bank to prescribe monetary penalty

248. Application for appeal of decisions

249. Monetary Penalty Review Committee

Division 3

Civil actions

250. Civil action by Bank

251. Orders by court

252. Civil action to seek compensation

253. Interim orders

254. Contravention of court order

255. No undertaking as to damages

256. Other actions

257. Evidence obtained in investigations may be used in civil proceedings

Division 4

Criminal offences

258. Imprisonment

259. Offences in relation to entries in documents

260. Offence committed by any person acting in official capacity

261. Offence by employees, etc.

262. Seizable offence

263. Duty of investigating officer to make over arrested person to police

264. Power to compound

265. Attempts, abetments and conspiracies

266. Prosecution

Division 5

General matters

267. Protection in relation to disclosure of information to Bank

268. Evidential provision

269. Power of Bank to publish information

PART XVII

GENERAL PROVISIONS

270. Enforceable undertakings

271. Regulations

272. Provisions relating to approvals, consents, standards, codes,
specifications, notices, requirements, directions or measures

273. Opportunity to make representations

274. Exemptions

275. Power of Minister to amend Schedule

Page 12 of 187

276. Decision of Minister to be final

277. Power of Bank to issue guidance

278. Protection against suits and legal proceedings

279. Application of Companies Act 1965

280. Application of certain provisions of Act to Labuan entities

281. Breach or contravention not to affect contract, agreement or
arrangement

PART XVIII

REPEAL, SAVINGS AND TRANSITIONAL

282. Repeal

283. Savings and transitional

284. Savings in respect of licences granted and registrations made under
repealed Acts

285. Savings and transitional provision in respect of specific provisions of
repealed Takaful Act 1984

286. Conversion to single takaful business

287. Licensed takaful operator which is a private company to convert to
public company

288. Savings in respect of Islamic deposits under repealed Islamic
Banking Act 1983

289. Savings in respect of approvals for designated Islamic payment
instrument under repealed Payment Systems Act 2003

290. Savings in respect of financial holding company

291. Savings in respect of Islamic deposits accepted by co-operative
societies

SCHEDULE 1

SCHEDULE 2

SCHEDULE 3

SCHEDULE 4

SCHEDULE 5

SCHEDULE 6

SCHEDULE 7

SCHEDULE 8

SCHEDULE 9

SCHEDULE 10

SCHEDULE 11

SCHEDULE 12

SCHEDULE 13

SCHEDULE 14

SCHEDULE 15

SCHEDULE 16

Page 13 of 187

PART I

PRELIMINARY

Short title and
commencement

1.   (1)   This Act may be cited as the Islamic Financial Services Act
2013.

  (2)   This Act comes into operation on a date to be appointed by the
Minister by notification in the Gazette and the Minister may appoint
different dates for the coming into operation of different parts or
different provisions of this Act.

Interpretation 2.   (1)   In this Act, unless the context otherwise requires—

Act 758.    “adjuster” has the same meaning assigned to it under subsection 2
(1) of the Financial Services Act 2013 [Act 758];

   “advertisement” means the disseminating or conveying of
information, invitation or solicitation by any means or in any form
including oral and written communication by means of print,
electronic and any other media;

   “agreement” means an agreement whether formal or informal, oral
or written, express or implied;

   “annuity” means the right to a series of periodical payments from
the takaful fund at intervals of one year or less under a takaful
certificate entered into by a takaful participant with a family takaful
operator;

   “annuity certain” means an annuity where the duration of periodic
payments is pre-determined and does not depend on the death or
survival of the takaful participant;

   “applicant” means—

(a) in Part III and schedule 5, the person who submits, on its
own behalf or through an advocate, a secretarial firm or
other duly authorized representative, the application for
authorization under section 9;

(b) in Part VII and schedule 6, the person who submits, on its
own behalf or through an advocate, a secretarial firm or
other duly authorized representative, the application for
approval under that Part; or

(c) in Part VIII, the person who submits the application to be a
financial holding company or proposes another company to
be a financial holding company;

   “appointed actuary” means an actuary appointed by a licensed
takaful operator under subsection 83(1) or by the Bank under section
84;

   “appointed date” in respect of any provision under this Act, means
the date appointed by the Minister under subsection 1(2) as the date
for the coming into operation of that provision;

   “approved business” means any business set out in Part 1 of
schedule 1;

   “approved Islamic financial adviser” means a person approved

Page 14 of 187

under section 11 to carry on Islamic financial advisory business;

   “approved issuer of a designated Islamic payment instrument”
means a person approved under section 11 to issue a designated
Islamic payment instrument;

   “approved operator of a payment system” means a person
approved under section 11 to operate a payment system set out in
paragraph 1 of Part 1 of schedule 1;

   “approved person” means a person approved under section 11 to
carry on an approved business;

   “approved representative office” means a representative office in
Malaysia of a foreign institution approved by the Bank under
subsection 17(4);

   “approved takaful broker” means a person approved under section
11 to carry on takaful broking business;

   “arrangement” means an arrangement whether formal or informal,
oral or written, express or implied;

   “associate corporation” means a corporation in which not less than
twenty per cent but not more than fifty per cent of the voting shares
of that corporation are held by another corporation, where the first-
mentioned corporation is an associate corporation of the other
corporation;

   “authorization” means the grant of a licence under section 10 or the
grant of an approval under section 11;

   “authorized business” means a licensed business or an approved
business;

   “authorized person” means a person licensed under section 10 or
approved under section 11 to carry on an authorized business;

Act 701.    “Bank” has the same meaning as defined in subsection 2(1) of the
Central Bank of Malaysia Act 2009 [Act 701];

Act 125.    “books” has the same meaning assigned to it in subsection 4(1) of
the Companies Act 1965 [Act 125];

   “bridge institution” means a body corporate established or acquired
by the Bank, and designated as a bridge institution under subsection
188(1);

   “business transfer scheme” means a scheme of transfer for Islamic
banking business, takaful business, international Islamic banking
business or international takaful business;

   “chief executive officer” in relation to—

(a) a body corporate or unincorporate, means an individual,
however styled, who, either individually or jointly with one
or more other persons, is responsible under the authority of
the directors, for the conduct of the business and the
administration of such body; or

(b) an authorized person which is established as a branch in
Malaysia, means an officer principally responsible for the
business of the branch in Malaysia;

   “child” includes a step-child and a child adopted under any written
law of Malaysia or of any place outside Malaysia, or under a custom
recognized by a class, category or description of persons in or
outside Malaysia;

Page 15 of 187

   “company” has the same meaning assigned to it in subsection 4(1)
of the Companies Act 1965;

Act 56.    “computer” has the same meaning assigned to it in section 3 of the
Evidence Act 1950 [Act 56];

   “computer output” means a statement or representation, whether in
written, printed, pictorial, film, graphical, acoustic or other form—

(a) produced by a computer;

(b) displayed on the screen of a computer; or

(c) accurately translated from a statement or representation so
produced;

   “constituent document” has the same meaning assigned to it in
subsection 2(1) of the Central Bank of Malaysia Act 2009;

   “corporate group” means a group of corporations which are related
to each other;

   “corporation” has the same meaning assigned to it in subsection 4
(1) of the Companies Act 1965;

Act 502.    “co-operative society” has the same meaning assigned to it in
section 2 of the co-operative societies Act 1993 [Act 502];

   “depositor” means a person entitled to the repayment of an Islamic
deposit, whether the Islamic deposit was made by him or any other
person;

   “designated Islamic payment instrument” means an Islamic
payment instrument prescribed as a designated Islamic payment
instrument under section 41;

   “designated payment system” means a payment system prescribed
as a designated payment system under subsection 39(1);

   “director” includes any person who occupies the position of a
director, however styled, of a body corporate or unincorporate, and
includes—

(a) a person in accordance with whose directions or instructions
the directors or officers of the body are accustomed to act;

(b) an alternate or substitute director; or

(c) in particular, without limiting the foregoing, in the case of—

(i) a corporation, has the same meaning assigned to it in
subsection 4(1) of the Companies Act 1965;

(ii) a co-operative society, means a member of the board, or
other governing body howsoever called, of the co-
operative society;

(iii) a statutory body, means a member of the board,
committee, council or other governing body howsoever
called, of the statutory body;

(iv) a partnership, means a partner;

(v) a sole proprietorship, means the sole proprietor; and

(vi) any other body, association or group of persons, whether
corporate or unincorporate, means any person having the
direction and control of the management of its affairs or
business;

Page 16 of 187

   “document” has the same meaning assigned to it in section 3 of the
Evidence Act 1950 and includes books;

   “electronic money” means any Islamic payment instrument,
whether tangible or intangible, that—

(a) stores funds electronically in exchange of funds paid to the
issuer; and

(b) is able to be used as a means of making payment to any
person other than the issuer;

   “electronic terminal” means an electronic device, operated by or on
behalf of an authorized person, through which a person may initiate
an electronic fund transfer, and includes a point-of-sale terminal,
automated teller machine or cash or cheque deposit machine;

   “family takaful business” means the business relating to the
administration, management and operation of a takaful arrangement
under a family takaful certificate;

   “family takaful certificate” means a takaful certificate by which
takaful benefits are payable on death or survival, including those
takaful benefits payable in respect of personal accidents, disease or
sickness, and includes an annuity but excludes a personal accident
takaful certificate;

   “financing facility” means—

(a) the giving of any advance or other facility in whatever form
or by whatever name called;

(b) the giving of a guarantee; or

(c) any other dealing or transaction as prescribed under section
4;

made in accordance with Shariah which shall include, and may be in
the form of, any sale or purchase arrangement, joint venture
arrangement, deferred payment sale, return sharing arrangement or
other financing arrangement;

   “financial group” means a financial holding company and a group
of related corporations under such financial holding company
primarily engaged in financial services or in other services in
connection with or for the purposes of such financial services which
includes at least one licensed person;

   “financial holding company” means a company which—

(a) holds an aggregate of more than fifty per cent of interest in
shares of a licensed person, or has an aggregate interest in
shares of fifty per cent or less but has control over a licensed
person; and

(b) has obtained the approval of the Bank pursuant to subsection
124(3) to be a financial holding company of such licensed
person;

   “financial year” has the same meaning assigned to it in subsection
4(1) of the Companies Act 1965;

   “foreign company” has the same meaning assigned to it in
subsection 4(1) of the Companies Act 1965;

   “foreign currency” means any currency other than ringgit;

   “foreign institution” means a foreign company, not being an

Page 17 of 187

authorized person, which carries on any business outside Malaysia
which corresponds, or is similar, to the business of any authorized
person, whether or not such person has an approved representative
office;

   “Governor” and “Deputy Governor” have the same meaning
assigned to them in subsection 2(1) of the Central Bank of Malaysia
Act 2009;

   “holding company” has the same meaning assigned to it in section
5 of the Companies Act 1965;

   “individual” means a natural person;

   “interest in shares” shall be construed as set out in schedule 3;

   “international Islamic banking business” means Islamic banking
business in currencies other than ringgit or such other business as
prescribed under section 3;

   “international takaful business” means takaful business in
currencies other than ringgit;

   “investment account” means an account under which money is
paid and accepted for the purposes of investment, including for the
provision of finance, in accordance with Shariah on terms that there
is no express or implied obligation to repay the money in full and—

(a) either only the profits, or both the profits or losses, thereon
shall be shared between the person paying the money and the
person accepting the money; or

(b) with or without any return;

   “investment company” has the same meaning assigned to it in
subsection 319(1) of the Companies Act 1965;

   “investment-linked takaful certificate” means a takaful certificate
in respect of a contract of family takaful or an annuity where the
takaful benefits are, wholly or partly, to be determined by reference
to units, the value of which is related to—

(a) the income from property of any description; or

(b) the market value of such property;

   “Islamic banking business” means the business of—

(a) accepting Islamic deposits on current account, deposit
account, savings account or other similar accounts, with or
without the business of paying or collecting cheques drawn
by or paid in by customers; or

(b) accepting money under an investment account; and

(c) provision of finance; and

(d) such other business as prescribed under section 3;

   “Islamic deposit” means a sum of money accepted or paid in
accordance with Shariah—

(a) on terms under which it will be repaid in full, with or
without any gains, return or any other consideration in
money or money’s worth, either on demand or at a time or in
circumstances agreed by or on behalf of the person making
the payment and person accepting it; or

(b) under an arrangement, on terms whereby the proceeds under

Page 18 of 187

the arrangement to be paid to the person paying the sum of
money shall not be less than such sum of money,

but excludes money paid bona fide—

(i) by way of an advance or a part payment under a contract
for the sale, hire or other provision of property or
services, and is repayable only in the event that the
property or services are not in fact sold, hired or
otherwise provided;

(ii) by way of security for the performance of a contract or
by way of security in respect of any loss which may
result from the non-performance of a contract;

(iii) without limiting paragraph (ii), by way of security for the
delivery up or return of any property, whether in a
particular state of repair or otherwise; and

(iv) in such other circumstances, or to or by such other
person, as set out in schedule 2;

   “Islamic derivative” means any agreement, including an option, a
swap, futures or forward contract, made in accordance with Shariah,
whose market price, value, delivery or payment obligations is
derived from, referenced to or based on, but not limited to, Islamic
securities, commodities, assets, rates (including profit rates or
exchange rates) or indices;

   “Islamic factoring business” means—

(a) the business of acquiring debts or other financial obligations
due to any person arising from any transaction which is in
accordance with Shariah; and

(b) such other business as prescribed under section 3;

   “Islamic financial adviser’s representative” means an individual,
however styled, in the direct employment of, acting for or by
arrangement with an approved Islamic financial adviser, who
performs for the Islamic financial adviser any services relating to
Islamic financial advisory business;

   “Islamic financial advisory business” means any of the following:

(a) analyzing the financial planning needs of a person relating to
a takaful product;

(b) recommending an appropriate takaful product to a person;

(c) sourcing a takaful product from a licensed takaful operator
for a person;

(d) arranging of a contract in respect of a takaful product for a
person; or

(e) such other business, service or activity in relation to a
financial service as prescribed under section 3;

   “Islamic foreign exchange market” means a foreign exchange
market where the transactions, instruments or operations are not
contrary to Shariah;

   “Islamic leasing business” means—

(a) the business of letting or sub-letting movable property on
hire in accordance with Shariah for the purpose of the use of
such property by the hirer or any other person in any

Page 19 of 187

business, trade, profession or occupation or in any
commercial, industrial, agricultural or other economic
enterprise whatsoever and, where the lessor is the owner of
the property, regardless whether the letting is with or without
an option to purchase the property, and for the purpose of
this definition, “movable property” includes any plant,
machinery, equipment or other chattel attached or to be
attached to the earth or fastened or to be fastened,
permanently or otherwise, to any thing attached to the earth;
and

(b) such other business as prescribed under section 3;

   “Islamic payment instrument” means any instrument, whether
tangible or intangible, which does not involve any element which is
contrary to Shariah, that enables a person to obtain money, goods or
services or to make any payment;

   “Islamic securities” means securities which are in accordance with
Shariah;

   “issuer” means any person, acting alone or under an arrangement
with another person, who undertakes to be responsible for the
payment obligation in respect of an Islamic payment instrument
resulting from a user being issued with or using the Islamic payment
instrument;

   “liabilities” includes debts or obligations of every kind, whether
present or future, or whether vested or contingent;

   “licence” means a licence granted under section 10;

   “licensed business” means Islamic banking business, takaful
business, international Islamic banking business or international
takaful business;

   “licensed international Islamic bank” means a person licensed
under section 10 to carry on international Islamic banking business;

   “licensed international takaful operator” means a person licensed
under section 10 to carry on international takaful business;

   “licensed Islamic bank” means a person licensed under section 10
to carry on Islamic banking business and includes a licensed
international Islamic bank;

   “licensed person” means a person licensed under section 10 to
carry on licensed business;

   “licensed takaful operator” means a person licensed under section
10 to carry on takaful business and includes a licensed international
takaful operator;

Act 720.    “Malaysia Deposit Insurance Corporation” means the Malaysia
Deposit Insurance Corporation referred to in the Malaysia Deposit
Insurance Corporation Act 2011 [Act 720];

   “Malaysian takaful certificate” means a takaful certificate which is
issued in Malaysia by a licensed takaful operator and is—

(a) a family takaful certificate where the takaful participant’s
address, as specified in the takaful certificate or any other
address subsequently notified in writing by the takaful
participant to the licensed takaful operator, is or was an
address in Malaysia;

Act 53. (b) a general takaful certificate which relates to risks arising in

Page 20 of 187

Malaysia, or where the takaful participant is a resident of, or
a permanent establishment in, Malaysia within the meaning
of the Income Tax Act 1967 [Act 53]; or

(c) a retakaful contract with another licensed takaful operator;

   “market participant” means any person who—

(a) issues, sells, purchases, repurchases, borrows, lends,
finances or otherwise deals with currencies or other Islamic
financial instruments traded in the Islamic money market or
Islamic foreign exchange market including over-the-counter
Islamic derivatives whose price, value or payment
obligations are derived from, referenced to or based on profit
rates or exchange rates; or

(b) arranges transactions in the Islamic money market or Islamic
foreign exchange market as an intermediary,

whether acting as a principal or an agent, and includes any other
persons as prescribed under section 4;

   “member” in relation to a body corporate or unincorporate which
is—

(a) a corporation, means a shareholder;

(b) a co-operative society, means a member of the co-operative
society;

(c) a partnership, means a partner;

(d) any other body corporate having a membership, means a
member of the body; and

Act 335. (e) a society registered under the Societies Act 1966 [Act 335],
means a member of the society;

   “Minister” means the Minister for the time being charged with the
responsibility for finance;

   “office” refers to a place where or at which any business of any
person is carried out, including the head office in Malaysia, or any
other office, a branch, an agency (except for a takaful agency in the
case of a licensed takaful operator), a mobile place of business, a
place of business set up and maintained for a limited period only or
an electronic terminal;

   “officer” in relation to a body corporate or unincorporate, includes
any employee or the chief executive officer of the body corporate or
unincorporate;

   “operator” means any person, acting alone or under an
arrangement with another person, responsible for the rules,
procedures and operations of a payment system;

   “operator of a designated payment system” means any person who
operates a designated payment system;

   “participant” means any person who is permitted by the rules
governing a payment system to send payment instructions or
settlement instructions to the payment system and who is bound by
the rules governing the payment system;

   “payment instruction” or “settlement instruction” in relation to a
payment system, includes an instruction to transfer, clear or settle
transactions in funds or securities, as the case may be;

Page 21 of 187

   “payment system” means any system or arrangement for the
transfer, clearing or settlement of funds or securities where the
operational arrangements of the payment system or business conduct
of the operator of such payment system are in accordance with
Shariah;

   “person” includes an individual, any corporation, statutory body,
local authority, society, trade union, co-operative society, partnership
and any other body, organization, association or group of persons,
whether corporate or unincorporate;

   “person covered” means a takaful participant or other person in
respect of whom the takaful participant enters the contract of takaful
and in respect of whom takaful benefits are payable to the takaful
participant or his beneficiaries on the occurrence of pre-agreed
events under the contract of takaful;

   “personal accident takaful certificate” means a takaful certificate
providing fixed pecuniary benefits or benefits in the nature of
indemnity, or both, against risks of the person covered sustaining
injury or dying as the result of an accident or becoming incapacitated
in consequence of disease;

   “premises” includes any land, building, structure or place;

   “prescribe” means to prescribe by an order published in the
Gazette, and a power to prescribe includes the power to prescribe
differently for different persons, payment systems or Islamic
payment instruments or different classes, categories or descriptions
of persons, payment systems or Islamic payment instruments;

   “private company” has the same meaning assigned to it in
subsection 4(1) of the Companies Act 1965;

   “professional retakaful operator” means a retakaful operator which
is licensed to carry on solely retakaful business;

   “proper claimant” means a person who claims to be entitled to the
whole or part of the takaful benefits under a takaful certificate as
executor of the deceased takaful participant, parent or guardian of an
incompetent nominee or an assignee or who claims to be otherwise
entitled to the takaful benefits under the relevant law;

   “property” means any movable or immovable property, whether
tangible or intangible and includes—

(a) any right, interest, title, claim, chose in action, power or
privilege, whether present or future, or whether vested or
contingent, in relation to any property, or which is otherwise
of value;

(b) any conveyance executed for conveying, assigning,
appointing, surrendering, or otherwise transferring or
disposing of immovable property of which the person
executing the conveyance is the proprietor or has possession
or in which he is entitled to a contingent right, either for the
whole interest or for any less interest;

(c) any security, including any stock, share, and fund;

(d) any negotiable instrument, including any bank note, bearer
note, Treasury bill, dividend warrant, bill of exchange,
cheque and negotiable certificate of deposit; or

(e) any mortgage or charge, whether legal or equitable,
guarantee, lien or pledge, whether actual or constructive,

Page 22 of 187

letter of hypothecation, trust receipt, indemnity, undertaking
or other means of securing payment or discharge of a debt or
liability, whether present or future, or whether vested or
contingent;

   “provision of finance” means entering into, or making an
arrangement for another person to enter into, the businesses or
activities which are in accordance with Shariah including—

(a) equity or partnership financing, including musyarakah,
musyarakah mutanaqisah and mudarabah;

(b) lease based financing, including al-ijarah, al-ijarah
muntahia bi al-tamlik and al-ijarah thumma al-bai;̀

(c) sale based financing, including istisna ,̀ bai` bithaman ajil,
bai` salam, murabahah and musawamah;

(d) currency exchange contracts;

(e) fee based activity, including wakalah;

(f) purchase of bills of exchange, certificates of Islamic deposit
or other negotiable instruments; and

(g) the acceptance or guarantee of any liability, obligation or
duty of any person;

   “public company” has the same meaning assigned to it in
subsection 4(1) of the Companies Act 1965;

   “related” in relation to a corporation, means related within the
meaning of section 6 of the Companies Act 1965;

   “relative” in relation to an individual, subject to subsection (2),
means—

(a) the spouse of the individual;

(b) the brother or sister of the individual, or of the spouse of the
individual;

(c) any lineal ascendant or descendant of the individual, or of
the spouse of the individual;

(d) the spouse of any individual referred to in paragraph (b) or
(c);

(e) any lineal descendant of an individual referred to in
paragraph (b) or (d);

(f) any uncle, aunt or cousin of the individual, or of the spouse
of the individual; or

(g) any spouse, or any lineal ascendant or descendant, of an
individual referred to in paragraph (f);

Act 276.
Act 312.

   “repealed Acts” means the Islamic Banking Act 1983 [Act 276]
and the Takaful Act 1984 [Act 312];

   “retakaful” means takaful cover arranged by a takaful operator
with a second takaful operator on the risks of the takaful fund it
administers, wholly or partly, and includes any similar arrangement
by a branch of the takaful operator in Malaysia with its branch
outside Malaysia (the head office of the takaful operator being, for
this purpose, treated as a branch);

   “return” in relation to the definitions of “financing facility”,
“investment account” and “Islamic deposit”, and “Islamic securities”

Page 23 of 187

as defined in subsection 224(1), includes any form of rental, profit,
dividend or benefit, and any fee or gift, payable or to be given;

   “risk to financial stability” has the same meaning assigned to it in
section 29 of the Central Bank of Malaysia Act 2009;

   “senior officer” means a person, other than the chief executive
officer or a director, having authority and responsibility for planning,
directing or controlling the activities of an authorized person,
operator of a designated payment system or a financial holding
company including the chief operating officer, members of decision-
making committees and other persons performing key functions such
as risk management, compliance, internal audit or other functions as
may be specified by the Bank under section 57, but shall not include
a member of a Shariah committee;

   “share” in relation to a corporation, means an issued share of the
corporation and includes stock except where a distinction between
stock and share is expressed or implied;

   “Shariah Advisory Council” means the Shariah Advisory Council
on Islamic finance established under section 51 of the Central Bank
of Malaysia Act 2009;

   “Shariah committee” means the Shariah committee of an
institution established pursuant to section 30;

   “specify” means to specify in writing by way of standards or any
other forms, and a power to specify includes the power to specify
differently for different persons, payment systems or Islamic
payment instruments or different classes, categories or descriptions
of persons, payment systems or Islamic payment instruments;

   “standards” includes any obligation or requirement as specified by
the Bank under this Act and such standards may contain any
interpretative, incidental, supplemental, consequential and
transitional provisions as the Bank considers appropriate;

   “statutory body” means any authority or body, whether corporate
or unincorporate, established, appointed or constituted by any written
law, but excludes any local authority;

   “subsidiary” has the same meaning assigned to it in section 5 of the
Companies Act 1965;

   “systemic risk” in relation to a designated payment system,
means—

(a) a risk that the failure of a participant or operator to meet his
payment or settlement obligations will cause another
participant to be unable to meet his payment or settlement
obligations when due; or

(b) a risk that the failure of a participant or operator to meet his
payment or settlement obligations may cause significant
liquidity or credit problems that might threaten the stability
of the financial system;

   “takaful” means an arrangement based on mutual assistance under
which takaful participants agree to contribute to a common fund
providing for mutual financial benefits payable to the takaful
participants or their beneficiaries on the occurrence of pre-agreed
events;

   “takaful agent” means a person who does all or any of the
following:

Page 24 of 187

(a) solicits or obtains a proposal for takaful certificate on behalf
of a takaful operator;

(b) offers or assumes to act on behalf of a takaful operator in
negotiating a takaful certificate; or

(c) does any other act on behalf of a takaful operator in relation
to the issuance, renewal, or continuance, of a takaful
certificate;

   “takaful benefits” includes any benefit, whether pecuniary or not,
which is payable under a takaful certificate;

   “takaful broker” means a person who, as an independent
contractor, carries on takaful broking business and includes a
retakaful broker;

   “takaful broking business” means the business of soliciting,
negotiating or procuring a takaful certificate with a takaful operator,
or the renewal or continuance of the takaful certificate by a person,
for a takaful participant other than for himself and includes retakaful
broking for a takaful operator;

   “takaful business” means the business relating to the
administration, management and operation of a takaful fund for its
takaful participants which may involve elements of investment and
savings and includes retakaful business and a reference to carrying
on takaful business may include all or any of the activities set out in
paragraph 5(4)(a);

   “takaful certificate” includes a takaful cover note or any contract of
takaful for family takaful business or general takaful business
whether or not embodied in or evidenced by an instrument in the
form of a takaful certificate, and references to—

(a) issuing a takaful certificate shall be construed as entering
into a contract of takaful, whether or not a formal contract
has been issued; and

(b) a takaful certificate of a takaful operator includes a takaful
certificate in respect of which the takaful operator is under
any liability, whether the takaful certificate was issued by
the takaful operator or the liability was transferred to the
takaful operator from another takaful operator;

   “takaful claim” means a demand for payment of an amount due
under a takaful certificate;

   “takaful contribution” means the amount payable by a takaful
participant to a takaful operator under a takaful certificate and
includes any remuneration for the functions and duties assumed by
the takaful operator;

   “takaful fund” means a takaful fund established and maintained
under section 90 and in respect of takaful business referred to in
sections 8 and 26, means any fund established and maintained for the
purposes of such takaful business;

   “takaful operator” includes a professional retakaful operator;

   “takaful participant” means the person who has legal title to a
takaful certificate and includes—

(a) where a takaful certificate has been assigned, the assignee;

(b) where a personal representative of a deceased takaful
participant is entitled as against the takaful operator to the

Page 25 of 187

benefit of a takaful certificate, the personal representative;

(c) in relation to a takaful certificate providing for the payment
of annuity, an annuitant; and

(d) where under a takaful certificate, moneys are due or payable,
whether periodically or otherwise, the person to whom the
moneys are due or payable;

   “user” means any person to whom a designated Islamic payment
instrument has been issued or any person who uses a designated
Islamic payment instrument to obtain money, goods or services or to
make any payment;

   “voting share” has the same meaning assigned to it in subsection 4
(1) of the Companies Act 1965.

Relative

  (2)   For the purpose of the definition of “relative” in subsection
(1)—

(a) the adoption of any person by another under any written law
of Malaysia or any country, territory or place outside
Malaysia, or under any custom recognized by any class of
persons in Malaysia or in any country, territory or place
outside Malaysia, shall be treated as creating between the
adopter and the adopted person the same natural relationship
as the adoptive relationship, and other relationships in
relation to it shall be determined accordingly; and

(b) references therein to a relationship include, where relevant, a
relationship by half-blood.

Control

  (3)   For the purposes of this Act, a person shall be presumed to
have control over a licensed person or corporation if such person—

(a) has an interest of more than fifty per cent of the shares in the
licensed person or corporation; or

(b) unless proven otherwise—

(i) has the power to elect, appoint, remove or prevent from
election, appointment or removal, or cause to be elected,
appointed, removed or prevented from being elected,
appointed or removed, a majority of the directors of the
licensed person or corporation;

(ii) has the power to make or cause to be made decisions in
respect of the business or administration of the licensed
person or corporation, and to give effect to such
decisions or cause them to be given effect to; or

(iii) is a person in accordance with whose directions,
instructions or wishes the directors, chief executive
officer or senior officers of the licensed person or
corporation are accustomed or under obligation, whether
formal or informal, to act,

and the phrase “controlled” or “controller” shall be construed
accordingly.

Acting in concert

  (4)   For the purposes of this Act—

Page 26 of 187

(a) “persons acting in concert” means persons who, pursuant to
an agreement, arrangement or understanding, co-operate
to—

(i) acquire jointly or severally interests in the shares of a
corporation for the purpose of obtaining or consolidating
control of that corporation; or

(ii) act jointly for the purpose of exercising control over a
corporation; and

(b) without limiting the generality of paragraph (a), the
following persons shall be presumed to be persons acting in
concert, unless proven otherwise:

(i) a corporation and its related and associate corporations;

(ii) a corporation and any of its directors, or the parent, child,
brother or sister of any of its directors, or the spouse of
any such director or of any such relative, or any related
trusts;

(iii) a corporation and any pension fund established by it;

(iv) a person and any investment company, unit trust fund or
any other fund whose investments such person manages
on a discretionary basis;

(v) a person and his client which is a corporation, where the
person manages on a discretionary basis the client’s
funds and has ten per cent or more interest in shares of
the client; or

(vi) a person who owns or controls twenty per cent or more
of the voting shares of a corporation falling within
subparagraph (i) and any parent, child, brother or sister
of such person, or the spouse of such person or any such
relative, or any related trusts together with one or more
persons falling within subparagraph (i).

Qualified financial agreements

  (5)   For the purposes of this Act—

(a) “qualified financial agreement” means—

(i) a master agreement in respect of one or more qualified
financial transactions under which if certain events
specified by the parties to the agreement occur—

(A) the transactions referred to in the agreement terminate
or may be terminated;

(B) the termination values of the transactions under
subparagraph (i) are calculated or may be calculated;
and

(C) the termination values of the transactions under
subparagraph (i) are netted or may be netted, so that a
net amount is payable,

and where an agreement is also in respect of one or more
transactions that are not qualified financial transactions,
the agreement shall be deemed to be a qualified financial
agreement only with respect to the transactions that are
qualified financial transactions and any permitted
enforcement by the parties of their rights under such

Page 27 of 187

agreement;

(ii) an agreement relating to financial collateral, including a
title transfer credit support agreement, with respect to
one or more qualified financial transactions under a
master agreement referred to in subparagraph (i); or

(iii) any other agreement as prescribed under section 4;

(b) “qualified financial transaction” means—

(i) an Islamic derivative, whether to be settled by payment
or delivery; or

(ii) a repurchase, reverse repurchase or buy-sell back
agreement with respect to Islamic securities;

(c) “financial collateral” means any of the following that is
subject to an interest or a right that secures payment or
performance of an obligation in respect of a qualified
financial agreement or that is subject to a title transfer credit
support agreement:

(i) cash or cash equivalents, including negotiable
instruments and demand deposits;

(ii) Islamic security, an Islamic securities account or a right
to acquire Islamic securities; or

(iii) futures agreement or futures account;

(d) “title transfer credit support agreement” means an agreement
under which title to property has been provided for the
purpose of securing the payment or performance of an
obligation in respect of a qualified financial agreement.

  (6)   Any reference in this Act to “this Act”, the “Financial Services
Act 2013” or the “Central Bank of Malaysia Act 2009” shall, unless
otherwise expressly stated, be deemed to include a reference to any
rule, regulation, order, notification or other subsidiary legislation
made under this Act, the Financial Services Act 2013 or the Central
Bank of Malaysia Act 2009, as the case may be.

Prescription by Minister
of additional business or

activity

3.   The Minister may, on the recommendation of the Bank,
prescribe—

(a) any business or activity as an addition to the definition of—

(i) “Islamic banking business”;

(ii) “international Islamic banking business”;

(iii) “Islamic financial intermediation activities”;

(iv) “Islamic factoring business”; or

(v) “Islamic leasing business”,

and upon such prescription, the definition as added to shall
be deemed to be an integral part of this Act as from the date
of such prescription, or from such later date as may be
specified in the order; and

(b) any business, service or activity in relation to a financial
service as an Islamic financial advisory business for the
purposes of the definition of “Islamic financial advisory

Page 28 of 187

business” under subsection 2(1).

Prescription by Bank of
additional agreement,
dealing, transaction or

person

4.   The Bank may, with the concurrence of the Minister, prescribe—

(a) any agreement in respect of a financial transaction that may
be entered into by parties in the financial markets, other than
a standardized derivative or an agreement in respect of
securities transactions entered into under the rules of a stock
exchange and approved clearing house as defined in
subsection 2(1) of the Capital Markets and Services Act
2007 as a qualified financial agreement for the purposes of
the definition of “qualified financial agreement” in
subsection 2(5);

(b) any dealing or transaction as a financing facility for the
purposes of the definition of “financing facility” in
subsection 2(1); and

(c) any other person as a market participant for the purposes of
the definition of “market participant” in subsection 2(1).

Classification of, and
construction of references

to, takaful business

5.   (1)   For the purposes of this Act, takaful business shall be
divided into two classes—

(a) family takaful business, which in addition to all takaful
business concerned with family takaful certificates shall
include any type of takaful business carried on as incidental
only to the family takaful operator’s business; and

(b) general takaful business, which means all takaful business
which is not family takaful business.

  (2)   For the purposes of this Act, the retakaful of liabilities under
takaful certificates shall be treated as belonging to the same class and
description as the takaful certificates issued by the retakaful operator
in respect of the retakaful of such liabilities.

  (3)   Notwithstanding anything in subsection (1) or the
determination of a takaful certificate to a particular takaful fund by a
licensed takaful operator, if the Bank is satisfied that any part of the
licensed takaful operator’s business which belongs to a particular
class or description of takaful business ought in that licensed takaful
operator’s case to be treated as belonging to another class or
description, the Bank may direct that it shall be so treated for the
purposes of this Act.

  (4)   For the purposes of this Act—

(a) a reference to carrying on takaful business includes all or
any of the following activities carried on by way of business:

(i) receiving proposals to participate in takaful
arrangements;

(ii) negotiating on proposals to participate in takaful
arrangements on behalf of a takaful operator;

(iii) issuing of takaful certificates for takaful arrangements;

(iv) collection or receipt of takaful contributions on takaful

Page 29 of 187

certificates for takaful arrangements; or

(v) settlement or recovery of takaful claims on takaful
certificates for takaful arrangements,

but, subject to paragraph (c), does not include the carrying
on of such activity by a person on behalf of a takaful
operator;

(b) a person is deemed to carry out any or all of the activities set
out in paragraph 5(4)(a) by way of business if he—

(i) engages in such activity in a manner which in itself
constitutes the carrying on of a business;

(ii) holds himself out as willing and able to engage in such
activity; or

(iii) regularly solicits other persons to engage with him in
transactions constituting such activity; and

(c) a reference to carrying on takaful business includes carrying
it on through an agent, or as an agent, but “takaful operator”
does not include a takaful agent as such nor in the case of a
person who is both takaful operator and takaful agent, any
business done by that person as a takaful agent.

  (5)   For the purposes of this Act—

(a) the Minister may, on the recommendation of the Bank,
prescribe any business or activity as takaful business;

(b) the Bank may determine such business or activity to belong
to a particular class referred to in subsection (1) or
description, of takaful business; and

(c) the businesses set out in schedule 4 shall not be treated as
takaful business.

PART II

REGULATORY OBJECTIVES AND POWERS AND
FUNCTIONS OF BANK

Regulatory objectives 6.   The principal regulatory objectives of this Act are to promote
financial stability and compliance with Shariah and in pursuing these
objectives, the Bank shall—

(a) foster—

(i) the safety and soundness of Islamic financial institutions;

(ii) the integrity and orderly functioning of the Islamic
money market and Islamic foreign exchange market;

(iii) safe, efficient and reliable payment systems and Islamic
payment instruments; and

(iv) fair, responsible and professional business conduct of
Islamic financial institutions; and

(b) strive to protect the rights and interests of consumers of
Islamic financial services and products.

Page 30 of 187

Powers and functions of
Bank

7.   (1)   The Bank shall exercise the powers and perform the
functions under this Act in a way which it considers most
appropriate for the purpose of meeting the regulatory objectives of
this Act and the Governor shall exercise such powers and perform
such functions of the Bank on its behalf.

  (2)   The powers and functions of the Bank under this Act are in
addition to, and not in derogation of, the powers and functions of the
Bank under the Central Bank of Malaysia Act 2009.

  (3)   The Bank shall, from time to time, keep the Minister informed
on matters relating to the exercise of its powers and performance of
its functions under this Act.

  (4)   The Bank may authorize a Deputy Governor or an officer of
the Bank to exercise any of its powers or perform any of its functions
under this Act.

  (5)   The Bank may establish and authorize a committee consisting
of members as the Bank may determine for the purpose of exercising
any of the powers or performing any of the functions of the Bank
under this Act.

  (6)   The Bank may, either generally or in a particular case, appoint
a person, whether in or outside Malaysia, who is not an officer of the
Bank—

(a) to render such assistance in the exercise of any of its powers
or performance of any of its functions under this Act; or

(b) to exercise any of its powers or perform any of its functions
on behalf of and in the name of the Bank,

as may be specified by the Bank.

PART III

AUTHORIZATION

Division 1

Authorized business

Authorized business to be
carried on by authorized

person

8.   (1)   Subject to section 14, no person shall carry on any
authorized business unless it is—

(a) licensed by the Minister, on the recommendation of the
Bank, under section 10 to carry on Islamic banking business,
takaful business, international Islamic banking business or
international takaful business; or

(b) approved by the Bank under section 11 to carry on any of the
businesses set out in Part 1 of Schedule 1.

  (2)   Paragraph (1)(b) shall not apply, in respect of Islamic financial
advisory business, to persons set out in Part 2 of Schedule 1.

  (3)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding ten years or to a fine not exceeding fifty million
ringgit or to both.

Page 31 of 187

Application for
authorization

9.   An applicant for a licence under section 10 or an approval under
section 11 to carry on an authorized business shall submit the
application in writing to the Bank together with such documents or
information as may be specified by the Bank.

Grant of licence by
Minister

10.   (1)   In assessing an application duly made under section 9 to
carry on any licensed business, the Bank shall have regard to all the
factors set out in Part 1 and Part 2 of Schedule 5 and such other
matters that the Bank considers relevant.

  (2)   Upon making an assessment under subsection (1) and where
the Bank is satisfied that such applicant may be granted a licence, the
Bank shall make a recommendation to the Minister to grant a licence
under subsection (4) with or without conditions.

  (3)   The Bank shall notify the applicant in writing if the Bank does
not make a recommendation to the Minister under subsection (2).

  (4)   Where the Bank makes a recommendation pursuant to
subsection (2), the Minister may grant a licence to the applicant to
carry on Islamic banking business, takaful business, international
Islamic banking business or international takaful business, with or
without conditions.

  (5)   The Bank shall notify the applicant in writing of the decision
of the Minister under subsection (4).

  (6)   Where the Minister grants a licence under subsection (4), a
licensed person shall commence its licensed business within a period
or such further period as may be specified by the Minister, on the
recommendation of the Bank.

Approval by Bank 11.   (1)   In assessing an application duly made under section 9 to
carry on any approved business, the Bank shall have regard to all the
factors set out in Part 1 of Schedule 5 and such other matters that the
Bank considers relevant.

  (2)   The Bank may—

(a) approve an application to carry on any approved business,
with or without conditions, or for such period as stated in the
approval; or

(b) reject the application.

  (3)   A person approved under paragraph (2)(a) to carry on takaful
broking business or Islamic financial advisory business shall at all
times have in force a professional indemnity cover of such amount as
may be specified by the Bank.

  (4)   The Bank shall notify the applicant in writing of its decision
under subsection (2).

  (5)   Where the Bank approves an application under paragraph (2)
(a), an approved person shall commence its approved business
within a period or such further period as may be specified by the
Bank.

  (6)   Any person who contravenes subsection (3) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding five years or to a fine not exceeding ten million ringgit

Page 32 of 187

or to both.

Requirements on
minimum capital funds or

surplus of assets over
liabilities

12.   (1)   No person shall be granted a licence under section 10 or an
approval under section 11 if—

(a) in the case of a company, its capital funds; or

(b) in the case of a branch established in Malaysia by a foreign
institution, its surplus of assets over liabilities,

is less than the minimum amount as may be prescribed by the
Minister in the case of a licensed person, or the Bank in the case of
an approved person.

  (2)   Every authorized person shall, in carrying on its authorized
business, maintain at all times such minimum amount applicable to
it.

  (3)   Notwithstanding subsections (1) and (2), the Minister may
grant a licence under section 10 to a person subject to the condition
that the person meets the minimum amount in the manner and within
the period which are specified by the Bank with the approval of the
Minister.

  (4)   For the purposes of this section, “capital funds” means paid-up
capital and any reserves as may be specified by the Bank.

  (5)   Any authorized person who contravenes subsection (2)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding eight years or to a fine not
exceeding twenty-five million ringgit or to both.

Additional conditions of
licence or approval

13.   (1)   The Minister, upon the recommendation of the Bank, in the
case of a licence granted under section 10, or the Bank in the case of
an approval granted under section 11, may at any time in writing
amend or revoke any existing condition of an authorization or
impose any new conditions thereto.

  (2)   Any authorized person who fails to comply with any of the
conditions imposed by the Minister or the Bank, as the case may be,
under subsection (1) or 10(4), paragraph 11(2)(a) or subsection 12(3)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding five years or to a fine not
exceeding ten million ringgit or to both.

Persons approved under
Financial Services Act

2013 to carry on Islamic
financial business

14.   (1)   Subsection 8(1) shall not prohibit or restrict—

(a) a licensed bank or licensed investment bank under the
Financial Services Act 2013 from carrying on Islamic
banking business;

(b) an approved insurance broker under the Financial Services
Act 2013 from carrying on takaful broking business;

(c) an approved financial adviser under the Financial Services
Act 2013 from carrying on Islamic financial advisory
business;

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(d) an approved operator of a payment system under the
Financial Services Act 2013 from facilitating participants
engaged in Islamic financial business to transfer, clear or
settle funds or securities; or

(e) an approved issuer of a designated payment instrument
under the Financial Services Act 2013 from issuing a
designated Islamic payment instrument:

   Provided that such licensed bank, licensed investment bank,
approved insurance broker, approved financial adviser, approved
operator of a payment system or approved issuer of a designated
payment instrument has obtained the prior written approval of the
Bank under subsection 15(1) of the Financial Services Act 2013.

  (2)   A person referred to in subsection (1) shall be subject to and
comply with—

(a) the provisions of this Act, in particular the provisions of
Parts IV, VI, IX, X and XIII, in so far as those provisions
relate to the business such person is approved to carry on
under subsection 15(1) of the Financial Services Act 2013,
as if a reference in this Act to—

(i) an “authorized person” is a reference to any person
referred to in paragraphs (1)(a) to (e);

(ii) a “licensed person” is a reference to a person referred to
in paragraph (1)(a); or

(iii) an “approved person” is a reference to a person referred
to in paragraph (1)(b) to (e); and

(b) any standards, notices, directions, conditions, specifications
or requirements specified or made under this Act relating to
the business such person is approved to carry on under
subsection 15(1) of the Financial Services Act 2013.

  (3)   The Minister may, on the recommendation of the Bank, by an
order published in the Gazette, provide that all or any provision of
this Act—

(a) shall not apply to a person referred to in subsection (1); or

(b) shall apply to a person referred to in subsection (1), with
such modifications consistent with the regulatory objectives
of this Act,

as may be set out in the order.

  (4)   Any person who contravenes any provision of this Act or of
any standards, notices, directions, conditions, specifications or
requirements specified or made by the Bank under this Act and
applied to it under subsection (2) commits an offence and shall be
liable to the same penalty applicable to a person convicted of an
offence under such provisions and if no offence is provided for such
contravention, the person commits a breach and the Bank may take
an action under paragraph 245(3)(b) in addition to other enforcement
actions that the Bank is empowered to take under this Act.

Division 2

Restriction on dealings of authorized persons

Page 34 of 187

Authorized person to
carry on authorized

business only

15.   (1)   Unless the Bank otherwise specifies, an authorized person
shall not carry on any business or activity in or outside Malaysia
except in connection with or for the purposes of its authorized
business.

  (2)   Notwithstanding subsection (1), an approved operator of a
payment system or approved issuer of a designated Islamic payment
instrument which is not a licensed person may carry on any business
or activity which is not in connection with or for the purposes of its
approved business.

  (3)   Except with the prior written approval of the Bank, a licensed
takaful operator shall not carry on annuity certain business, financial
guarantee takaful business or credit guarantee takaful business.

  (4)   Any authorized person who contravenes subsection (1) or (3)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding eight years or to a fine not
exceeding twenty-five million ringgit or to both.

Licensed takaful operator
to carry on family takaful

or general takaful
business

16.   (1)   A licensed takaful operator, other than a licensed
professional retakaful operator, shall not carry on both family takaful
business and general takaful business.

  (2)   Notwithstanding subsection (1), a licensed family takaful
operator may carry on the general takaful business relating to
medical by reason of disease or sickness or medical expenses subject
to such requirements and conditions as may be specified by the
Bank.

  (3)   Any licensed takaful operator who contravenes subsection (1)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding eight years or to a fine not
exceeding twenty-five million ringgit or to both.

Division 3

Representative office

Requirements for
representative office

17.   (1)   No foreign institution shall—

(a) establish a representative office in Malaysia unless it has
obtained the prior written approval of the Bank; or

(b) through its approved representative office, carry on any
authorized business in Malaysia.

  (2)   Subject to the prohibition under paragraph (1)(b), a foreign
institution may carry on, through its approved representative office,
only such activities as may be specified by the Bank.

  (3)   An application to establish a representative office shall be
made in writing to the Bank together with such documents or
information as may be specified by the Bank.

  (4)   The Bank may on an application having been duly made in
accordance with subsection (3) approve the application, with or
without conditions, or reject the application.

  (5)   The Bank may at any time in writing amend or revoke any

Page 35 of 187

existing conditions of an approval granted under subsection (4) or
impose any new condition thereto.

  (6)   The Bank may revoke an approval granted under subsection
(4) if—

(a) the approved representative office has—

(i) breached or contravened any provision of this Act or the
Central Bank of Malaysia Act 2009; or

(ii) failed to comply with any condition imposed pursuant to
the approval,

regardless that there has been no prosecution or other action in
respect of such breach, contravention or non-compliance;

(b) the approved representative office has contravened any law
in or outside Malaysia; or

(c) it is in the interest of consumers of financial services and
products in Malaysia to do so.

  (7)   The Bank may, with the approval of the Minister, revoke an
approval granted under subsection (4) if it is in the national interest
to do so.

  (8)   Any person who contravenes subsection (1) or (2) or fails to
comply with any condition imposed under subsection (4) or (5)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding ten years or to a fine not
exceeding fifty million ringgit or to both.

Division 4

Revocation, surrender or cessation of business or operations

Grounds for revocation of
authorization

18.   (1)   The Minister may, on the recommendation of the Bank,
revoke the licence of a licensed person, and the Bank may revoke the
approval of an approved person, on the grounds that—

(a) the person is pursuing aims, or carrying on its operations,
business, affairs and activities contrary to Shariah;

(b) the Bank has, in connection with the application under
section 9, been provided with false, misleading, inaccurate or
incomplete information;

(c) the person has not commenced the business in respect of
which it is licensed or approved within the period specified
by the Minister under subsection 10(6) or by the Bank under
subsection 11(5);

(d) the person has ceased to carry on business for which it is
licensed or approved;

(e) the person has—

(i) breached or contravened any provision of this Act or the
Central Bank of Malaysia Act 2009;

(ii) failed to comply with any condition of its licence or
approval; or

(iii) failed to comply with any direction issued by the Bank

Page 36 of 187

under section 168, or an order under the Central Bank of
Malaysia Act 2009,

regardless that there has been no prosecution or other
action in respect of such breach, contravention or non-
compliance;

(f) the person has ceased to be viable in the opinion of the
Bank;

(g) the Bank, pursuant to the exercise of its powers under Part
XIV relating to such person, has substantially completed all
the transfer of business, assets or liabilities of the person;

(h) the person has been wound-up or otherwise dissolved; or

(i) it is in the interest of consumers of financial services and
products to do so.

  (2)   The Minister may, on the recommendation of the Bank, revoke
the licence of a licensed person, and the Bank may with the
concurrence of the Minister revoke an approval of an approved
person, if it is in the interest of the public to do so.

  (3)   In addition to subsections (1) and (2), the Bank may revoke the
approval of an approved person on the grounds that—

(a) in the opinion of the Bank, the person is committing or is
about to commit an act, or is pursuing or is about to pursue
any course of conduct, that is unsafe or unsound or has failed
to commit an act or pursue a course of conduct that is
necessary to maintain the safety and soundness of the
person;

(b) in the opinion of the Bank, the person is carrying on business
in a manner detrimental to the interests of its customers,
creditors, participants, users or the public generally;

(c) a receiver or manager of the property of the person has been
appointed; or

(d) possession of the property of the person has been taken by or
on behalf of a debenture holder pursuant to a charge on the
property.

  (4)   The Bank—

(a) shall publish in the Gazette, as soon as practicable, a notice
of a revocation of a licence under subsection (1) or (2); or

(b) may publish a notice of a revocation of an approval under
subsection (1), (2) or (3) in such form as the Bank deems
appropriate.

Surrender of licence or
notification on cessation
of business or operations

19.   (1)   A licensed person may surrender its licence to the Bank
and upon surrendering, the licensed person shall provide a written
notice of its surrender to the Bank.

  (2)   An approved person shall submit a written notice to the Bank
if it ceases to carry on its business.

  (3)   An approved representative office shall submit a written notice
to the Bank if it ceases operations.

  (4)   The surrender under subsection (1) or the notification under
subsection (2) or (3) shall take effect on the date the Bank receives

Page 37 of 187

such notice or where a later date is specified in the notice, on that
date.

  (5)   The Bank—

(a) shall publish in the Gazette, as soon as practicable, a notice
of a surrender of a licence under subsection (1); or

(b) may publish a notice of cessation of business under
subsection (2) or cessation of operations under subsection
(3) in such form as the Bank deems appropriate.

  (6)   Any person who contravenes subsection (1), (2) or (3)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding one year or to a fine not
exceeding five million ringgit or to both.

Effect of revocation,
surrender, notification on

cessation of business or
operations, and expiry

20.   (1)   Where—

(a) the Minister revokes a licence of a licensed person under
section 18;

(b) the Bank revokes an approval of an approved representative
office under subsection 17(6) or (7) or an approved person
under section 18;

(c) a surrender of a licence by a licensed person or notification
by an approved person on the cessation of its business or an
approved representative office on the cessation of its
operations has taken effect under subsection 19(4); or

(d) an approval granted to an approved person under section 11
has expired,

such person or representative office shall immediately cease to carry
on its business or operations, as the case may be.

  (2)   Notwithstanding the revocation, surrender, notification on the
cessation of business or operations, or expiry referred to in
subsection (1), the person or representative office referred to in
subsection (1) shall continue—

(a) to be subject to this Act to the same extent as an authorized
person or approved representative office, as the case may be;
and

(b) to discharge its obligations,

until the Bank is satisfied that the person or representative office has
discharged its obligations, or that adequate arrangements have been
made to discharge its obligations, which remain undischarged at the
time of revocation, surrender, notification on the cessation of
business or operations or expiry, as the case may be.

  (3)   A revocation, surrender, notification on the cessation of
business or operations or expiry referred to in subsection (1) shall
not operate so as to—

(a) avoid or affect any agreement, arrangement or transaction
entered into by the person or representative office referred to
in subsection (1) with any person; or

(b) affect any right, obligation or liability arising under any such

Page 38 of 187

agreement, arrangement or transaction.

  (4)   Any person who contravenes subsection (1) or fails to
discharge its obligations under subsection (2) commits an offence
and shall, on conviction, be liable to imprisonment for a term not
exceeding five years or to a fine not exceeding ten million ringgit or
to both.

Division 5

General matters

Form of establishment 21.   (1)   Unless otherwise specified by the Bank, a person who is to
be licensed under section 10 to carry on Islamic banking business or
takaful business (other than a person who is to be a professional
retakaful operator) shall be a public company.

  (2)   The Bank may specify the form of establishment of—

(a) a person who is to be licensed as a professional retakaful
operator, or to carry on international Islamic banking
business or international takaful business; or

(b) a person who is to be approved under section 11 to carry on
an approved business.

Establishment or
relocation of office of

authorized persons

22.   (1)   Unless otherwise specified by the Bank, no licensed person
shall establish or relocate an office in or outside Malaysia without
the prior written approval of the Bank.

  (2)   Where an approved person establishes or relocates an office in
or outside Malaysia, such approved person shall notify the Bank in
writing within such period as may be specified by the Bank.

Fees 23.   (1)   Regulations may be made under section 271 to prescribe—

(a) any fee to be paid by an authorized person in respect of its
authorization, establishment of any office or the annual fee;
and

(b) a processing fee to be paid by an applicant for authorization
under section 9,

of such amount, or calculated at such rate or in such manner as set
out in the regulations.

  (2)   Any fee paid to the Bank under this section shall be paid into
and form part of the Federal consolidated Fund.

  (3)   Any unpaid fees may be sued for and recovered as a civil debt
due to the Government and in addition, the court may order for a late
payment charge to be awarded to the Government in accordance with
the rules of the court and the Government shall deal with the late
payment charge awarded as provided in such rules.

Publication of names of
authorized persons

24.   (1)   The Bank shall, from time to time, publish in the Gazette a
list of all licensed persons and any additions to or deletions from the
list.

Page 39 of 187

  (2)   The Bank shall, from time to time, publish a list of approved
persons in such form as the Bank deems appropriate.

Holding out as authorized
person

25.   (1)   No person shall hold himself out to be an authorized
person unless he is authorized under this Act.

  (2)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding ten years or to a fine not exceeding fifty million
ringgit or to both.

Acting on behalf of
unlicensed person

26.   (1)   No person shall act on behalf of a foreign institution or any
person who is not licensed under this Act in relation to carrying on
Islamic banking business, takaful business, international Islamic
banking business, or international takaful business or accepting
Islamic deposits in Malaysia unless approved in writing by the Bank.

  (2)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding ten years or to a fine not exceeding fifty million
ringgit or to both.

PART IV

SHARIAH REQUIREMENTS

Division 1

Shariah compliance

Interpretation 27.   In this Part, “institution” refers to an authorized person or
operator of a designated payment system.

Duty of institution to
ensure compliance with

Shariah

28.   (1)   An institution shall at all times ensure that its aims and
operations, business, affairs and activities are in compliance with
Shariah.

  (2)   For the purposes of this Act, a compliance with any ruling of
the Shariah Advisory Council in respect of any particular aim and
operation, business, affair or activity shall be deemed to be a
compliance with Shariah in respect of that aims and operations,
business, affair or activity.

  (3)   Where an institution becomes aware that it is carrying on any
of its business, affair or activity in a manner which is not in
compliance with Shariah or the advice of its Shariah committee or
the advice or ruling of the Shariah Advisory Council, the institution
shall—

(a) immediately notify the Bank and its Shariah committee of
the fact;

(b) immediately cease from carrying on such business, affair or
activity and from taking on any other similar business, affair
or activity; and

Page 40 of 187

(c) within thirty days of becoming aware of such non-
compliance or such further period as may be specified by the
Bank, submit to the Bank a plan on the rectification of the
non-compliance.

  (4)   The Bank may carry out an assessment as it thinks necessary to
determine whether the institution has rectified the non-compliance
referred to in subsection (3).

  (5)   Any person who contravenes subsection (1) or (3) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Power of bank to specify
standards on Shariah

matters

29.   (1)   The Bank may, in accordance with the advice or ruling of
the Shariah Advisory Council, specify standards—

(a) on Shariah matters in respect of the carrying on of business,
affair or activity by an institution which requires the
ascertainment of Islamic law by the Shariah Advisory
Council; and

(b) to give effect to the advice or rulings of the Shariah
Advisory Council.

  (2)   In addition, the Bank may also specify standards relating to
any of the following matters which does not require the
ascertainment of Islamic law:

(a) Shariah governance including—

(i) functions and duties of the board of directors, senior
officers and members of the Shariah committee of an
institution in relation to compliance with Shariah;

(ii) fit and proper requirements or disqualifications of a
member of a Shariah committee; and

(iii) internal Shariah compliance functions; and

(b) any other matter in relation to the business, affair and
activity of an institution for the purposes of compliance with
Shariah.

  (3)   Every institution, its director, chief executive officer, senior
officer or member of a Shariah committee shall at all times comply
with the standards specified by the Bank under subsections (1) and
(2) which are applicable to such person.

  (4)   Every institution shall at all times—

(a) ensure that its internal policies and procedures on Shariah
governance are consistent with the standards specified by the
Bank under this section; and

(b) whether or not standards have been specified by the Bank
under this section, manage its business, affairs and activities
in a manner which is not contrary to Shariah.

  (5)   Every director, officer or a member of a Shariah committee of
an institution shall at all times comply with the internal policies and
procedures adopted by such institution to implement the standards
specified by the Bank under subsection (1) or (2).

  (6)   Any person who fails to comply with any standards specified

Page 41 of 187

under subsection (1), commits an offence and shall, on conviction,
be liable to imprisonment for a term not exceeding eight years or to a
fine not exceeding twenty-five million ringgit or to both.

Division 2

Shariah governance

Establishment of Shariah
committee

30.   (1)   A licensed person shall establish a Shariah committee for
purposes of advising the licensed person in ensuring its business,
affairs and activities comply with Shariah.

  (2)   For the purposes of subsection (1), where there is more than
one licensed person within a financial group, one of the licensed
persons may apply to the Bank for the establishment of a single
Shariah committee within the financial group and the Bank may
approve the application in writing if the Bank is satisfied that the
Shariah committee so established is capable of ensuring compliance
with Shariah by all licensed persons within the financial group.

  (3)   The Bank may require an approved person or operator of a
designated payment system to establish a Shariah committee for
purposes of advising the approved person or operator of a designated
payment system in ensuring their business, affairs and activities
comply with Shariah.

Appointment of Shariah
committee member

31.   No person shall be appointed, reappointed or accept any
appointment as a member of a Shariah committee unless such person
meets the requirements as set out in any standards as may be
specified by the Bank under subparagraph 29(2)(a)(ii) and has
obtained the prior written approval of the Bank.

Duties of Shariah
committee and its

members

32.   A Shariah committee and every member of the Shariah
committee shall have such duties and functions set out in any
standards as may be specified by the Bank under subparagraph 29(2)
(a)(i).

Cessation as member of
Shariah committee

33.   (1)   A member of a Shariah committee shall cease to be a
member if—

(a) such member resigns as a member;

(b) the institution, subject to the Bank’s prior written approval
under subsection (2), terminates the appointment of such
member;

(c) such member is disqualified pursuant to any standards
specified by the Bank under subparagraph 29(2)(a)(ii); or

(d) such member no longer meets the fit and proper
requirements as may be specified by the Bank under
subparagraph 29(2)(a)(ii) to the satisfaction of the Bank.

  (2)   A member of a Shariah committee who—

(a) resigns as a member; or

(b) becomes aware that he is disqualified pursuant to any

Page 42 of 187

standards specified by the Bank under subparagraph 29(2)(a)
(ii) and as such, pursuant to paragraph (1)(c), cease to be a
member,

shall notify the Bank of that fact and the reasons thereof immediately
or in any case not later than fourteen days of such circumstance.

  (3)   An institution shall not terminate the appointment of a member
of its Shariah committee unless the institution has obtained the prior
written approval of the Bank to do so.

  (4)   Subject to section 273, the Bank may, by an order in writing,
remove a member of a Shariah committee if the Bank is of the
opinion that—

(a) any of the circumstances set out in paragraph (1)(c) or (d)
has occurred in relation to that member and such member
remains to be a member of the Shariah committee; or

(b) such member has contravened any provision of this Act or
failed to comply with any standards applicable to him.

  (5)   The removal of a member of a Shariah committee under
subsection (4) shall be lawful and valid notwithstanding anything
contained in a contract of service or any other agreement relating to
his appointment and whether or not made or provided for under any
written law, and a person so removed from office shall not be
entitled to claim compensation for the loss of office.

Notice of cessation as
member of Shariah

committee

34.   (1)   Where a person ceases to be a member of a Shariah
committee of an institution pursuant to—

(a) paragraph 33(1)(a), (b) or (d); or

(b) paragraph 33(1)(c) if such disqualification is within the
institution’s knowledge,

the institution shall notify the Bank in writing of that fact and the
reasons of such cessation immediately or in any case not later than
fourteen days from the date of such cessation.

  (2)   Where a person ceases to be a member of a Shariah committee
under subsection 33(1) or is removed by the Bank under subsection
33(4), the institution shall appoint a new member of its Shariah
committee in accordance with section 31 within such period as may
be specified by the Bank.

Information to be
provided to Shariah

committee

35.   (1)   An institution and any director, officer or controller of such
institution shall—

(a) provide any document or information within its or his
knowledge, or capable of being obtained by it or him, which
the Shariah committee may require; and

(b) ensure that such document or information provided under
paragraph (a) is accurate, complete, not false or misleading
in any material particular,

to enable the Shariah committee to carry out its duties or perform its
functions under this Act.

  (2)   Except as provided in section 36, a member of a Shariah
committee shall not disclose any document or information furnished

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under subsection (1) to any other person.

Qualified privilege and
duty of confidentiality

36.   A member of a Shariah committee shall not be liable—

(a) for a breach of a duty of confidentiality between such
member and the institution in respect of—

(i) any reporting to the Bank; or

(ii) the discharge of his duties and performance of his
functions,

pursuant to any standards specified by the Bank under
subparagraph 29(2)(a)(i) which was done or made in good faith;
or

(b) to be sued in any court for defamation in respect of any
statement made by the member without malice in the
discharge of his duties under this Act.

Division 3

Audit on Shariah compliance

Appointment of person by
institution to conduct

audit on Shariah
compliance

37.   (1)   The Bank may require an institution to appoint any person
as the Bank may approve, to carry out an audit on Shariah
compliance by the institution.

  (2)   The person appointed under subsection (1) shall have such
duties and functions as may be specified by the Bank and shall
submit a report to the Bank on the audit carried out pursuant to this
section.

  (3)   The remuneration and expenses of the person appointed under
subsection (1) relating to any audit on Shariah compliance under this
section shall be borne by the institution.

  (4)   A person appointed under subsection (1) shall not be liable for
a breach of duty of confidentiality between such person and the
institution in respect of matters reported to the Bank pursuant to an
audit on Shariah compliance under this section.

Appointment of person by
Bank to conduct audit on

Shariah compliance

38.   (1)   Without prejudice to section 37, the Bank may appoint for
an institution any person to conduct an audit on Shariah
compliance—

(a) if the institution fails to appoint a person under subsection 37
(1);

(b) in addition to the person appointed under subsection 37(1);
or

(c) under any other circumstances as the Bank deems
appropriate for the purposes of compliance with Shariah by
the institution,

and the remuneration and expenses relating to such appointment
shall be borne by the institution.

  (2)   The person appointed under subsection (1) shall have such

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duties and functions as may be specified by the Bank and shall
submit a report to the Bank on the audit carried out pursuant to this
section.

  (3)   A person appointed under subsection (1) shall not be liable for
a breach of duty of confidentiality between such person and the
institution in respect of matters reported to the Bank pursuant to an
audit on Shariah compliance under this section.

PART V

PAYMENT SYSTEMS

Division 1

Designation of payment systems and Islamic payment instruments

Designation and
revocation of designation

of payment systems

39.   (1)   Where the Bank is of the opinion that a disruption in the
operations of the payment system could affect public confidence in
the overall payment systems of Malaysia or impact the monetary or
financial stability of Malaysia—

(a) in the case of an operator of a payment system who is
subject to the supervision or oversight of another supervisory
authority in Malaysia, the Minister on the recommendation
of the Bank and such supervisory authority; or

(b) in any other case, the Bank with the concurrence of the
Minister,

may, by an order published in the Gazette, designate such payment
system as a designated payment system.

  (2)   In the case of an operator of a payment system who is subject
to the supervision or oversight of another supervisory authority in
Malaysia, the Bank shall consult with such supervisory authority in
forming an opinion under subsection (1).

  (3)   If the circumstances in subsection (1) no longer apply, the
designation of a payment system may be revoked—

(a) in the case of an operator of a payment system who is
subject to the supervision or oversight of another supervisory
authority in Malaysia, by the Minister, on the joint
recommendation of the Bank and such supervisory authority;
or

(b) in any other case, by the Bank,

by an order published in the Gazette.

  (4)   The Bank and the supervisory authority shall regularly review
the status of the payment system designated under paragraph (1)(a),
to determine whether the circumstances under subsection (1), no
longer applies for purposes of making the joint recommendation
under paragraph (3)(a).

Operator of designated
payment system

40.   (1)   An operator of a designated payment system under the
Financial Services Act 2013 which has obtained the approval of the
Bank under subsection 15(1) of that Act may facilitate participants

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engaged in Islamic financial business to transfer, clear or settle funds
or securities.

  (2)   An operator of a designated payment system referred to in
subsection (1) shall be subject to and comply with—

(a) the provisions of this Act, in particular the provisions of
Parts IV, VI, IX, X and XIII, in so far as those provisions
relate to the business such operator is approved to carry on
under subsection 15(1) of the Financial Services Act 2013,
as if a reference in this Act to an “operator of a designated
payment system” is a reference to an operator of a
designated payment system which has obtained the approval
of the Bank under subsection 15(1) of the Financial Services
Act 2013; and

(b) any standards, notices, directions, conditions, specifications
or requirements specified or made under this Act relating to
the business such person is approved to carry on under
subsection 15(1) of the Financial Services Act 2013.

  (3)   The Minister may, on the recommendation of the Bank, by an
order published in the Gazette, provide that all or any provision of
this Act—

(a) shall not apply to an operator of a designated payment
system which has obtained the approval of the Bank under
subsection 15(1) of the Financial Services Act 2013; or

(b) shall apply to an operator of a designated payment system
which has obtained the approval of the Bank under
subsection 15(1) of the Financial Services Act 2013, with
such modifications consistent with the regulatory objectives
of this Act,

as may be set out in the order.

  (4)   Any person who contravenes any provision of this Act or of
any standards, notices, directions, conditions, specifications or
requirements specified or made by the Bank under this Act and
applied to it under subsection (2) commits an offence and shall be
liable to the same penalty applicable to a person convicted of an
offence under such provisions and if no offence is provided for such
contravention, the person commits a breach and the Bank may take
an action under paragraph 245(3)(b) in addition to other enforcement
actions that the Bank is empowered to take under this Act.

Designation of Islamic
payment instruments

41.   Where the Bank is of the opinion that—

(a) an Islamic payment instrument may be of widespread use as
a means of making payment and may affect the payment
systems in Malaysia; and

(b) it is necessary to maintain the integrity, efficiency and
reliability of the Islamic payment instrument,

the Bank may, with the concurrence of the Minister, by an order
published in the Gazette, designate such Islamic payment instrument
as a designated Islamic payment instrument.

Division 2

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Requirements for operation of payment systems and issuance of
designated Islamic payment instruments

Application of this act on
payment systems

42.   Unless otherwise prescribed by the Bank, this Act shall apply to
a person outside Malaysia who is an operator of a payment system
which accepts payment instructions or settlement instructions from
participants in Malaysia.

Power of bank to specify
standards for payment

systems

43.   (1)   The Bank may specify standards for payment systems—

(a) for promoting safety, integrity, efficiency or reliability of the
designated payment system, the payment system set out in
Part 1 of schedule 1 or the designated Islamic payment
instrument including facilitating interoperability, technical
specifications and security standards; or

(b) in the interest of current or prospective participants of the
designated payment system or the payment system set out in
Part 1 of schedule 1 or users.

  (2)   An operator of a designated payment system, approved
operator of a payment system or approved issuer of a designated
Islamic payment instrument shall at all times comply with the
standards specified by the Bank under subsection (1) which are
applicable to such operator or issuer.

Direction to participants
of designated payment

system

44.   The Bank may issue directions in writing to any participant of a
designated payment system if the Bank is of the opinion that it is
necessary for ensuring the integrity and proper management of the
designated payment system or it is in the interest of the public to do
so.

Operational arrangements 45.   (1)   An operator of a designated payment system, approved
operator of a payment system or approved issuer of a designated
Islamic payment instrument shall establish the following operational
arrangements:

(a) rules, procedures and requirements setting out the rights,
liabilities or any other obligations of—

(i) the operator and participants of the designated payment
system;

(ii) the approved operator of a payment system and its
participants; and

(iii) the approved issuer of a designated Islamic payment
instrument and its users,

including the risks that such participants or users may incur; and

(b) measures to ensure the safety, security and operational
reliability of the designated payment system, payment
system set out in Part 1 of schedule 1 or the designated
Islamic payment instrument including contingency
arrangements.

  (2)   In addition to the operational arrangements under subsection

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(1), an operator of a designated payment system or approved
operator of a payment system shall establish the following
operational arrangements:

(a) procedures, controls and measures for the management of
credit, liquidity or settlement risk, including rules
determining the time when a transfer order is final in the
case of payment systems that have been issued a certificate
of finality by the Bank under section 48; and

(b) criteria for participation in the designated payment system or
payment system set out in Part 1 of Schedule 1.

  (3)   Without limiting the generality of subsection (1), the approved
issuer of a designated Islamic payment instrument shall establish
measures to ensure prudent management of funds collected from the
users, including measures to ensure that such funds are always
available for repayment to the users of the designated Islamic
payment instrument.

Power of bank to inspect 46.   The Bank may, in considering whether—

(a) to designate or recommend to the Minister to designate a
payment system under section 39;

(b) to designate an Islamic payment instrument under section
41; or

(c) to recommend to the Minister to include an operation of a
payment system into Part 1 of schedule 1 under section 275,

inspect the premises, apparatus, equipment, machinery, documents
and transactions relating to the payment system or Islamic payment
instrument, upon giving a written notice to the operator or issuer.

Division 3

Finality of payment and netting arrangement

Interpretation 47.   For the purposes of this Division—

   “certificate of finality” means a certificate issued by the Bank to
any designated payment system under section 48;

   “certified designated payment system” means a designated
payment system that has been issued a certificate of finality by the
Bank which may include a payment system operated by the Bank, or
by any body corporate established or acquired by the Bank under the
Central Bank of Malaysia Act 2009 or by any person authorized by
the Bank;

   “insolvency administrator” includes a receiver, manager, receiver
and manager, liquidator, provisional liquidator, judicial manager,
curator, special administrator or any other person, however styled,
authorized under any law in or outside Malaysia to take control of a
person’s property for the benefit of that person’s creditors in the
event that the person is, or is likely to become, insolvent;

   “netting arrangement” means an arrangement in writing to convert
several claims or obligations into one net claim or one net obligation;

   “transfer order” means—

Page 48 of 187

(a) an instruction by a participant of a designated payment
system to place at the disposal of a recipient an amount of
money by means of account book-entry;

(b) an instruction which, when settled, results in the assumption
or discharge of a payment obligation as defined by the rules
of a designated payment system; or

(c) an instruction by a participant of a designated payment
system either to settle an obligation for the transfer of book-
entry securities or for the transfer of such securities.

Power of bank to issue
certificate of finality

48.   The Bank may, with the concurrence of the Minister, by an
order published in the Gazette, issue a certificate of finality to a
designated payment system where the following criteria are met:

(a) the payment system poses or is likely to pose a systemic
risk;

(b) the settlement of transfer order is effected within the
designated payment system itself; and

(c) the operator of the payment system has complied with the
requirements as may be specified by the Bank.

Revocation of certificate
of finality

49.   The Bank may, with the concurrence of the Minister, by an
order published in the Gazette, revoke a certificate of finality if the
Bank is of the opinion that—

(a) any of the criteria specified in section 48 is no longer met; or

(b) the operator of the certified designated payment system has
breached or contravened any provision of this Act.

Application of this
division

50.   (1)   The provisions of this Division shall apply to—

(a) any transfer order sent through a certified designated
payment system; and

(b) any netting arrangement, in respect of claims or obligations
arising from a transfer order that is final under subsection 52
(1), entered into between an operator and a participant or
between participants only in respect of a certified designated
payment system.

  (2)   Any written law relating to bankruptcy and insolvency shall
continue to apply, but where there is any conflict or inconsistency
between the provisions of this Division and the written law relating
to bankruptcy and insolvency, the provisions of this Division shall
prevail.

Transfer order made after
appointment of

insolvency administrator

51.   This Division shall not apply in relation to any transfer order
which is sent through a certified designated payment system after the
expiry of the day on which an insolvency administrator is appointed
in respect of an operator or a participant of a certified designated
payment system.

Finality of payment and 52.   (1)   A transfer order shall be valid and enforceable by and

Page 49 of 187

netting arrangement against an operator or a participant of a certified designated payment
system and shall be final and shall not be revoked, reversed or set
aside by any person from the time the transfer order is determined to
be final under the rules of the certified designated payment system
required to be established under paragraph 45(2)(a) and no order
shall be made by any court for the rectification or stay of such
transfer order.

  (2)   A netting arrangement shall be valid and enforceable and an
operator or a participant of a certified designated payment system
shall do whatever is permitted or required under the netting
arrangement in order to give effect to the netting arrangement.

  (3)   Any payment or settlement obligations owed to an operator or
a participant of a certified designated payment system under the
netting arrangement that has not been discharged—

(a) is provable in insolvency proceedings; and

(b) may be recovered for the benefit of creditors.

  (4)   Without limiting the generality of subsection 50(2), any
transfer order that is final and irrevocable under subsection (1) and
any netting arrangement that is valid and enforceable under
subsections (2) and (3), shall be given effect notwithstanding
anything to the contrary contained in—

(a) sections 223 and 224 of the Companies Act 1965 in relation
to the avoidance of dispositions of property;

Act 360.Act 587. (b) section 296 of the Companies Act 1965, section 59 of the
Bankruptcy Act 1967 [Act 360] or subsection 40(1) of the
Pengurusan Danaharta Nasional Berhad Act 1998 [Act 587]
in relation to the disclaiming of an onerous property;

(c) section 219 of the Companies Act 1965 and section 47 of the
Bankruptcy Act 1967 in relation to the time of
commencement of insolvency;

(d) section 293 of the Companies Act 1965 and section 53 of the
Bankruptcy Act 1967 in relation to undue preference; and

(e) section 222 of the Companies Act 1965 and section 10 of the
Bankruptcy Act 1967 in relation to the power to stay or
restrain proceedings.

Preservation of rights 53.   For the avoidance of doubt, the provisions of this Division shall
not restrict or preclude any person from enforcing his rights under
the law in so far as it does not affect the finality of the transfer order
or the validity and enforceability of a netting arrangement under this
Division.

Non-recognition of
insolvency order by

foreign court

54.   Notwithstanding any other written law, a court shall not
recognize or give effect to an order of a foreign court exercising
jurisdiction under any law of insolvency outside Malaysia in so far
as the making of the order would be inconsistent with or contrary to
the provisions of this Division.

Requirement to notify in
event of insolvency, etc.

55.   (1)   Where an operator of a certified designated payment
system—

Page 50 of 187

(a) is insolvent or is likely to become insolvent;

(b) has become or is likely to become unable to meet any or all
of its obligations; or

(c) has suspended payments or compounded with its creditors,

such operator shall immediately notify the participants of the
certified designated payment system.

  (2)   Where a participant of a certified designated payment
system—

(a) is insolvent or is likely to become insolvent;

(b) has become or is likely to become unable to meet any or all
of its obligations; or

(c) has suspended payments or compounded with its creditors,

such participant shall immediately notify the operator who shall
notify the other participants of the certified designated payment
system.

  (3)   Any person who contravenes subsection (1) or (2) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

PART VI

PRUDENTIAL REQUIREMENTS

Interpretation 56.   For the purposes of Divisions 1, 2, 3 and 4, “institution” refers
to an authorized person or operator of a designated payment system.

Division 1

Standards on prudential matters

Power of bank to specify
standards on prudential

matters

57.   (1)   The Bank may specify standards on prudential matters to
promote—

(a) the sound financial position of an institution; or

(b) integrity, professionalism and expertise in the conduct of the
business, affairs and activities of an institution.

  (2)   Without limiting the generality of subsection (1), standards
specified under that subsection may include standards relating to—

(a) capital adequacy;

(b) liquidity;

(c) corporate governance;

(d) risk management;

(e) related party transactions;

(f) maintenance of reserve funds;

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(g) takaful funds; and

(h) prevention of an institution from being used, intentionally or
unintentionally, for criminal activities.

  (3)   For purposes of paragraph (2)(e), “related party transactions”
means transactions with an institution involving—

(a) a director, officer or shareholder of the institution;

(b) a member of the Shariah committee of the institution;

(c) any person in a position to influence or control the institution
or affect the decisions of the institution;

(d) a relative or dependent of any person referred to in
paragraph (a), (b) or (c); or

(e) any other person as may be specified by the Bank, which in
the opinion of the Bank may cause the institution to be in a
conflict of interest situation.

Institution, director and
officer to comply with

standards

58.   (1)   Every institution shall at all times—

(a) comply with the standards as may be specified by the Bank
under subsection 57(1) which are applicable to such
institution;

(b) ensure that its internal policies and procedures are consistent
with the standards as may be specified by the Bank under
subsection 57(1); and

(c) whether or not standards have been specified by the Bank
under subsection 57(1), manage its business, affairs and
activities in a manner consistent with sound risk
management and governance practices which are effective,
accountable and transparent.

  (2)   Every director and officer of an institution shall at all times
comply with the internal policies and procedures adopted by such
institution including internal policies and procedures to implement
the standards as may be specified by the Bank under subsection 57
(1).

Single counterparty
exposure limit for

licensed person

59.   (1)   No licensed person shall have an exposure to a single
counterparty which exceeds the limit as may be specified by the
Bank under subsection 57(1).

  (2)   An exposure to a single counterparty referred to in subsection
(1) shall include an exposure to any group of persons connected to
such single counterparty but shall not include any exposure to, and
any exposure explicitly guaranteed by, the Bank or the Government.

  (3)   For the purposes of this section, the Bank may specify what
constitutes “connected”, “counterparty” or “exposure”.

Restrictions on payment
of dividend by licensed

person

60.   (1)   No licensed person shall declare or pay any dividend on its
shares except with the prior written approval of the Bank or where
the Bank has specified standards permitting the declaration of
payments of any dividend under subsection 57(1).

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  (2)   Where there is an application made by a licensed person for
approval under subsection (1) in respect of the proposed amount of
dividend to be declared, the Bank shall, in considering whether or
not to grant an approval on the proposed amount or approve a
reduced amount of dividend payment, have regard to the prevailing
and prospective financial condition of the licensed person including
its ability to comply with any standards as may be specified by the
Bank under paragraph 57(2)(a).

Maintenance of assets in
Malaysia by licensed

person

61.   The Bank may require a licensed person to hold at all times all
or such part of its assets, as may be specified by the Bank, in
Malaysia.

Division 2

Corporate governance

Interpretation 62.   For the purposes of this Division, “chairman” means chairman
of the board of directors.

Chairman, directors and
chief executive officer of

institution

63.   (1)   Every institution shall at all times have a chief executive
officer.

  (2)   Except with the prior written approval of the Bank—

(a) no licensed person shall appoint or elect, or reappoint or re-
elect any person as its chairman, director or chief executive
officer; and

(b) no person shall accept any appointment or election, or
reappointment or re-election as a chairman, director or chief
executive officer, of a licensed person.

  (3)   The licensed person shall submit an application in writing to
the Bank together with such documents or information as may be
specified by the Bank for the purposes of an approval under
subsection (2).

  (4)   An approved person or operator of a designated payment
system shall notify the Bank in writing of the appointment,
reappointment, election or re-election of its chairman, director or
chief executive officer and in the case of an approved Islamic
financial adviser, its representative, within seven days or such other
period as may be specified by the Bank together with such
documents or information as may be specified by the Bank.

Requirements to be
chairman, director, chief

executive officer or senior
officer

64.   (1)   An institution shall not appoint or elect, reappoint or re-
elect any person as a chairman, director, chief executive officer or
senior officer of the institution, unless such person—

(a) is an individual;

(b) is not disqualified under subsection 68(1); and

(c) has complied with the fit and proper requirements as may be
specified by the Bank under section 69.

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  (2)   No person shall accept any appointment or election,
reappointment or re-election as a chairman, director, chief executive
officer or senior officer of an institution, unless such person—

(a) is not disqualified under subsection 68(1); and

(b) has complied with the fit and proper requirements as may be
specified by the Bank under section 69.

  (3)   Unless the Bank otherwise approves, a chief executive officer
of an institution shall have his principal or only place of residence
within Malaysia and devote the whole of his professional time to the
service of the institution.

Functions and duties of
board of directors

65.   (1)   The business and affairs of an institution shall be managed
under the direction and oversight of its board of directors, subject to
this Act and any other written law which may be applicable to the
institution.

  (2)   Without limiting the generality of subsection (1), the board of
directors shall—

(a) set and oversee the implementation of business and risk
objectives and strategies and in doing so shall have regard to
the long term viability of the institution and reasonable
standards of fair dealing;

(b) ensure and oversee the effective design and implementation
of sound internal controls, compliance and risk management
systems commensurate with the nature, scale and complexity
of the business and structure of the institution;

(c) oversee the performance of the senior management in
managing the business and affairs of the institution;

(d) ensure that there is a reliable and transparent financial
reporting process within the institution;

(e) promote timely and effective communications between the
institution and the Bank on matters affecting or that may
affect the safety and soundness of the institution; and

(f) have due regard to any decision of the Shariah committee on
any Shariah issue relating to the carrying on of business,
affairs or activities of the institution.

  (3)   In carrying out its functions or duties under this Division—

(a) the board of directors of an institution shall have regard to
the interests of, as the case may be, depositors, investment
account holders and takaful participants of the institution or
participants; and

(b) the board of directors of a licensed takaful operator shall, in
the event of conflict between the interest of the takaful
participants and the shareholders, give priority to the interest
of the takaful participants.

Duties of directors 66.   (1)   A director of an institution shall at all times—

(a) act in good faith in the best interests of the institution;

(b) exercise reasonable care, skill and diligence with—

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(i) the knowledge, skill and experience which may reasonably
be expected of a director having the same responsibilities;
and

(ii) any additional knowledge, skill and experience which the
director has;

(c) only exercise powers conferred on him for the purposes for
which such powers are conferred;

(d) exercise sound and independent judgment; and

(e) comply with any standards specified by the Bank under
subsection 29(2) which are applicable to a director.

  (2)   Subsection (1) has effect in addition to, and not in derogation
of, any written law or rule of law relating to the duty or liability of a
director.

  (3)   Any director who contravenes paragraph (1)(c) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Duty to disclose interests
in material transaction or

material arrangement

67.   (1)   A director of an institution shall disclose to the board of
directors of the institution the nature and extent of his interest,
whether directly or indirectly, in a material transaction or material
arrangement with the institution.

  (2)   Whether or not a declaration under subsection (1) has been
made, a director who has, directly or indirectly, an interest in a
material transaction or material arrangement shall not be present at
the board meeting where the material transaction or material
arrangement is being deliberated by the board of directors.

  (3)   Where there is any change in the nature and extent of a
director’s interest in a material transaction or material arrangement
subsequent to the disclosure pursuant to subsection (1), the director
shall make a further disclosure of such changes in accordance with
subsection (1).

  (4)   For the purposes of subsection (1), the Bank may specify—

(a) the time, form, manner, procedures or any other incidental or
ancillary matters in which the disclosure under subsection
(1) is to be made; and

(b) what constitutes a material transaction or material
arrangement.

Disqualifications 68.   (1)   A person is disqualified from being appointed or elected,
reappointed or re-elected, accepting any appointment or election, or
holding office, as a chairman, director, chief executive officer or
senior officer of an institution if—

(a) he is an undischarged bankrupt, has suspended payments or
has compounded with his creditors whether in or outside
Malaysia;

(b) a charge for a criminal offence relating to dishonesty or
fraud under any written law or the law of any country,
territory or place outside Malaysia, has been proven against
him;

Page 55 of 187

(c) he is prohibited from being a director of a company or in any
way, whether directly or indirectly, be concerned or take part
in the management of a company in Malaysia pursuant to a
court order made under section 130A of the Companies Act
1965 and has not obtained any leave of the court under the
same section; or

(d) under any law relating to prevention of crime, drug
trafficking or immigration—

(i) an order of detention, supervision or deportation has been
made against that person; or

(ii) any form of restriction or supervision by bond or
otherwise, has been imposed on him.

  (2)   Where any criminal proceeding is pending in any court for any
offence referred to in paragraph (1)(b) against a chairman, director,
chief executive officer or senior officer of an institution, such person
shall not—

(a) act in such capacity, hold any other office or act in any other
capacity, in that institution; or

(b) be concerned with, take part or engage in, any manner,
whether directly or indirectly, in any activity, affairs or
business of, or in relation to, that institution,

except as may be permitted by the board of directors of the
institution subject to such conditions as may be specified by the
Bank.

  (3)   For the purposes of subsection (2), “criminal proceedings”
shall be deemed to be pending from the date that the accused person
is first charged in court for the offence until the date of the final
conclusion of the proceedings, whether in the court of original
jurisdiction or, in the event of any appeal by any party, in the court
of final appellate jurisdiction.

Fit and proper
requirements

69.   (1)   Without limiting the generality of section 57 and for the
purposes of paragraphs 64(1)(c) and 64(2)(b), the Bank may specify
fit and proper requirements to be complied with by a chairman,
director, chief executive officer or senior officer of an institution or
an Islamic financial adviser’s representative, which may include
minimum criteria relating to—

(a) probity, personal integrity and reputation;

(b) competency and capability; and

(c) financial integrity.

  (2)   Where an issue arises as to whether a chairman, director, chief
executive officer, senior officer or an Islamic financial adviser’s
representative has complied with the fit and proper requirements as
specified under subsection (1), the Bank shall have full discretion to
determine the issue.

Cessation from office 70.   (1)   Where a chairman, director, chief executive officer or
senior officer of an institution or an Islamic financial adviser’s
representative, as the case may be—

(a) becomes disqualified under subsection 68(1); or

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(b) no longer complies with any of the fit and proper
requirements as may be specified by the Bank under section
69,

such chairman, director, chief executive officer, senior officer or
Islamic financial adviser’s representative shall immediately cease to
hold office and act in such capacity.

  (2)   The institution shall immediately—

(a) in the case of paragraph (1)(a), terminate the appointment of
such chairman, director, chief executive officer, senior
officer or Islamic financial adviser’s representative; or

(b) in the case of paragraph (1)(b), remove such chairman,
director, chief executive officer, senior officer or Islamic
financial adviser’s representative from such office.

  (3)   Notwithstanding anything contained in any contract of service
or any other agreement relating to his appointment, the chairman,
director, chief executive officer, senior officer or Islamic financial
adviser’s representative terminated under paragraph (2)(a) shall not
be entitled to claim any compensation for such termination.

Notice of cessation from
office

71.   An institution shall notify the Bank in writing of the fact that a
person has ceased to be its chairman, director, chief executive
officer, senior officer or Islamic financial adviser’s representative, as
the case may be, pursuant to this Division or under any other
circumstances and of the reasons for the cessation within seven days
from the date of such cessation.

Division 3

Transparency requirements

Interpretation 72.   For the purposes of this Division—

   “accounting records” has the same meaning assigned to it in
subsection 4(1) of the Companies Act 1965;

Act 558.    “approved accounting standards” has the same meaning assigned
to it in section 2 of the Financial Reporting Act 1997 [Act 558];

   “financial statements” has the same meaning as set out in the
approved accounting standards issued or approved by the Malaysian
Accounting standards Board under the Financial Reporting Act
1997.

Maintenance of
accounting records and

information

73.   An institution shall maintain or cause to be maintained proper
accounting records and information in such manner as will
sufficiently enable the institution to prepare its financial statements
under section 74 and shall cause those records to be kept in such
manner as to enable them to be conveniently and properly audited.

Compliance with
approved accounting

standards

74.   (1)   An institution shall prepare its financial statements in
accordance with—

(a) the approved accounting standards subject to any standards

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as may be specified by the Bank under subsection 57(1); or

(b) in the absence of any approved accounting standards, any
standards as may be specified by the Bank under subsection
57(1).

  (2)   Where the financial statements of an institution are prepared in
accordance with paragraph (1)(a), such financial statements are
deemed to have been prepared in accordance with the approved
accounting standards.

Publication of financial
statements

75.   (1)   An institution shall publish its financial statements
prepared under subsection 74(1) from time to time subject to any
standards as may be specified by the Bank under subsection 57(1).

  (2)   Notwithstanding subsection (1), the Bank may require that the
financial statements shall be audited before any publication under
subsection (1).

Division 4

Auditors

Appointment of auditor
by institution

76.   (1)   Every institution shall appoint an auditor for each financial
year who meets such requirements or has such qualifications set out
in any standards as may be specified by the Bank under subsection
57(1).

  (2)   Except with the prior written approval of the Bank, no licensed
person shall appoint any person as its auditor and no person shall
accept any appointment as an auditor of a licensed person.

  (3)   An approved person or operator of a designated payment
system shall notify the Bank of the appointment of its auditor within
such period as may be determined by the Bank.

  (4)   For the purposes of this Division—

(a) a person shall not be deemed to be an officer of an institution
by reason only of him having been appointed as an auditor of
the institution; and

(b) the term “appointment” includes reappointment.

Appointment of auditor
by Bank

77.   Without prejudice to section 76, the Bank may appoint an
auditor for an institution—

(a) if the institution fails to appoint an auditor as required under
subsection 76(1); or

(b) to act with an existing auditor of the institution appointed
under subsection 76(1),

and the remuneration and expenses relating to such appointment
shall be borne by the institution.

Duties of auditor 78.   (1)   An auditor appointed under this Division shall—

(a) carry out an audit of the business, affairs and books of the

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institution;

(b) submit a report of such audit to the members of the
institution and the Bank;

(c) submit any additional information as may be specified by the
Bank relating to the audit conducted under paragraph (a);

(d) expand or extend the scope of the audit conducted under
paragraph (a) within such time, in such manner or to such
extent as may be specified by the Bank; or

(e) carry out any specific assessment of the business, affairs and
books of the institution as may be specified by the Bank and
submit a report to the Bank on such assessment.

  (2)   The remuneration and expenses of the auditor relating to any
expanded or extended scope of audit under paragraph (1)(d) or any
specific assessment under paragraph (1)(e) shall be borne by the
institution.

  (3)   Any audit carried out under subsection (1) shall be in
accordance with generally accepted auditing standards applicable in
Malaysia.

Notice of cessation as
auditor

79.   Where during the course of an audit on an institution, an auditor
appointed under section 76 or 77 has ceased to be an auditor of an
institution, the auditor shall notify the Bank in writing of that fact
and the reasons of such cessation within seven days from the date of
such cessation.

Information to be
provided to auditor

80.   An institution and any director, officer or controller of that
institution shall—

(a) provide the auditor appointed under section 76 or 77 all
information within its or his knowledge or capable of being
obtained by it or him which the auditor may require; and

(b) ensure that all such information provided under paragraph
(a) is accurate, complete, not false or misleading in any
material particular,

to enable the auditor to carry out his duties under this Act.

Reporting obligations of
auditor

81.   An auditor shall report such matter to the Bank immediately in
writing if, in the course of carrying out his duties as an auditor of an
institution under this Act, he is satisfied that—

(a) there has been a breach or contravention of any provision of
this Act or a non-compliance of any standards as may be
specified by the Bank under this Act which may have a
material effect on the financial position of the institution;

(b) an offence involving fraud or dishonesty under any written
law has been committed by the institution or by any director
or officer of the institution;

(c) any irregularity which may have a material effect on the
financial position of the institution, including any
irregularity which jeopardizes or may jeopardize the interests
of the depositors, investment account holders, takaful
participants, creditors of the institution, participants or users,

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or any other serious irregularity, has occurred;

(d) he is unable to confirm that claims of depositors, investment
account holders, takaful participants, creditors of the
institution, participants or users, as the case may be, are
covered by the assets of the institution or assets attributable
to the investment accounts or takaful fund, managed by the
institution, as the case may be;

(e) there is any weakness in the internal controls which is
relevant to the financial reporting process undertaken by the
institution; or

(f) the financial position of the institution is likely to be or has
been materially affected by any event, conduct of activity by
the institution or any weakness in the internal controls of the
institution.

Qualified privilege and
duty of confidentiality

Act 498.

82.   (1)   Subsection 145(1) shall not apply to any documents or
information relating to the affairs or account of any customer of an
Islamic financial institution subject to such conditions as may be
specified by the Bank, disclosed by an auditor of an Islamic financial
institution to the Audit Oversight Board established under the
Securities Commission Act 1993 [Act 498] or an officer or other
person authorized in writing by the Audit Oversight Board to
perform the responsibilities of the Audit Oversight Board.

  (2)   An auditor of an institution shall not be liable—

(a) for a breach of a duty of confidentiality between the auditor
and the institution in respect of any reporting to the Bank
done in good faith under this Division; or

(b) to be sued in any court for defamation in respect of any
statement made by the auditor without malice in the
discharge of his duties under this Act.

Division 5

Appointed actuaries

Appointment of actuary
by licensed takaful

operator

83.   (1)   Every licensed takaful operator shall appoint an actuary in
respect of a family takaful business or general takaful business
carried on by the licensed takaful operator.

  (2)   Any actuary to be appointed under subsection (1) shall meet
such requirements or have such qualifications as set out in any
standards as may be specified by the Bank under subsection 57(1).

  (3)   Except with the prior written approval of the Bank, no licensed
takaful operator shall appoint any person as its actuary under
subsection (1) and no person shall accept such appointment.

  (4)   An appointment under subsection (1) shall be for each
financial year or such longer period as approved by the Bank.

Appointment of actuary
by Bank

84.   Without prejudice to section 83, the Bank may appoint an
actuary for a licensed takaful operator if the licensed takaful operator
fails to appoint an actuary as required under subsection 83(1) and the

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remuneration and expenses relating to such appointment shall be
borne by the licensed takaful operator.

Duties of appointed
actuary

85.   An appointed actuary shall have such duties and functions set
out in any standards as may be specified by the Bank under
subsection 57(1).

Cessation as appointed
actuary

86.   A person shall cease to be the appointed actuary of a licensed
takaful operator if—

(a) such person resigns from office;

(b) the licensed takaful operator terminates his appointment; or

(c) such person, in the opinion of the Bank, no longer meets the
requirements or cease to have the qualifications as may be
specified by the Bank under subsection 83(2).

Notice of cessation as
appointed actuary

87.   (1)   Where a person ceases to be an appointed actuary of a
licensed takaful operator under section 86, such person shall notify
the Bank in writing of that fact and the reasons of such cessation not
later than seven days from the date of such cessation.

  (2)   Where a person ceases to be the appointed actuary of a
licensed takaful operator under subsection (1), such takaful operator
shall appoint another person as its appointed actuary under
subsection 83(1) not later than such period as may be specified by
the Bank from the date of the cessation.

Information to be
provided to appointed

actuary

88.   A licensed takaful operator and any director, officer or
controller of such licensed takaful operator shall—

(a) provide the appointed actuary all information within its or
his knowledge or capable of being obtained by it or him
which the appointed actuary may require; and

(b) ensure that all such information provided under paragraph
(a) is accurate, complete, not false or misleading in any
material particular,

to enable the appointed actuary to carry out his duties and functions
under this Act.

Qualified privilege and
duty of confidentiality

89.   An appointed actuary shall not be liable—

(a) for a breach of a duty of confidentiality between the
appointed actuary and a licensed takaful operator in respect
of—

(i) any reporting to the Bank; or

(ii) the discharge of his duties and performance of his
functions,

pursuant to any standards as may be specified under
subsection 57(1) which was done or made in good faith; or

(b) to be sued in any court for defamation in respect of any

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statement made by the appointed actuary without malice in
the discharge of his duties under this Act.

Division 6

Takaful funds and shareholders’ fund

Establishment and
maintenance of takaful

funds

90.   A licensed takaful operator shall establish and maintain one or
more takaful funds for any class or description of its takaful business
as may be specified by the Bank.

Takaful funds to be
separate from

shareholders’ fund

91.   A licensed takaful operator shall keep any takaful fund
established and maintained under section 90 separate from its
shareholders’ fund.

Requirements relating to
takaful funds

92.   (1)   A takaful fund established under section 90 shall be
maintained and managed by a licensed takaful operator on behalf of
and in the best interests of the takaful participants and the licensed
takaful operator shall—

(a) pay into a takaful fund all receipts in respect of takaful
certificates to which the takaful fund relates and which are
issued by it or under which the takaful fund has undertaken
liability, including all income of that takaful fund;

(b) maintain at all times assets in a takaful fund of a value
equivalent to or higher than the liabilities of that takaful
fund;

(c) apply the assets of a takaful fund only to meet the liabilities
and expenses properly incurred by that takaful fund; and

(d) comply with such other requirements as may be specified by
the Bank under paragraph 57(2)(g) including requirements
on the types of assets to be, or not to be included, as assets of
a takaful fund.

  (2)   For the purposes of subsection (1), the Bank may specify what
constitutes “receipts”, “income”, “liabilities” or “expenses” of the
takaful fund which are attributable to the business to which a takaful
fund or takaful certificate relates, and the manner to determine or
value the receipts, income, assets, liabilities or expenses.

  (3)   Unless the Bank otherwise approves, a licensed takaful
operator shall maintain a takaful fund established under section 90 so
long as it is under liability in respect of any takaful certificate or
takaful claim relating to that takaful fund.

Requirements relating to
shareholders’ fund in

respect of takaful funds

93.   (1)   A licensed takaful operator shall comply with any
requirements relating to its shareholders’ fund which are attributable
to the business to which a takaful fund or takaful certificate relates as
may be specified by the Bank.

  (2)   For the purposes of subsection (1), the Bank may specify what
constitutes “receipts”, “income”, “assets”, “liabilities” or “expenses”
of the licensed takaful operator which are attributable to the business
to which a takaful fund or takaful certificate relates, and the manner

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to determine or value the receipts, income, assets, liabilities or
expenses.

Withdrawal from takaful
funds

94.   A licensed takaful operator shall not make any withdrawal from
a takaful fund, whether from the surplus or otherwise of that takaful
fund, unless—

(a) it has complied with such requirements on withdrawals as
may be specified by the Bank;

(b) the withdrawal does not impair the sustainability of the
takaful fund to meet its liabilities; and

(c) the interests and fair treatment of takaful participants,
including their reasonable expectations, have been given due
regard.

Deficiency of takaful
funds

95.   Where the value of the assets of the takaful fund is less than the
value specified under paragraph 92(1)(b), the licensed takaful
operator shall provide qard or other forms of financial support to the
takaful fund from the shareholders’ fund for an amount and on such
terms and conditions as may be specified by the Bank.

Assumption of risk 96.   (1)   No licensed takaful operator shall cause any takaful fund
which it operates to assume any risk in respect of such description of
takaful certificate as may be prescribed by the Bank unless and until
the takaful contribution payable is received by the licensed takaful
operator in such manner and within such time as may be prescribed
by the Bank.

  (2)   Where the takaful contribution payable under subsection (1) is
received by a person on behalf of a licensed takaful operator, the
receipt shall be deemed to be receipt by the licensed takaful operator
for the purpose of that subsection and the onus of proving that the
takaful contribution was received by a person who was not
authorized to receive the takaful contribution shall lie on the licensed
takaful operator.

Division 7

Subsidiaries

Establishment or
acquisition of subsidiaries
and acquisition or holding

of material interest in
corporation

97.   (1)   No authorized person shall—

(a) establish or acquire a subsidiary in or outside Malaysia; or

(b) acquire or hold any material interest in any corporation,

without the prior written approval of the Bank.

  (2)   The Bank may specify what constitutes “material interest” for
the purposes of paragraph (1)(b).

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PART VII

OWNERSHIP, CONTROL AND TRANSFER OF BUSINESS

Application and non-
application

98.   (1)   Divisions 1 and 2 shall apply to a licensed person
incorporated in Malaysia.

  (2)   Sections 99, 100, 101, 111 and 112 shall not apply to the
Malaysia Deposit insurance corporation, its subsidiary, bridge
institution or any person appointed under paragraph 99(1)(c) or
section 106 of the Malaysia Deposit Insurance Corporation Act
2011, where such person is exercising its powers under that Act.

Division 1

Interest in shares of licensed person

Acquisition of interest in
shares requiring approval

99.   (1)   Subject to section 104 and except with the prior written
approval of the Bank, no person—

(a) shall enter into an agreement or arrangement, to acquire any
interest in shares of a licensed person by which, if the
agreement or arrangement is carried out, he would hold
(together with any interest in shares of that licensed person
which are already held by such person) an aggregate interest
of five per cent or more in the shares of the licensed person;
or

(b) who has obtained an approval of the Bank under paragraph
102(3)(a), or the Minister under subsection 102(6) in respect
of the prohibition under subsection (2), as the case may be,
shall enter into any subsequent agreement or arrangement,
by which, if the agreement or arrangement is carried out, he
would hold an aggregate interest in shares of a licensed
person of, or exceeding—

(i) any multiple of five per cent; or

(ii) the percentage holding for a mandatory offer under the
Malaysian code on Take-Overs and Mergers prescribed
under section 217 of the Capital Markets and Services
Act 2007.

  (2)   Notwithstanding subsection (1), no person shall enter into an
agreement or arrangement to acquire any interest in shares of a
licensed person by which, if the agreement or arrangement is carried
out, he would hold (together with any interest in shares of that
licensed person which are already held by such person) an aggregate
of more than fifty per cent of the interest in shares of the licensed
person, without obtaining the prior written approval of the Minister,
on the recommendation of the Bank.

  (3)   For the avoidance of doubt, a person shall not be required to
obtain—

(a) the approval of the Bank—

(i) under subsection (1), for any subsequent acquisition of
interests in the shares of a licensed person, if—

(A) such person has already obtained the approval of the

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Bank under that subsection; and

(B) such acquisition will result in the person holding
interest in shares which is less than any multiple of
five per cent; or

(ii) under subparagraph (1)(b)(i), if the approval of the
Minister under subsection (2) is also required for such
acquisition; or

(b) the approval of the Minister under subsection (2) for any
subsequent acquisition of interests in the shares of a licensed
person if such person has already obtained the approval of
the Minister under subsection 102(6) to hold an aggregate of
more than fifty per cent of interest in shares of the licensed
person.

Control over licensed
person prohibited in some

cases

100.   (1)   Subject to subsection (2), no person shall have control
over a licensed person, unless such person obtains the prior written
approval of the Minister, on the recommendation of the Bank.

  (2)   Subsection (1) shall not apply to—

(a) any director or chief executive officer of a licensed person in
respect of the carrying out of his duties and functions in the
management of the licensed person; and

(b) a person who has obtained an approval of the Minister under
subsection 102(6) to hold more than fifty per cent of the
interest in shares of the licensed person.

Disposal of interest in
shares requiring approval

101.   Except with the prior written approval of the Minister, on the
recommendation of the Bank, no person who has an aggregate
interest in shares of a licensed person of—

(a) more than fifty per cent; or

(b) fifty per cent or less but has control over the licensed person,

shall enter into an agreement or arrangement to dispose any interest
in shares of a licensed person by which, if the agreement or
arrangement is carried out, such disposal would result in the person
holding an interest in shares of less than fifty per cent or in any way
ceasing to have control over the licensed person.

Application procedures
for section 99, 100 or 101

102.   (1)   An application for an approval of—

(a) the Bank under subsection 99(1); or

(b) the Minister under subsection 99(2) or 100(1), or section
101,

as the case may be, shall be made by submitting the application to
the Bank together with such documents or information as may be
specified by the Bank.

  (2)   In assessing the suitability of an applicant for the purposes
of—

(a) granting an approval of the Bank under subsection 99(1); or

(b) recommending to the Minister under subsection 99(2) or 100

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(1),

the Bank shall take into consideration matters that the Bank
considers relevant including any of the factors set out in Schedule 6,
and any standards as may be specified by the Bank under subsection
103(1).

  (3)   Upon making an assessment under subsection (2) and where
the Bank is satisfied with the suitability of the applicant, the Bank—

(a) may approve an application in respect of subsection 99(1),
with or without conditions; or

(b) may make a recommendation to the Minister to approve the
application in respect of subsection 99(2) or 100(1), with or
without conditions.

  (4)   Where an application is made under subsection (1) for an
approval of the Minister in respect of section 101, the Bank shall
consider the application and may make a recommendation to the
Minister to grant the approval if the Bank is of the opinion that it
would not be detrimental to the safety and soundness of the licensed
person.

  (5)   The Bank shall notify the applicant in writing if the Bank does
not make a recommendation to the Minister under paragraph (3)(b)
or subsection (4).

  (6)   Where the Bank makes a recommendation pursuant to
paragraph (3)(b) or subsection (4), the Minister may approve the
application, with or without conditions, or reject the application.

  (7)   The Minister, on the recommendation of the Bank, in the case
of an approval under subsection (6), or the Bank, in the case of an
approval under paragraph (3)(a), may, at any time amend or revoke
any condition imposed on such approval under subsection (6) or
paragraph (3)(a), as the case may be.

  (8)   The Bank shall notify the applicant of its decision under
paragraph (3)(a) or the decision of the Minister under subsection (6),
as the case may be.

  (9)   The Bank may, at any time by notice in writing, require a
person who has obtained the approval of the Bank under paragraph
(3)(a) or the Minister under subsection (6) in respect of subsection
99(2) or 100(1), to submit any information or particulars of any share
acquired or held directly or indirectly either for his own benefit or
any other person.

  (10)   Any person who has been served with a notice under
subsection (9) shall submit to the Bank such information and
particulars as may be specified by the Bank.

Power of Bank to specify
standards on shareholder

suitability

103.   (1)   The Bank may specify standards on shareholder
suitability to give full effect to Schedule 6.

  (2)   Any person who has obtained the approval of the Bank in
under paragraph 102(3)(a) or the Minister under subsection 102(6) in
respect of subsection 99(2) or 100(1), shall at all times comply with
the standards as may be specified under subsection (1) to the
satisfaction of the Bank.

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Maximum permissible
holdings

104.   (1)   Unless with the prior written approval of the Bank, no
individual shall hold more than ten per cent of interest in shares of a
licensed person.

  (2)   The Bank may grant an approval under subsection (1) if the
Bank is satisfied that—

(a) the aggregate holding of interest in shares of the licensed
person by the individual would not result in him having the
power to exercise control over the licensed person; and

(b) such individual has given a written undertaking that he will
not, either directly or indirectly through any person
connected to him, exercise any control over the licensed
person.

  (3)   Section 270 shall apply to a written undertaking given under
this section.

Notification on
acquisition or disposal of

interest in shares of
licensed person

105.   (1)   Where it comes to the knowledge of a director or an
officer of a licensed person or a financial holding company that—

(a) any agreement or arrangement as referred to in section 99 or
101 has been or is about to be effected; or

(b) any person approved by the Bank under paragraph 102(3)(a)
or the Minister under subsection 102(6) in respect of
subsection 99(2) or 100(1), has failed to comply or is likely
to fail to comply with standards as may be specified under
subsection 103(1),

the director or officer shall immediately notify the Bank of all such
information which is within his knowledge.

  (2)   No director or officer shall be liable to any action for
defamation at the suit of any person or be subject to any disciplinary
proceedings in respect of the notification under subsection (1) made
by the director or officer without malice.

Division 2

Action by Bank in event of breach

Order against defaulting
persons

106.   (1)   Where the Bank is satisfied that any person (in this
section referred to as “the defaulting person”)—

(a) has breached section 99, 100, 101 or 104;

(b) has failed to comply with any condition imposed pursuant to
the approval of the Bank or the Minister, as the case may be,
under section 99, 100, 101 or 104;

(c) has failed to comply with any standards as may be specified
by the Bank under subsection 103(1); or

(d) has failed to comply with an undertaking provided to the
Bank under subsection 104(2),

the Bank may exercise its powers under subsection (2) as may be
applicable or appropriate in the circumstances of the breach or non-
compliance.

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  (2)   Subject to section 273, where any of the circumstances
described in subsection (1) exists, the Bank may make the following
order:

(a) in respect of any shares which are the subject of the breach
or non-compliance—

(i) prohibit the transfer of, or the carrying out of the
agreement to transfer, such shares, or, in the case of
unissued shares, prohibit the transfer of, or the carrying
out of the agreement to transfer, the right to be issued
with such unissued shares;

(ii) prohibit the exercise of any voting rights in respect of
such shares;

(iii) prohibit the issue of any further shares in right of such
shares or in pursuance of any offer made to their holder;

(iv) except in a liquidation, prohibit the payment of any sum
due from the licensed person on such shares, whether in
respect of capital or otherwise; or

(v) direct the defaulting person to surrender the shares to the
Bank within a certain period as may be specified by the
Bank; or

(b) in respect of a breach of section 100, direct the defaulting
person to take such necessary actions as may be specified by
the Bank in order to cease exercising or to relinquish its
control over a licensed person.

  (3)   An order made under subsection (2) shall be served on the
defaulting person as soon as is practicable, and may be published by
the Bank in such manner as the Bank deems fit.

  (4)   Where a defaulting person has been served with an order under
subsection (2), he shall notify any person for the time being holding
any shares to which such order applies, any other person specified in
the order or any person to whom the order is directed.

  (5)   An order under subsection (2) shall be binding on the
defaulting person, any person for the time being holding any shares
to which such order applies and any other person specified in the
order or any person to whom the order is directed, notwithstanding—

(a) anything contained in any constituent documents of the
licensed person; or

(b) anything contained in any contract entered into by such
persons affecting the shares relating to the licensed person.

  (6)   The Bank may give such instructions or directions to the
directors or officers of the licensed person as may be necessary or
requisite to give effect to any order of the Bank under this section, or
as may be incidental, ancillary or consequential to such order.

  (7)   Any transaction entered into by the defaulting person,
including any agreement or arrangement in relation to any shares,
interest in shares, or security, which is in contravention of any order
under subsection (2) or of any instructions or directions given by the
Bank under subsection (6), shall be void and of no effect.

  (8)   The satisfaction of the Bank under subsection (1) that a person
has breached or failed to comply with section 99, 100, 101 or 104 or
standards specified by the Bank under subsection 103(1), may be

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arrived at regardless that there has been no exercise of any action in
respect of such breach or non-compliance.

  (9)   A person who fails to comply with an order issued under
subsection (2) or contravenes subsection (4) commits an offence and
shall, on conviction, be liable to imprisonment for a term not
exceeding eight years or to a fine not exceeding twenty-five million
ringgit or to both.

Additional provisions
relating to order under

subparagraph 106(2)(a)
(v)

107.   (1)   After considering the representation made by the
defaulting person under section 273 and where the Bank confirms an
order made under subparagraph 106(2)(a)(v), the Bank may dispose
of the shares surrendered to it pursuant to the order made under that
subparagraph to such persons and to such extent as shall be
consistent with the same being held lawfully by the person who
acquires the shares under this Act.

  (2)   The proceeds of the disposal of the shares under subsection (1)
shall be paid into the High Court, and any person claiming to be
beneficially entitled to the whole or any part of such proceeds may,
within thirty days of such payment into the High Court, apply to a
judge of the High Court in chambers for payment out of the same to
him.

Division 3

Interest in shares of approved person

Interpretation 108.   For the purposes of this Division, “an approved person” does
not include an approved operator of a payment system and approved
issuer of a designated Islamic payment instrument.

Acquisition of interest in
shares of approved person

109.   (1)   Where a person enters into an agreement or arrangement
to acquire any interest in shares of an approved person, by which, if
the agreement or arrangement is carried out, he would hold, together
with any interest in shares of the approved person which were then
already held by him, an aggregate interest in shares of not less than
five per cent of the shares of the approved person, such person shall
notify the Bank of such fact upon entering into such agreement or
arrangement within the period as may be specified by the Bank.

  (2)   In addition to subsection (1), no person shall enter into any
agreement or arrangement for the purpose of acquiring interest in
shares pursuant to subsection (1), if such acquisition will result in a
change in the control of an approved person, unless such person
obtains the prior written approval of the Bank upon entering into
such agreement or arrangement.

  (3)   The Bank may specify standards on shareholder suitability to
give full effect to subsections (1) and (2).

  (4)   Any person who has notified the Bank under subsection (1) or
obtained the approval of the Bank under subsection (2), shall at all
times comply with the standards specified by the Bank under
subsection (3) to the satisfaction of the Bank.

  (5)   For the purposes of this section, the Bank may, at any time by
notice in writing, require a person who has notified the Bank under

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subsection (1) or obtained the approval of the Bank under subsection
(2) to submit any information or particulars of any share acquired or
held directly or indirectly either for his own benefit or any other
person.

  (6)   Any person who has been served with a notice under
subsection (5) shall submit to the Bank such information and
particulars as may be specified by the Bank.

Division 4

Transfer of business, reconstruction or amalgamation of licensed
person

Interpretation 110.   For the purposes of this Division—

   “security” includes any means of securing payment or discharge of
a debt or liability, whether present or future, or whether vested or
contingent, a charge, whether legal or equitable, a bill of exchange,
guarantee, lien or pledge, whether actual or constructive,
hypothecation, indemnity and undertaking;

   “transferee” means a person, including a licensed person, to which
the whole or any part of the licensed business of a transferor is
transferred under a business transfer scheme;

   “transferor” means a licensed person which transfers the whole or
any part of its licensed business under a business transfer scheme.

Approval required for
reconstruction or

amalgamation of licensed
person

111.   No person shall enter into an agreement or arrangement for the
reconstruction or amalgamation under the Companies Act 1965 of a
licensed person except with the prior written approval of the
Minister, on the recommendation of the Bank.

Approval required for
business transfer scheme

112.   (1)   No person shall enter into an agreement or arrangement
for a scheme to transfer the whole or any part of the business of a
licensed person, except with the prior written approval of the Bank.

  (2)   For the purposes of subsection (1), in the case of a licensed
international takaful operator or professional retakaful operator
which is a foreign institution, a reference to “business” in subsection
(1) is a reference to its Malaysian business as may be specified by
the Bank.

  (3)   The transferor and transferee shall jointly submit an
application for the approval of the Bank together with such
documents or information as may be specified by the Bank.

  (4)   Where an agreement or arrangement for a business transfer
scheme proposes to transfer the whole business, or a material part of
the business of a licensed person, the Bank shall, prior to giving
approval—

(a) be satisfied that the proposed agreement or arrangement is
not prejudicial to—

(i) the interests of any person likely to be affected by the
scheme; and

(ii) the safety and soundness of such licensed person; and

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(b) obtain the concurrence of the Minister in respect of the
proposed agreement or arrangement.

  (5)   For the purpose of subsection (4), the Bank may, after
consultation with the Minister, specify what constitutes a material
part of the business of a licensed person.

  (6)   The Bank may approve an application submitted under
subsection (3), with or without conditions, or reject the application.

  (7)   The Bank shall notify the transferor and transferee of its
decision under subsection (6) in writing.

Notification of business
transfer scheme

113.   (1)   Before an application is made to the High Court under
subsection 114(1), a transferor shall publish in the Gazette a notice
stating its intention to make the application to the High Court for
confirmation of the business transfer scheme.

  (2)   In addition to the notice under subsection (1), the Bank may
require the transferor to give such other notice in respect of the
business transfer scheme and for such purpose, the Bank may specify
the following requirements:

(a) persons to whom, and when such notices shall be given;

(b) the form or manner of the notices to be given; and

(c) the period within which a person specified under paragraph
(a) may object to the proposed scheme.

  (3)   Where any person files an objection to the proposed scheme,
the transferor, with the approval of the Bank, may modify the
scheme.

Application to High Court
for confirmation of

business transfer scheme

114.   (1)   Upon obtaining the approval of the Bank under
subsection 112(6), the transferor and transferee may make an
application to the High Court for confirmation of the business
transfer scheme.

  (2)   An application to the High Court with respect to any matter
connected with a business transfer scheme may be made by a person,
who in the opinion of the High Court, is likely to be affected by the
scheme, at any time before the High Court grants an order under
subsection (3) confirming the scheme.

  (3)   The High Court may confirm the business transfer scheme by
granting an order in the terms applied for, or with modifications to
the terms applied, or refuse to confirm the scheme.

  (4)   When the High Court makes an order confirming the business
transfer scheme under subsection (3) after hearing all parties
concerned, the High Court shall fix a date, to be applied for by the
transferor and transferee and to be known as the transfer date, on
which the business transfer scheme shall take effect.

Bank to be party to
proceedings

115.   (1)   A person making an application to the High Court under
subsection 114(2) in relation to a business transfer scheme shall—

(a) deliver a copy of the application to the Bank;

(b) give notice to the Bank of all proceedings relating to the
application; and

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(c) give to the Bank a copy of any document relating to the
proceedings,

at the same time as the proceedings are instituted or the document is
lodged, in the High Court or the document is served on a party to the
proceedings.

  (2)   The Bank shall be entitled to be heard in proceedings relating
to the application under subsection (1).

  (3)   Notwithstanding that the Bank has given its approval to a
business transfer scheme under subsection 112(6), the Bank may
propose any modification to the scheme.

Orders sought by
transferor and transferee

116.   (1)   In an application made under subsection 114(1), the
transferor and transferee may seek all or any of the following orders:

(a) for the transferor’s rights and title to the assets to be
transferred to the transferee under a business transfer scheme
without the need to effect the transfer of rights and titles to
each asset individually;

(b) in relation to an Islamic banking business transfer scheme or
international Islamic banking business transfer scheme, for
any account between the transferor and its customer to
become an account between the transferee and the customer,
subject to the same conditions and incidents existed between
the transferor and its customer, and such account to be
deemed for all purposes to be a single continuing account;

(c) in relation to a takaful business transfer scheme or an
international takaful business transfer scheme, for the
transferee to be fully responsible for liabilities transferred by
the business transfer scheme whether arising out of takaful
certificates or otherwise as though the liabilities were
originally assumed by the transferee without the need for the
transferee to confirm each liability individually;

(d) for any existing instrument, whether in the form of a deed,
will or otherwise, or order of any court, under or by virtue of
which any property became vested in the transferor, to be
construed and to have effect as if for any reference therein to
the transferor there were substituted a reference to the
transferee;

(e) for any existing agreement to which the transferor was a
party to have effect as if the transferee had been a party
thereto instead of the transferor;

(f) for any existing instruction, order, direction, mandate, power
of attorney, authority, undertaking or consent, whether or not
in relation to an account, given to the transferor, either alone
or jointly with another person, to have effect, in respect of
anything due to be done as if given to the transferee either
alone or, as the case may be, jointly with the other person;

(g) for any negotiable instrument or order for payment of money
drawn on, or given to, or accepted or endorsed by, the
transferor or payable at the office of the transferor, whether
so drawn, given, accepted or endorsed before, on, or after,
the transfer date, to have the same effect on and from the
transfer date, as if it had been drawn on, or given to, or
accepted or endorsed by, the transferee or were payable at

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the office of the transferee;

(h) for the custody of any document, goods or thing held by the
transferor as bailee immediately before the transfer date to
pass to the transferee and the rights and obligations of the
transferor under any contract of bailment relating to any such
document, goods or thing to be transferred to the transferee;

(i) for any security held immediately before the transfer date by
the transferor, or by a nominee of, or trustee for, the
transferor, as security for the payment or discharge of any
liability of any person, to be held by the transferee or, as the
case may be, to be held by that nominee or trustee as the
nominee of, or trustee for, the transferee, and to the extent of
those liabilities, be available to the transferee as security for
the payment or discharge of those liabilities; and where any
such security extends to future advances or future liabilities,
to be held by, and to be available as aforesaid to, the
transferee as security for future advances by, and future
liabilities to, the transferee in the same manner in all respects
as future advances by, or future liabilities to, the transferor
were secured thereby immediately before the transfer date;

(j) where any right or liability of the transferor is transferred to
the transferee, for the transferee to have the same rights,
powers and remedies (and in particular the same rights and
powers as to taking or resisting legal proceedings or making
or resisting applications to any authority) for ascertaining,
protecting or enforcing that right or resisting that liability as
if it had at all times been a right or liability of the transferee,
including those rights or liabilities in respect of any legal
proceedings or applications to any authority pending
immediately before the transfer date by or against the
transferor;

(k) any judgment or award obtained by or against the transferor
and not fully satisfied before the transfer date to be
enforceable by or, as the case may be, against the transferee;
and

(l) for all such incidental, consequential and supplemental
orders as are necessary to secure that the business transfer
scheme shall be fully and effectively carried out.

  (2)   Where the order for confirmation of the High Court under
subsection 114(3) provides for the transfer of any business, including
assets and liabilities, vested in or held by the transferor, either alone
or jointly with any other person, then, by virtue of the order, that
business, including assets and liabilities shall, on and from the
transfer date, become vested in or held by the transferee either alone
or, as the case may be, jointly with such other person, and the order
shall have effect according to its terms notwithstanding anything in
any law and shall be binding on all persons affected by it, regardless
that the person is not a party to the proceedings under this Division
or any other related proceedings, or had no notice of the proceedings
under this Division or of other related proceedings.

  (3)   Where an order of the High Court under subsection 114(3)
vests any alienated land, or any share or interest in any alienated
land, in the transferee—

Act 56/1965. (a) the High Court shall, where such alienated land is in
Peninsular Malaysia, pursuant to subsection 420(2) of the

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National Land Code [Act 56 of 1965], cause a copy of the
order to be served on the Registrar of Titles or the Land
Administrator, as the case may be, immediately after the
making of the order so that the Registrar of Titles or the
Land Administrator, as the case may be, gives effect to
subsections 420(2), (3) and (4) of the National Land Code;

Sbh Cap. 68. (b) where such alienated land is in Sabah, the transferee shall, as
soon as practicable after the order has been made, present an
authenticated copy of such order to the Registrar for
registration of the vesting of the alienated land or of the
share or interest in alienated land as provided under the Land
Ordinance of Sabah [Sabah Cap. 68]; or

Swk Cap. 81. (c) where such alienated land is in Sarawak, the transferee shall,
as soon as practicable after the order has been made, produce
an authenticated copy of such order to the Registrar for the
registration of the vesting of the alienated land or of the
share or interest in alienated land, in the transferee, as
provided under section 171 of the Land Code of Sarawak
[Sarawak Cap. 81].

  (4)   An order of the High Court under subsection 114(3) may relate
to any assets or business of the transferor outside Malaysia and, if it
so relates, effect may be given to it either in accordance with any
reciprocal arrangements relating to enforcement of judgments that
may exist between Malaysia and the country, territory or place
outside Malaysia in which such assets or business is, or where there
are no such arrangements, in accordance with the law applicable in
such country, territory or place.

Publication of court order
under section 114

117.   (1)   An order of the High Court made under subsection 114(3)
shall, subject to the directions of the High Court, be published by the
transferee in not less than two daily newspapers published in
Malaysia and approved by the Bank, one of which shall be in the
national language and the other in English.

  (2)   A transferor shall, within thirty days after the business transfer
scheme has taken effect, lodge—

(a) such documents or information relating to the business
transfer scheme as may be specified by the Bank, with the
Bank; and

(b) a certified copy of such order made by the High Court under
subsection 114(3) together with a certified copy of the
Bank’s approval, with—

(i) the Registrar of Companies; and

(ii) the appropriate authority, if any, concerned with the
registration or recording of dealings in any movable
property, or any interest in movable property transferred
pursuant to the order.

Reimbursement of Bank’s
expenses

118.   The transferor and transferee shall be jointly and severally
liable to reimburse the Bank for any expenses the Bank may incur
under this Division.

Prohibition of payment 119.   Unless the Bank otherwise approves, no licensed takaful

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out of takaful fund operator shall pay to any person any remuneration out of the assets
of a takaful fund in relation to a business transfer scheme.

PART VIII

FINANCIAL GROUPS

Purpose of this Part 120.   The Bank is empowered under this Part to exercise oversight
over financial groups for the purposes of promoting the safety and
soundness of a licensed person.

Disapplication of sections
122 and 123 to licensed

persons, and licensed
persons and financial

holding companies under
Financial Services Act

2013

121.   Sections 122 and 123 shall not apply to—

(a) licensed persons under this Act; and

(b) licensed persons and financial holding companies under the
Financial Services Act 2013.

Application to be
financial holding

company

122.   (1)   Any company which has to obtain the prior written
approval of the Minister under section 99 to hold an aggregate
interest in shares of more than fifty per cent in a licensed person
shall submit an application to the Bank for it to be approved as a
financial holding company.

  (2)   A company referred to in subsection (1) may propose another
company within its corporate group to be approved as a financial
holding company if it can be shown that the proposed company is in
a position to have control over the licensed person and its proposed
financial group.

  (3)   A person, other than a foreign institution or a company
referred to in subsections (1) and (2), which is required to obtain the
prior written approval of the Minister under section 99 to hold an
aggregate interest in shares of more than fifty per cent in a licensed
person shall propose a company within its corporate group which
will have control over a licensed person and such proposed company
shall submit to the Bank an application to be approved as a financial
holding company.

Power of Bank to require
submission of application

123.   Where the Bank considers it is necessary for the purpose of
maintaining effective regulation and supervision of a licensed
person, the Bank may require—

(a) any other company within the corporate group of the
applicant, if the Bank is of the opinion that neither the
applicant nor the other company proposed by the applicant
under section 122 should be approved as a financial holding
company; or

(b) a company which has an aggregate interest in shares of fifty
per cent or less in the licensed person but has control over
the licensed person,

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to submit to the Bank an application to be approved as a financial
holding company.

Approval of application
as financial holding

company under section
122 or 123

124.   (1)   An application to be a financial holding company under
section 122 or 123, as the case may be, shall be submitted to the
Bank together with such documents or information as may be
specified by the Bank.

  (2)   In assessing an application under section 122 or 123 for an
applicant company to be approved as a financial holding company
submitted under subsection (1), the Bank shall have regard to all
matters that the Bank considers relevant including the factors set out
in Schedule 6 and any standards specified by the Bank under
subsection 103(1).

  (3)   Where the Bank is satisfied that such matters referred to in
subsection (2) have been fulfilled by the applicant, the Bank may
approve an application made pursuant to section 122 or 123, as the
case may be, with or without conditions, or reject such application.

  (4)   The Bank may, at any time, in writing amend or revoke any
existing condition of approval of a financial holding company under
subsection (3) or impose any new condition thereto and such
conditions shall not have retrospective effect.

  (5)   The Bank shall notify the applicant of its decision under
subsection (3) in writing.

Bank may approve more
than one financial holding

company

125.   The Bank may require more than one company within a
corporate group of the applicant to be approved as a financial
holding company.

Business of financial
holding company

126.   (1)   Unless the Bank otherwise approves, a financial holding
company of a licensed person shall not carry on any business, other
than the business of holding investments directly or indirectly in
corporations which are primarily engaged in financial services or in
other services in connection with or for the purpose of such financial
services.

  (2)   The Bank may specify standards to give full effect to
subsection (1).

Prudential requirements
on financial holding

company and subsidiaries

127.   (1)   Subject to subsection (2), Part VI shall apply to a
financial holding company as if references in that Part to an
“institution” or a “licensed person” are references to a “financial
holding company”.

  (2)   The Minister may, on the recommendation of the Bank, by an
order published in the Gazette, provide that all or any provision of
Part VI—

(a) shall not apply to a financial holding company; or

(b) shall apply with such modifications consistent with the
regulatory objectives of this Act.

  (3)   The Bank may specify standards on prudential matters under
section 57 to a subsidiary of a financial holding company, if the
Bank is of the opinion that the activities of such subsidiary may pose

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risks to the licensed person or its financial group.

  (4)   A subsidiary of a financial holding company referred to in
subsection (3) shall at all times ensure that its internal policies and
procedures are consistent with the standards specified by the Bank
under that subsection.

  (5)   A financial holding company or any of its subsidiaries which
contravenes any provision of this Act or any standards, notice,
direction, condition, specification or requirement specified or issued
by the Bank under any provision of this Act applied to it under this
section commits a breach and the Bank may take an action under
paragraph 245(3)(b) in addition to other enforcement actions that the
Bank is empowered to take under this Act.

Power to issue directions
to financial holding

company and subsidiaries

128.   (1)   The Bank may issue one or more of the directions
specified in subsection (2) or (3), if the Bank is of the opinion that—

(a) the financial holding company, its subsidiary or director,
chief executive officer or senior officer of such financial
holding company or such subsidiary—

(i) is committing or is about to commit an act, or is pursuing
or is about to pursue any course of conduct or carrying
on its business, in a manner that is detrimental to the
safety and soundness of a licensed person;

(ii) has failed to comply with any standards, notice,
condition, specification, requirement, restriction,
direction or code specified, issued or made under this Act
or a direction under subsection 225(6) or section 227
regardless that there has been no prosecution or other
action in respect of such non-compliance; or

(iii) has breached or contravened any provision of this Act
which is applicable to such financial holding company or
any of its subsidiaries, the Central Bank of Malaysia Act
2009 or any written law, other than securities laws as
defined in the Securities Commission Act 1993,
regardless that there has been no prosecution or other
action in respect of such breach or contravention; or

(b) any state of affairs exist in respect of a financial group that
may directly or indirectly affect the safety and soundness of
a licensed person.

  (2)   Subject to section 273, the Bank may issue a direction in
writing to a financial holding company, any of its subsidiaries or a
director or chief executive officer of such financial holding company
or such subsidiary, to cease or refrain from committing an act or
pursuing a course of conduct or to do any act, in relation to its
business, affairs or property if the Bank is of the opinion that it is
necessary to remedy any of the circumstances in subsection (1).

  (3)   Without limiting the generality of subsection (2) and subject to
section 273, a direction under subsection (2) may include any one or
more of the following directions:

(a) to vary or terminate any agreement or arrangement other
than any qualified financial agreement entered into by the
financial holding company or any of its subsidiaries with any
person in relation to its business, affairs or property;

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(b) to dispose of all or any of the investments or assets held by
the financial holding company or any of its subsidiaries in
any body corporate;

(c) to prohibit the financial holding company or any of its
subsidiaries from carrying on any part of its business;

(d) to prohibit the financial holding company or any of its
subsidiaries from entering into any other transaction or class
of transactions, or to enter into it subject to such restrictions
or conditions as may be specified by the Bank; or

(e) with respect to a financial holding company, to increase its
capital to such amount as may be specified by the Bank.

General provisions
dealing with directions

129.   (1)   The direction issued under subsection 128(2) or (3) shall
specify—

(a) the grounds on which the Bank proposes to issue the
direction; and

(b) the time by which, or period during which, the direction is to
be complied with.

  (2)   The Bank may at any time—

(a) amend or revoke a direction; or

(b) replace a direction with another direction.

  (3)   Any direction issued under subsection 128(2) or (3) shall not
affect the enforcement by the parties of their rights under a qualified
financial agreement.

Consequences of failing
to comply with directions

130.   A financial holding company, its subsidiary, director or chief
executive officer of such financial holding company or such
subsidiary who fails to comply with a direction issued under
subsection 128(2) or (3) commits an offence and shall, on
conviction, be liable to imprisonment for a term not exceeding ten
years or to a fine not exceeding fifty million ringgit or to both.

Additional provisions
relating to paragraph 128

(3)(e)

131.   (1)   A direction issued pursuant to paragraph 128(3)(e) may
direct the financial holding company to issue shares or other capital
instruments of a kind specified in the direction.

  (2)   Where the financial holding company issues shares or other
capital instruments in compliance with a direction pursuant to
subsection (1), the financial holding company shall give a notice in
writing to the members of the financial holding company, to
subscribe to the shares or other capital instruments within the period
specified in the notice.

  (3)   Where a member of the financial holding company does not
subscribe to the shares or other capital instruments within the period
specified in the notice given by the financial holding company
pursuant to subsection (2), the Bank may issue a further direction
pursuant to subsection 128(2) to the financial holding company
requiring the financial holding company to allot the shares or other
capital instruments to a person determined by the Bank.

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Power to remove director
or chief executive officer

of financial holding
company

132.   (1)   Subject to section 273, the Bank may by a notice in
writing, remove a director or chief executive officer of a financial
holding company if the Bank is of the opinion that the director or
chief executive officer of the financial holding company—

(a) no longer fulfills the fit and proper requirements specified by
the Bank under section 69 which is applicable to a financial
holding company pursuant to section 127, and fails to cease
holding such office or acting in such capacity; or

(b) has failed to comply with or by action or negligence has
contributed to the breach or contravention of, any provision
of this Act, a direction of the Bank referred to in section 128
or an enforceable undertaking accepted by the Bank under
section 270.

  (2)   A director or chief executive officer removed from office or
employment in a financial holding company under subsection (1)
shall cease to hold the office from which he is removed with effect
from the date set out in the order and shall cease to be concerned
with the business or affairs of the financial holding company.

  (3)   Notwithstanding anything contained in any contract of service
or any other agreement relating to his appointment, the removal of
the director or chief executive officer under subsection (1) shall not
entitle him to claim any compensation for such removal.

Division 1

Interpretation

Interpretation 133.   For the purposes of this Division, Division 2 and Schedule 7—

   “eligible complainant” means any person who is eligible to refer a
dispute to a financial ombudsman scheme in accordance with the
terms of reference of the scheme;

   “financial consumer” means any person who uses, has used or may
be intending to use, any financial service or product—

(a) for personal, domestic or household purposes;

(b) in connection with a small business as may be specified by
the Bank under section 135; or

(c) whether or not for the purposes set out in paragraph (a) or
(b), if—

(i) the value of the financial services or products does not
exceed an amount as may be specified by the Bank under
section 135; or

(ii) such person is of a class, category or description of
persons as may be specified by the Bank under section
135;

   “financial ombudsman scheme” means a scheme for the resolution
of disputes between an eligible complainant and a financial service
provider in respect of financial services or products;

   “financial services or products” means financial services or
financial products developed, offered or marketed, by a financial
service provider or for and on behalf of another person by a financial

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service provider;

   “financial service provider” means an authorized person.

Division 2

Business conduct, complaints, disputes, etc.

Application 134.   (1)   Sections 135 and 136 shall apply without prejudice to the
provisions of the Capital Markets and Services Act 2007 in so far as
such provisions relate to capital market products or capital market
services as defined in subsection 2(1) of the Capital Markets and
Services Act 2007, developed, offered or marketed by a licensed
Islamic bank or licensed takaful operator.

  (2)   The Bank shall enter into an arrangement in writing with the
Securities Commission to coordinate on the regulation of business
conduct relating to capital market products or capital market services
as defined in subsection 2(1) of the Capital Markets and Services Act
2007, developed, offered or marketed by a licensed Islamic bank or
licensed takaful operator.

Standards on business
conduct

135.   (1)   The Bank may specify standards on business conduct to a
financial service provider for the purposes of ensuring that a
financial service provider is fair, responsible and professional when
dealing with financial consumers.

  (2)   Without limiting the generality of subsection (1), standards
specified under that subsection may include standards relating to—

(a) transparency and disclosure requirements including the
provision of information to financial consumers that is
accurate, clear, timely and not misleading;

(b) fairness of terms in a financial consumer contract for
financial services or products;

(c) promotion of financial services or products;

(d) provision of recommendations or advice including
assessments of suitability and affordability of financial
services or products offered to financial consumers; and

(e) complaints and dispute resolution mechanisms.

  (3)   The Bank may specify any class, category or description of
persons for purposes of the definition of “financial consumer” under
section 133.

  (4)   Where the Bank specifies a standard on business conduct
under subsection (1) which relates specifically to capital market
products or capital market services as defined in subsection 2(1) of
the Capital Markets and Services Act 2007, such standard shall be
specified jointly with the Securities Commission.

Prohibited business
conduct

136.   (1)   A financial service provider shall not engage in any
prohibited business conduct set out in Schedule 7.

  (2)   Without limiting the generality of section 277, the Bank may
issue guidance in writing on—

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(a) descriptions of conduct which amount to; or

(b) factors that are to be taken into account in determining
whether a financial service provider has engaged in,

any prohibited business conduct set out in Schedule 7.

  (3)   Where the Bank issues guidance relating to prohibited business
conduct set out in paragraphs 5 and 6 of Schedule 7, such guidance
shall be issued in consultation with the Competition Commission.

  (4)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding five years or to a fine not exceeding ten million ringgit
or to both.

  (5)   In relation to any complaint from an aggrieved person
involving the prohibited business conduct set out in paragraphs 5 and
6 of Schedule 7, the Bank shall refer such complaint to the
Competition Commission.

Approved takaful broker,
approved Islamic

financial adviser and
approved issuer of
designated Islamic

payment instrument to
establish customer

account

137.   (1)   Where—

(a) an approved takaful broker or approved Islamic financial
adviser receives any money—

(i) from or on behalf of a person covered or potential person
covered for or on account of a licensed takaful operator
in connection with a contract of takaful or a proposed
contract of takaful; or

(ii) from or on behalf of a licensed takaful operator for or on
account of a person covered; or

(b) an approved issuer of a designated Islamic payment
instrument as may be determined by the Bank, receives any
money from or on behalf of its user in exchange of the
Islamic payment instrument issued,

such approved person shall, for the purposes of this section, establish
and maintain one or more accounts for its customers in a licensed
Islamic bank separate from its own account.

  (2)   For the purposes of subsection (1)—

(a) a lien or claim on, or a right to set-off, the moneys in any
account established for customers under subsection (1) shall
be void unless the moneys are for fees due and owing to
such approved persons; and

(b) a charge, mortgage or an attachment on the moneys in any
account established for customers under subsection (1) shall
be void.

  (3)   Moneys in the account established for customers under
subsection (1) is taken to be held in trust by the approved persons for
the benefit of the customers.

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Financial ombudsman
scheme

138.   (1)   For the purposes of ensuring effective and fair handling of
complaints and for the resolution of disputes in connection with
financial services or products, regulations may be made under
section 271 to require any class, category or description of financial
service providers—

(a) to be a member of a financial ombudsman scheme approved
under subsection (2); and

(b) at all times, to comply with terms of membership of such
scheme.

  (2)   The Bank may approve any financial ombudsman scheme for
the purposes of paragraph (1)(a).

  (3)   Regulations may be made under section 271 for the purposes
of ensuring a financial ombudsman scheme is fair, accessible and
effective, including regulations on the following:

(a) the matters that the Bank may have regard to in determining
whether to approve a financial ombudsman scheme under
subsection (2);

(b) the functions and duties of, or other requirements to be
complied with by any person operating a financial
ombudsman scheme;

(c) the terms of a financial ombudsman scheme setting out the
scope including types of dispute that may be referred to it
and its eligible complainants, membership requirements,
application, operations, procedures, the fees that may be
charged and the types of award which may be granted under
the financial ombudsman scheme;

(d) appointment of directors of any person operating a financial
ombudsman scheme;

(e) the documents or information that shall be submitted by any
person operating a financial ombudsman scheme to the
Bank; and

(f) withdrawal or suspension of an approval under subsection
(2).

  (4)   A financial service provider, who is a member of a financial
ombudsman scheme approved under subsection (2), shall—

(a) provide documents or information as may be required for the
purposes of the resolution of disputes referred to the
financial ombudsman scheme; and

(b) comply with any award granted under the financial
ombudsman scheme, including a direction that requires the
financial service provider to take such steps in relation to a
dispute.

Act 599.   (5)   Where a dispute has been referred to a financial ombudsman
scheme by an eligible complainant, the eligible complainant is not
entitled to lodge a claim on such dispute with the Tribunal for
Consumer Claims established under the Consumer Protection Act
1999 [Act 599].

Division 3

Takaful issues

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Obtaining takaful outside
Malaysia

139.   (1)   Except with the prior written approval of the Bank, no
person shall enter into or cause to be entered into, a contract of
general takaful of such description as may be prescribed by the Bank
with a takaful operator other than a licensed general takaful operator.

  (2)   The Bank may grant an approval under subsection (1) after
consultation with the Minister.

  (3)   A person shall provide to the Bank such information on any
contract of general takaful entered into, or caused to be entered into
with a takaful operator other than a licensed general takaful operator,
as the Bank may require by notice in writing within such period as
may be specified in the notice.

Provisions relating to
takaful certificates

140.   Schedule 8 sets out provisions relating to takaful certificates.

Pre-contractual disclosure
and representations, and

remedies for
misrepresentations

141.   (1)   Schedule 9 sets out the pre-contractual duty of disclosure
and representations for contracts of takaful in Part 2, and the
remedies for misrepresentations relating to contracts of takaful in
Part 3.

  (2)   Any person who contravenes the duty of disclosure under
paragraph 11 of Schedule 9 commits an offence and shall, on
conviction, be liable to imprisonment for a term not exceeding five
years or to a fine not exceeding ten million ringgit or to both.

Payment of takaful
benefits under family
takaful certificate and

personal accident takaful
certificate

142.   Schedule 10 sets out provisions for the payment of takaful
benefits upon death of a takaful participant under a family takaful
certificate, and a personal accident takaful certificate, issued in
respect of a contract of takaful entered into by the takaful participant
upon his life.

Division 4

Information and secrecy

Interpretation 143.   For the purposes of this Division—

   “customer” includes a participant or user;

   “Islamic financial institution” refers to—

(a) a licensed Islamic bank;

(b) a licensed international Islamic bank;

(c) an approved operator of a payment system;

(d) an operator of a designated payment system; or

(e) an approved issuer of a designated Islamic payment
instrument.

Restriction on inquiring
specifically into affairs of

particular customer

144.   (1)   Nothing in this Act shall—

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(a) authorize the Minister to direct the Bank; or

(b) authorize the Bank,

to inquire specifically into the affairs or account of any customer of
any authorized person.

  (2)   Notwithstanding paragraph (1)(b), the Bank may inquire into
the affairs or account of a customer of an authorized person for the
purposes of exercising its powers or functions under this Act, the
Financial Services Act 2013 or section 47 of the Central Bank of
Malaysia Act 2009.

Secrecy 145.   (1)   No person who has access to any document or
information relating to the affairs or account of any customer of an
Islamic financial institution, including—

(a) the Islamic financial institution; or

(b) any person who is or has been a director, officer or agent of
the Islamic financial institution,

shall disclose to another person any document or information
relating to the affairs or account of any customer of the Islamic
financial institution.

  (2)   Subsection (1) shall not apply to any document or information
relating to the affairs or account of any customer of an Islamic
financial institution—

(a) that is disclosed to the Bank, any officer of the Bank or any
person appointed under this Act or the Central Bank of
Malaysia Act 2009 for the purposes of exercising any
powers or functions of the Bank under this Act or the
Central Bank of Malaysia Act 2009;

(b) that is in the form of a summary or collection of information
set out in such manner as does not enable information
relating to any particular customer of the Islamic financial
institution to be ascertained from it; or

(c) that is at the time of disclosure is, or has already been made
lawfully available to the public from any source other than
the Islamic financial institution.

  (3)   No person who has any document or information which to his
knowledge has been disclosed in contravention of subsection (1)
shall disclose the same to any other person.

  (4)   Any person who contravenes subsection (1) or (3) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding five years or to a fine not exceeding ten million ringgit
or to both.

Permitted disclosures 146.   (1)   An Islamic financial institution or any of its directors or
officers may—

(a) for such purpose or in such circumstances as set out in the
first column of Schedule 11, disclose any document or
information relating to the affairs or account of its customer
to such persons specified in the second column of that
Schedule; or

(b) disclose any document or information relating to the affairs

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or account of its customer to any person where such
disclosure is approved in writing by the Bank.

  (2)   The Islamic financial institution or its directors or officers
making a disclosure for the purposes or in such circumstances set out
in Schedule 11 and paragraph (1)(b), shall be subject to such
conditions as may be specified by the Bank.

  (3)   For the purposes of subsection (2), the Bank may at any time
amend or revoke any existing conditions or impose any new
conditions in respect of permitted disclosures by the Islamic
financial institutions set out in Schedule 11 or paragraph (1)(b).

  (4)   Any person who receives any document or information
relating to the affairs or account of a customer as permitted under
subsection (1) above shall not disclose such document or information
to any other person.

  (5)   In any proceedings under paragraph 3, 4, 5, 6 or 7 of the first
column of Schedule 11 or circumstances approved by the Bank
under paragraph (1)(b), where any document or information is likely
to be disclosed in relation to a customer’s account, the court may on
its own motion, or on the application of a party to the proceedings or
the customer to which the document or information relates—

(a) order that the proceedings be held in camera and in such
case, the document or information shall be secret as between
the court and the parties thereto, and no such party shall
disclose such document or information to any other person;
and

(b) make such further orders as it may consider necessary to
ensure the confidentiality of the customer information.

  (6)   Unless the court otherwise orders, no person shall publish the
name, address or photograph of any parties to such proceedings as
are referred in subsection (5), or any document or information likely
to lead to the identification of the parties thereto, either during the
currency of the proceedings or at any time after they have been
concluded.

  (7)   Any person who fails to comply with conditions imposed by
the Bank pursuant to subsection (2) or (3) or contravenes subsection
(4) or (6) commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding five years or to a fine not
exceeding ten million ringgit or to both.

Division 5

Restrictions relating to consumer protection

Application of this
Division

147.   This Division shall not apply to a licensed bank or a licensed
investment bank which has obtained the approval of the Bank under
subsection 15(1) under the Financial Services Act 2013 to carry on
Islamic banking business.

Islamic deposit 148.   For the purposes of sections 149 and 150, “Islamic deposit”
means a sum of money or any precious metal or precious stone, or
any article or thing as may be prescribed by the Minister, on the
recommendation of the Bank, accepted, paid or delivered, in

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accordance with Shariah—

(a) on terms under which it will be repaid or returned in full,
regardless whether the repayment or return is by way of
instalments, with or without any gains, any form of rental,
profit, dividend or benefit, including any fee or gift, payable
or to be given, or any other consideration in money or
money’s worth, either on demand or at a time or in
circumstances agreed by or on behalf of the person making
the payment or delivery and the person accepting it; or

(b) under an arrangement, on terms whereby the proceeds under
the arrangement to be paid to the person paying the sum of
money or any precious metal or precious stone, or any article
or thing shall not be less than such sum of money or any
precious metal or precious stone, or any article or thing,

but excludes money paid bona fide—

(i) by way of an advance or a part payment under a contract
for the sale, hire or other provision of property or
services, and is repayable only in the event that the
property or services are not in fact sold, hired or
otherwise provided;

(ii) by way of security for the performance of a contract or
by way of security in respect of any loss which may
result from the non-performance of a contract;

(iii) without limiting paragraph (ii), by way of security for the
delivery up or return of any property, whether in a
particular state of repair or otherwise; and

(iv) in such other circumstances, or to or by such other
person, as set out in Schedule 2.

Restriction on accepting
Islamic deposits

149.   (1)   No person shall accept Islamic deposits except under a
licence granted under section 10 regardless of whether the
transaction is described as a loan, a financing, an advance, an
investment, a savings, a sale or a sale and repurchase or by whatever
name called.

  (2)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding ten years or to a fine not exceeding fifty million
ringgit or to both.

Advertisements for
Islamic deposits

150.   (1)   No person, other than a licensed Islamic bank, shall issue,
or otherwise facilitate any person to issue, an advertisement which—

(a) contains any offer or invitation—

(i) to make any Islamic deposit; or

(ii) to enter or offer to enter into any agreement to make any
Islamic deposit; or

(b) is intended, directly or indirectly, to lead to or induce the
making of any Islamic deposit.

  (2)   Subsection (1) shall not apply to the issuance by any person of
any advertisement for or on behalf of a licensed Islamic bank.

  (3)   Any person who contravenes subsection (1) commits an

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offence and shall, on conviction, be liable to imprisonment for a term
not exceeding five years or to a fine not exceeding ten million ringgit
or to both.

Restriction on use of
certain words

151.   (1) Except with the prior written approval of the Bank, no
person shall—

(a) in its name, description or title under which such person
carries on business or in the conduct of its business, use—

(i) the word “Islamic bank” unless such person is licensed
under this Act to carry on Islamic banking business;

(ii) the word “takaful”, “Islamic insurance” or “Islamic
assurance” unless such person is authorized under this
Act to carry on takaful business, takaful broking business
or Islamic financial advisory business;

(iii) the words “Islamic financial adviser” unless such person
is approved under this Act to carry on Islamic financial
advisory business;

(iv) any derivative of the words in subparagraph (i), (ii) or
(iii) in any language; or

(v) any other words in any language,

capable of being construed as indicating thecarrying on of
any of the authorized business; or

[sic]

(b) make any representation to the effect of paragraph (a) in any
document relating to its business or document used in the
course of carrying on its business or in any other manner
whatsoever.

  (2)   The restriction in subsection (1) shall not apply to—

(a) the persons specified in Part 1 of Schedule 12 for the word
“Islamic bank” in subparagraph (1)(a)(i);

(b) the persons specified in Part 2 of Schedule 12 for the word
“takaful”, “Islamic insurance” or “Islamic assurance” in
subparagraph (1)(a)(ii); and

(c) the persons specified in Part 3 of Schedule 12 for the words
“Islamic financial adviser” in subparagraph (1)(a)(iii).

  (3)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

PART X

Islamic MONEY MARKET AND Islamic FOREIGN EXCHANGE
MARKET

Power of Bank to specify
standards or issue codes

152.   (1)   The Bank may specify standards or issue codes for the
purposes of developing, or maintaining orderly conditions or the
integrity of, and ensuring compliance with Shariah in, the Islamic
money market or the Islamic foreign exchange market.

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  (2)   Without limiting the generality of subsection (1), standards
specified or codes issued under that subsection may include
standards or codes relating to—

(a) compliance with Shariah by the market participants or any
person employed by such market participants in relation to
their conduct or activities in the Islamic money market or the
Islamic foreign exchange market;

(b) obligations and duties of any market participant or any
officer of the market participant; and

(c) the issuance, sale, purchase, repurchase, borrowing or
lending, of or other dealings in, currencies or other Islamic
financial instruments traded in the Islamic money market or
Islamic foreign exchange market including over-the-counter
Islamic derivatives whose price, value or payment
obligations are derived from, referenced to or based on profit
rates or exchange rates.

  (3)   Standards or codes may only be specified or issued under
paragraph (2)(b) in respect of over-the-counter Islamic derivatives
derived from, referenced to or based on profit rates for the purposes
of ensuring compliance with Shariah and maintaining monetary
stability.

  (4)   Any market participant or any officer of the market participant
in the Islamic money market or the Islamic foreign exchange market
shall at all times comply with any standards specified or codes issued
by the Bank under this section.

  (5)   Without limiting the Bank’s powers to take action under any
provision of this Act, the Bank may impose any condition, restriction
or prohibition including, suspension from trading and restrictions on
dealings in these markets on any market participant or any officer of
the market participant for failure to comply with or give effect to
such standards specified or codes issued under this section.

Prohibited conduct in
Islamic money market

and Islamic foreign
exchange market

153.   (1)   No person shall—

(a) engage in any conduct or activities in the Islamic money
market or the Islamic foreign exchange market which is
contrary to Shariah;

(b) take part in or carry out a transaction that has or is likely to
have the effect of creating a rate which is an off-market rate
which results in an artificial rate for dealing in Islamic
financial instruments in the Islamic money market or Islamic
foreign exchange market;

(c) create, or cause to be created, or do anything that is
calculated to create, a false or misleading appearance of
active dealing in Islamic financial instruments in the Islamic
money market or Islamic foreign exchange market;

(d) make a statement, or disseminate information that is false or
misleading in a material particular and is likely to induce
another person to deal in Islamic financial instruments or is
likely to have the effect of raising, lowering, maintaining or
stabilising the market rate of such Islamic financial
instruments in the Islamic money market or Islamic foreign

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exchange market and when the person makes the statement,
or disseminates the information—

(i) the person does not exercise due care whether the
statement or information is true or false; or

(ii) the person knows, or ought reasonably to have known,
the statement or information is false or is materially
misleading;

(e) take part in or carry out a transaction based on information
that is not generally available to persons who regularly deals
in the Islamic money market or Islamic foreign exchange
market that would, or would tend to, have a material effect
on the price or value of Islamic financial instruments; or

(f) engage in any other conduct relating to Islamic money
market or Islamic foreign exchange market as may be
prescribed by the Minister, on the recommendation of the
Bank.

  (2)   Without limiting the generality of section 277, the Bank may
issue guidance in writing on—

(a) descriptions of conduct which amount to; or

(b) factors that are to be taken into account in determining
whether a person has engaged in,

any conduct set out in subsection (1).

  (3)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding ten years or to a fine not exceeding fifty million
ringgit or to both.

Arrangement with
relevant supervisory

authority

154.   (1)   The Bank shall enter into arrangements with relevant
supervisory authorities to coordinate on the regulation of Islamic
financial instruments traded in the Islamic money market which are
within the purview and oversight of the relevant supervisory
authorities.

  (2)   For the purposes of this section, “relevant supervisory
authorities” means any authority, body or agency in Malaysia other
than the Bank which is responsible for the supervision or oversight
of the capital market, or capital market intermediaries or capital
market participants.

PART XI

SUBMISSION OF DOCUMENT OR INFORMATION

Submission of document
or information to Bank

155.   (1)   Where under this Act or any written law, any person
including—

(a) an authorized person;

(b) an operator of a designated payment system;

(c) a financial holding company;

(d) a market participant;

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(e) an approved representative office;

(f) an Islamic financial institution prescribed under section 223;

(g) an associate corporation or related corporation of a person
referred to in paragraphs (a) to (f); or

(h) a participant, user or any other person having dealings with a
person referred to in paragraphs (a) to (f),

is required to submit any document or information to the Bank, such
person shall submit such document or information to the Bank.

  (2)   Where, for the purposes of the exercise of any of its powers or
the performance of any of its functions under this Act or any written
law, the Bank requires any document or information from any person
including a person referred to in subsection (1), such person shall
submit such document or information to the Bank.

  (3)   Any person who is required to submit any document or
information under subsection (1) or (2) shall not submit any
document or information—

(a) which he knows, or has reason to believe, to be false or
misleading in a material particular; or

(b) which is inaccurate or incomplete in respect of which there
is a material error or omission, or any recurring error or
omission.

  (4)   For the purposes of subsection (1) or (2), any document or
information required to be submitted shall be submitted within a
period, at such intervals, in the manner or form as may be specified
by the Bank.

  (5)   Any person complying with subsection (1) or (2) shall not be
treated as being in breach of any contract, agreement or arrangement.

  (6)   The Bank may require—

(a) any document or information submitted under subsection (1)
or (2) to be verified in such manner as may be specified by
the Bank; or

(b) any document produced to be certified as a true copy,

by any person, including an auditor of a person referred to in
subsection (1).

  (7)   Subject to section 157, where a document or information
obtained by the Bank under subsection (1) relates to the account or
affairs of any customer of any person referred to in subsection (1),
that document or information shall be secret as between the Bank
and such person submitting the document or information.

  (8)   Any person who contravenes paragraph (3)(a) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Submission of statistical
information, etc.

156.   (1)   For the purposes of collating statistical or other
information on financial intermediation or financial inclusion in
Malaysia or for other purposes related to the regulatory objectives of
this Act, the Bank may require any person to submit any document
or information to the Bank.

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  (2)   Subject to section 157, the Bank shall not disclose to any
person any document or information submitted under subsection (1)
unless such disclosure is in summary or consolidated form and does
not in any manner lead to the identification of any person to which
such document or information relates.

Secrecy requirements
under sections 155 and

156 not to apply

157.   The secrecy requirements in subsections 155(7) and 156(2)
shall not apply—

(a) for the purposes of the exercise of any of its powers or the
performance of any of its functions by the Bank under this
Act or the Central Bank of Malaysia Act 2009, including for
the purposes of—

(i) the credit bureau established under section 47 of the
Central Bank of Malaysia Act 2009; or

(ii) submitting any proposal to the Financial Stability
Executive Committee;

(b) in respect of information provided by the Bank under section
95 of the Malaysia Deposit Insurance Corporation Act 2011;

(c) where such disclosure is in summary or consolidated form
and does not in any manner lead to the identification of any
person to which such document or information relates
including the publication of consolidated statements or
reports in respect of each class, category or description of
persons as the Bank deems appropriate by aggregating the
figures in all or any document or information submitted to
the Bank under section 155 or 156; and

(d) for the purposes of prosecuting any person for any offence
under any written law.

PART XII

EXAMINATION

Examination of
authorized person, etc.

158.   (1)   The Bank may examine, without any prior notice, the
business and affairs of the following persons:

(a) an authorized person, operator of a designated payment
system or a financial holding company and the offices,
related corporations and any agent of any such persons, in or
outside Malaysia;

(b) a market participant; or

(c) an approved representative office.

  (2)   The Bank may, for the purposes of an examination under
subsection (1), examine any director, officer or controller of any
person referred to in subsection (1).

Duty to provide access to,
and produce documents,

information, etc.

159.   (1)   For the purposes of an examination under section 158, a
person under examination and its director, officer or controller—

(a) shall afford the Bank access to its documents, including

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documents of title to its assets, all securities held by it in
respect of its customers’ transactions and investments held
by it, cash, premises, apparatus, equipment or machinery,
and produce to the Bank all such documents or cash, as the
Bank may require within such time as it may specify;

(b) shall allow the Bank to copy or make extracts of any
document referred to in paragraph (a); and

(c) shall give to the Bank, orally or in writing, all such
information and explanation relating to its business and
affairs or of its agent as the Bank may require within such
time as it may specify.

  (2)   The Bank may take possession of any documents, titles,
securities, cash, apparatus, equipment or machinery to which it has
access under subsection (1), if the Bank is of the opinion that the
documents, titles, securities, cash, apparatus, equipment or
machinery may be—

(a) interfered with, destroyed, concealed or removed unless the
Bank takes possession of them; or

(b) needed as evidence in any legal proceedings, whether civil
or criminal, which may be instituted under this Act, the
Central Bank of Malaysia Act 2009 or any other written law.

  (3)   Any person who contravenes subsection (1) or refuses to allow
the Bank to take possession of the documents, titles, securities, cash,
apparatus, equipment or machinery under subsection (2), commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Examination of other
persons

160.   (1)   The Bank may, for the purposes of an examination under
section 158, examine—

(a) a person who was at any time, a director or officer of a
person referred to in subsection 158(1);

(b) a person who is, or was at any time having dealings with a
person referred to in subsection 158(1); or

(c) a person whom the Bank believes to be acquainted with the
facts and circumstances of the case, including the auditor of
a person referred to in subsection 158(1) or a member of the
Shariah committee of an authorized person,

and that person shall give to the Bank such document, information or
explanation as the Bank may require within such time as it may
specify.

  (2)   Any person falling under paragraph (1)(b), an auditor or a
member of the Shariah committee referred to in paragraph (1)(c),
shall not be liable for breach of a contract relating to, or duty of,
confidentiality for giving a document, information or explanation
under subsection (1).

  (3)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

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Appearance before Bank 161.   (1)   Any person examined under sections 158 and 160 shall
appear before the Bank at such place, and at such time, as may be
specified by the Bank.

  (2)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Examination or
assessment by auditor or

actuary, etc.

162.   (1)   The Bank may require an authorized person, operator of a
designated payment system or financial holding company to appoint
an auditor, actuary or any other person as may be specified by the
Bank, as the case may be, to carry out any specific examination or
assessment in respect of its business or affairs as may be specified by
the Bank and submit a report of such examination or assessment to
the Bank.

  (2)   Where an examination or assessment is required under
subsection (1), the remuneration of the person appointed under
subsection (1) and other expenses related to such examination or
assessment shall be borne by the authorized person, operator of a
designated payment system or financial holding company.

Confidential information 163.   (1)   Any document or information produced by the Bank as
provided in subsection (2) as a result of the administration or
enforcement of this Act, the Central Bank of Malaysia Act 2009 or
any other written law administered by the Bank, or from an
examination by a relevant supervisory authority under section 164,
shall not be disclosed by any authorized person, operator of a
designated payment system or financial holding company, or any
director, officer, auditor, actuary or a member of the Shariah
committee of such persons, to any other person except in such
circumstances as may be specified by the Bank.

  (2)   A document or information referred to in subsection (1) which
shall not be disclosed, whether wholly or in part, shall include—

(a) any rating assigned by the Bank or relevant supervisory
authority, as the case may be, to an authorized person,
operator of a designated payment system or financial holding
company;

(b) any stage of intervention assigned to an authorized person,
operator of a designated payment system or financial holding
company;

(c) any assessment of an authorized person, operator of a
designated payment system or financial holding company
made by the Bank or relevant supervisory authority, as the
case may be, as a result of an examination or other
supervisory review of such person including any report,
correspondence or recommendation made to such persons;

(d) any enforceable undertaking accepted by the Bank under
section 270;

(e) any order made, or direction issued by the Bank under this
Act or by the relevant supervisory authority, as the case may
be, to an authorized person, operator of a designated
payment system or financial holding company; or

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(f) any other information as may be specified by the Bank.

  (3)   In any court proceedings, where any document or information
referred to in this section is likely to be disclosed, the court, of its
own motion, or at the application of a party to the proceedings or the
Bank, may order for such proceedings to be held in camera and in
such case, the document or information shall be secret as between
the court and parties or the Bank thereto, and no such party shall
disclose such document or information to any other person.

  (4)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Examination by relevant
overseas supervisory

authority

164.   (1)   A relevant supervisory authority outside Malaysia which
exercises functions corresponding to those of the Bank under this
Act may, with the approval of the Bank, examine the books and
transactions of—

(a) an approved representative office in Malaysia of a foreign
institution;

(b) an authorized person which operates in Malaysia as a branch
of a foreign institution; or

(c) an authorized person, operator of a designated payment
system or a financial holding company which is a subsidiary
of a foreign institution,

established or incorporated in that country, territory or place,
provided that such examination by the relevant supervisory authority
is for the sole purpose of its supervisory functions.

  (2)   The relevant supervisory authority shall give to the Bank a
written undertaking to protect the confidentiality of any information
it has obtained during, or arising out of its examination under
subsection (1) and the purposes for which such information may be
used.

  (3)   Where the Bank has granted its approval under subsection (1),
the provisions of section 145 shall not apply in relation to the
examination to be carried out under such approval, to the extent
specified in the approval.

  (4)   A copy of the report of an examination under subsection (1)
shall be lodged with the Bank upon the conclusion of such
examination.

Disclosure of information
by Bank to relevant

overseas supervisory
authority

165.   The Bank may, subject to such terms and conditions it deems
fit, provide to a relevant supervisory authority outside Malaysia
which exercises functions corresponding to those of the Bank under
this Act, such document or information relating to—

(a) the affairs of—

(i) any authorized person, operator of a designated payment
system or financial holding company which is a
subsidiary of a foreign institution; or

(ii) any authorized person, operator of a designated payment
system or financial holding company which is an
associate of a foreign institution;

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(b) any office of an authorized person, operator of a designated
payment system or a financial holding company; or

(c) any authorized person, operator of a designated payment
system or financial holding company for the purposes of
assessing a proposed establishment of any office by the
authorized person, operator of a designated payment system
or financial holding company,

if the Bank considers it necessary that the document or information
be disclosed to the relevant supervisory authority outside Malaysia
for the sole purpose of carrying out its supervisory functions.

PART XIII

DIRECTIONS OF COMPLIANCE

Interpretation 166.   For the purposes of this Part, “institution” refers to an
authorized person or operator of a designated payment system.

Circumstances for
exercising power to issue

directions

167.   The Bank may issue one or more of the directions specified in
section 168 if the Bank is of the opinion that an institution, its
director, chief executive officer or senior officer—

(a) is carrying on or is about to carry on any part of its business,
affairs or activities in a manner which is contrary to Shariah;

(b) is committing or is about to commit an act, or is pursuing or
is about to pursue any course of conduct, that is unsafe or
unsound or has failed to commit an act or pursue a course of
conduct that is necessary to maintain the safety and
soundness of the institution;

(c) is carrying on business in a manner detrimental to the
interests of depositors, investment account holders, takaful
participants, participants, users, creditors or the public
generally;

(d) has failed to manage its business or affairs in a manner that
is consistent with sound risk management and good
governance practices;

(e) has failed to comply with any standards, notice, condition,
specification, requirement, restriction, direction or code
specified, issued or made under this Act or a direction under
subsection 225(6) or section 227 regardless that there has
been no prosecution or other action in respect of such non-
compliance;

(f) has breached or contravened any provision of this Act, the
Central Bank of Malaysia Act 2009 or any written law, other
than securities laws as defined in the Securities Commission
Act 1993, regardless that there has been no prosecution or
other action in respect of the breach or contravention; or

(g) has failed to ensure the safety, efficiency and reliability of
the payment system or Islamic payment instrument, having
regard, inter alia, to the reasonableness of admission criteria
for participating in the payment system and the overall cost
to the participants or users of, or any other persons involved

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with, the payment system or Islamic payment instrument.

Power to issue directions
to institution

168.   (1)   Subject to section 273, the Bank may issue a direction in
writing to the institution, its director, chief executive officer or senior
officer, to cease or refrain from committing an act or pursuing a
course of conduct or to do any act, in relation to its business, affairs
or property if the Bank is of the opinion that it is necessary to
remedy any of the circumstances in section 167.

  (2)   Without limiting the generality of subsection (1), the direction
under subsection (1) may include—

(a) with respect to any institution, any one or more of the
following directions:

(i) to vary or terminate any agreement or arrangement other
than any qualified financial agreement entered into by the
institution with any person in relation to its business,
affairs or property;

(ii) to dispose of all or any of the investments or assets held
by the institution in any body corporate;

(iii) to prohibit the institution from carrying on any part of its
business including, imposing any limitation on or
prohibiting the giving of financing facilities, the making
of investments, or in the case of a licensed Islamic bank,
the acceptance of Islamic deposits or acceptance of
money under investment accounts, or in the case of
licensed takaful operators, the entering into contracts of
takaful;

(iv) to prohibit the institution from entering into any other
transaction or class of transactions, or to enter into it
subject to such restrictions or conditions as may be
specified by the Bank; or

(v) to derecognize any income derived from any business or
activity which is contrary to Shariah;

(b) with respect to an institution which is a licensed person, to
increase its capital to such amount as may be specified by
the Bank;

(c) with respect to an institution which is an approved operator
of a payment system, approved issuer of a designated
Islamic payment instrument or operator of a designated
payment system, any one or more of the following
directions:

(i) to make any modification to such payment system or
Islamic payment instrument, as the case may be,
including any operational arrangements;

(ii) cease to issue the designated Islamic payment
instrument; or

(iii) cease to operate the designated payment system or a
payment system set out in Part 1 of Schedule 1; and

(d) with respect to an institution which is a licensed takaful
operator, to transfer from its shareholders’ fund to any
takaful fund managed by it, such amount and in such form or
manner as may be specified by the Bank.

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General provisions
dealing with directions

169.   (1)   The direction issued under section 168 shall specify—

(a) the grounds on which the Bank proposes to issue the
direction; and

(b) the time by which, or period during which, the direction is to
be complied with.

  (2)   The Bank may at any time—

(a) amend or revoke a direction; or

(b) replace a direction with another direction.

  (3)   Any direction issued under section 168 shall not affect the
enforcement by the parties of their rights under a qualified financial
agreement.

Consequences of failing
to comply with directions

170.   An institution, its director, chief executive officer or senior
officer who fails to comply with a direction issued under section 168
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding ten years or to a fine not
exceeding fifty million ringgit or to both.

Additional provisions
relating to paragraph 168

(2)(b)

171.   (1)   A direction issued pursuant to paragraph 168(2)(b) may
direct the licensed person to issue shares or other capital instruments
of a kind specified in the direction.

  (2)   Where the licensed person issues shares or other capital
instruments in compliance with a direction pursuant to subsection
(1), the licensed person shall give a notice in writing to the members
of the licensed person to subscribe to the shares or other capital
instruments within the period specified in the notice.

  (3)   Where a member of the licensed person does not subscribe to
the shares or other capital instruments within the period specified in
the notice given by the licensed person pursuant to subsection (2),
the Bank may issue a further direction pursuant to subsection 168(1)
to the licensed person requiring the licensed person to allot the
shares or other capital instruments to a person determined by the
Bank.

PART XIV

INTERVENTION AND REMEDIAL ACTION

Application of this Part to
member institution

172.   (1)   Notwithstanding any other provision in this Part, in
respect of an institution that is a member institution as defined under
the Malaysia Deposit Insurance Corporation Act 2011—

(a) the Bank may exercise the following powers:

(i) the powers under sections 173 to 175 and paragraph 200
(a); and

(ii) for the sole purpose of averting or reducing any risk to
financial stability and where the institution has not
ceased to be viable or is not considered by the Bank to be

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likely to become non-viable, the powers under the
following provisions:

(A) paragraph 200(b);

(B) sections 201 and 202; and

(C) section 219; and

(b) the following provisions shall continue to apply:

(i) subsections 185(1) and (2) except where the application
for the appointment of a receiver and manager to manage
the whole or part of the business, affairs or property of a
member institution is made by the Malaysia Deposit
Insurance Corporation;

(ii) subsection 185(3) and section 206; and

(iii) section 207 except where the application for the winding
up of a member institution is presented by the Malaysia
Deposit Insurance Corporation.

  (2)   For the avoidance of doubt, in respect of an institution that is a
member institution as defined under the Malaysia Deposit Insurance
Corporation Act 2011, in relation to section 219, the provision shall
be read to apply, only in relation to the powers that may be exercised
by the Bank under subsection (1).

Division 1

Removal of director, chief executive officer or senior officer

Interpretation 173.   For the purposes of this Division, “institution” refers to a
licensed person or an operator of a designated payment system.

Power to remove director,
chief executive officer or

senior officer

174.   Subject to section 273, the Bank may, by an order in writing,
remove a director, chief executive officer or senior officer from
office or employment in an institution if the Bank is of the opinion
that the director, chief executive officer or senior officer of the
institution—

(a) no longer fulfils the fit and proper requirements specified
under section 69 and fails to cease holding such office or
acting in such capacity; or

(b) has breached, contravened or failed to comply with or, by
action or negligence, has contributed to the breach or
contravention of, or non-compliance with any provision of
this Act, a direction under section 168 or an enforceable
undertaking accepted by the Bank under section 270.

Provisions relating to
removal

175.   (1)   A director, chief executive officer or senior officer
removed from office or employment in an institution under section
174 shall cease to hold the office from which he is removed with
effect from the date set out in the order and shall cease to be
concerned with the business or affairs of the institution.

  (2)   The removal of a director, chief executive officer or senior
officer under section 174 shall be lawful and valid notwithstanding

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anything contained in a contract of service or any other agreement
relating to his appointment and whether or not made or provided for
under any written law, and a person so removed from office or
employment shall not be entitled to claim compensation for the loss
of office.

Division 2

Power to take intervention and remedial action

Subdivision 1 - Circumstances for exercising intervention and
remedial action

Interpretation 176.   For the purposes of this Subdivision, “institution” refers to a
licensed person, an approved issuer of a designated Islamic payment
instrument or operator of a designated payment system.

Circumstances for
exercise of Bank’s power

177.   Where the Bank is of the opinion that any of the following
circumstances exist in respect of an institution:

(a) the institution has breached or contravened any provision of
this Act, the Central Bank of Malaysia Act 2009 or any
written law, regardless that there has been no prosecution or
other action in respect of the breach or contravention;

(b) the institution has failed to comply with any direction under
section 168;

(c) the assets of the institution are not sufficient to give adequate
protection to its depositors, investment account holders,
takaful participants, participants, users or creditors, as the
case may be;

(d) the capital of the institution has reached a level or is eroding
in a manner that may detrimentally affect its depositors,
investment account holders, takaful participants,
participants, users, creditors or the public generally;

(e) the institution has become or is likely to become insolvent or
is likely to become unable to meet all or any of its
obligations; or

(f) any other state of affairs exists in respect of the institution
that may be materially prejudicial to the interests of the
depositors, investment account holders, takaful participants,
participants, users or creditors of the institution or the
owners of any assets under the licensed person’s
administration, including where proceedings under a law
relating to bankruptcy or insolvency have been commenced
in Malaysia or elsewhere in respect of the holding company
of the institution, including its financial holding company,

the Bank may exercise its powers under this Division or Division 3.

Subdivision 2 - Assumption of control

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Interpretation 178.   For the purposes of this Subdivision—

   “appointed person” refers to a person appointed by the Bank under
subsection 179(1);

   “institution” refers to a licensed person or an operator of a
designated payment system.

Power to assume control 179.   (1)   Subject to section 273, where any of the circumstances set
out in section 177 exist in respect of an institution, the Bank may,
with the prior approval of the Minister, by an order in writing,
assume control of the whole or part of the business, affairs or
property of the institution and manage the whole or such part of its
business and affairs, or appoint any person to do so on behalf of the
Bank.

  (2)   The terms and conditions of the appointed person shall be
determined by the Bank.

  (3)   Where an order has been made under subsection (1) or revoked
under subsection 180(1), the Bank shall—

(a) notify that fact in the Gazette; and

(b) give notice of the commencement of the assumption of
control under subsection (1), or revocation of the order in
writing under subsection 180(1), as soon as is practicable by
publication in at least two daily newspapers in Malaysia, one
of which shall be in the national language.

  (4)   All costs and expenses of the Bank, including the remuneration
of the appointed person, shall be payable out of the funds and
properties of the institution, as a first charge on the funds and
properties of the institution.

Effect of assumption of
control

180.   (1)   Upon assuming control of the whole or part of the
business, affairs or property of the institution, the Bank or the
appointed person shall take custody and control of the whole or part
of the business, affairs or property of the institution, and shall
manage the whole or such part of the business and affairs of the
institution in the name and on behalf of that institution until the order
is revoked by the Bank in writing.

  (2)   During the period an order under this Subdivision is in force,
the functions, rights and privileges of—

(a) the directors and chief executive officer of the institution
shall be suspended unless the Bank gives its approval in
writing for any director to remain as director or the chief
executive officer to continue in the employment of the
institution on such terms and conditions as the Bank may
determine; and

(b) such senior officers of the institution as may be specified by
the Bank, shall be suspended.

  (3)   The Bank or the appointed person shall be vested with such
powers and functions of the institution and its board of directors,
under its constituent documents or exercisable by the institution or
its directors under any written law regardless whether the powers are
exercisable by resolution or in any other manner whatsoever.

  (4)   The Bank or the appointed person, in effecting any action

Page 100 of 187

under this Subdivision, shall not be required to notify or obtain the
approval of the members or creditors of the institution in a general
meeting or otherwise notwithstanding any contract or law including
without limitation to sections 132C, 132D and 132E of the
Companies Act 1965 or anything in its constituent documents.

  (5)   The Bank or the appointed person may alter the constituent
documents of the institution or other arrangements for governance if
the alteration is necessary to facilitate the exercise of powers or
performance of functions of the Bank or the appointed person under
this Subdivision, in relation to the institution.

  (6)   The Bank or the appointed person may sell or otherwise
dispose of the whole or part of the business or property of the
institution, on any terms and conditions determined by the Bank.

  (7)   Sections 111, 112 and 113 shall not apply to any sale or
disposal of the whole or part of the business or property under
subsection (6).

Information and facilities 181.   (1)   Where control of the whole or part of the business, affairs
or property of an institution has been assumed pursuant to an order
under this Subdivision—

(a) the institution, its directors, chief executive officer and
officers shall submit the whole or part of the business, affairs
and property to such control and provide the Bank or the
appointed person with such facilities, documents or
information as may be required to facilitate the exercise of
powers or performance of functions of the Bank or the
appointed person under this Subdivision; and

(b) the Bank or the appointed person may require a person who
has, at any time, been a director, chief executive officer or an
officer of the institution to give the Bank or the appointed
person any information relating to the business, affairs or
property of the institution that the Bank or the appointed
person requires.

  (2)   Any person who contravenes paragraph (1)(a) or fails to
comply with the requirements under paragraph (1)(b) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Additional provisions
relating to assumption of

control

182.   (1)   Upon assuming control of the whole or part of the
business, affairs or property of the institution, where the Bank gives
its approval in writing for the director or chief executive officer to
remain in his appointment pursuant to paragraph 180(2)(a), any
remuneration payable to the director or chief executive officer of the
institution shall be determined by the Bank, in relation to the activity
required or authorized by the Bank or the appointed person.

  (2)   Notwithstanding anything contained in any contract of service
or any other agreement relating to his appointment, the suspension of
the director or chief executive officer under paragraph 180(2)(a)
shall not entitle him to claim any compensation for such suspension.

  (3)   An order under this Subdivision shall not have the effect of—

(a) conferring on, or vesting in, the Bank or the appointed

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person, any title to, or any beneficial interest in, any property
of the institution to which the order relates; or

(b) rendering the Bank or the appointed person, liable for any
obligation or liability of the institution, whether incurred
before or after the order comes into force.

  (4)   Where the Bank or the appointed person sells or disposes of
the whole or part of the business or property of the institution
pursuant to subsection 180(6), any person aggrieved by the
transacted price may appeal on the transacted price to the Assessor
Committee and section 221 shall apply.

Subdivision 3 - Power to appoint receiver and manager

Interpretation 183.   For the purposes of this Subdivision, “institution” refers to a
licensed person, an approved issuer of a designated Islamic payment
instrument or operator of a designated payment system.

Appointment of receiver
and manager by Bank

184.   (1)   Subject to section 273, where any of the circumstances
described in section 177 exist in respect of an institution, the Bank
may make an application to the High Court for an order—

(a) to appoint a receiver and manager to manage the whole or
part of the business, affairs or property of the institution; and

(b) for all such incidental, ancillary or consequential orders or
directions of the High Court in relation to such appointment
as may, in the opinion of the Bank, be necessary or
expedient.

  (2)   On an application by the Bank, the High Court shall appoint as
receiver and manager such person as may be specified by the Bank
in its application including such person as may be specified by the
Bank to fill a vacancy or to remove and replace a receiver and
manager appointed under this Subdivision.

  (3)   All costs and expenses of the Bank, including the remuneration
of such receiver and manager shall be payable out of the funds and
properties of the institution, as a first charge on the funds and
properties of the institution.

  (4)   A receiver and manager appointed under this Subdivision may
apply to the High Court for directions in relation to any particular
matter arising under the appointment.

PU(A) 205/2012.   (5)   Order 30 of the Rules of Court 2012 [P.U. (A) 205/2012] shall
not apply to an application for the appointment of a receiver and
manager under this Subdivision.

  (6)   An application for the appointment of a receiver and manager
under this Subdivision may be made by way of an ex parte
originating summons.

Appointment of receiver
and manager by persons

other than Bank

185.   (1)   Any person may make an application to the High Court
for the appointment of a receiver and manager to manage the whole
or part of the business, affairs or property of a licensed person, an
approved person or operator of a designated payment system, as the
case may be, by giving prior written notice of thirty days to the Bank

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of its intention to do so.

  (2)   Where an application is made to the High Court for an order to
appoint a receiver and manager to manage the whole or part of the
business, affairs or property of a licensed person, an approved person
or operator of a designated payment system, as the case may be, that
person shall, as soon as practicable, deliver a sealed copy of the
application to the Bank.

  (3)   Where, pursuant to an Islamic instrument or any other
instrument, a receiver and manager is appointed over the whole or
part of the business, affairs or property of a licensed person, an
approved person or operator of a designated payment system, as the
case may be, by a person other than the Bank, that person shall
immediately notify the Bank of the appointment.

  (4)   Any person who contravenes subsection (1), (2) or (3)
commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding five years or to a fine not
exceeding ten million ringgit or to both.

Provisions in relation to
appointment of receiver

and manager

186.   Where a receiver and manager has been appointed by the Bank
to manage the whole or part of the business, affairs or property of an
institution pursuant to section 184, the receiver and manager shall
have the power—

(a) to enter into any premises of the institution and take
possession and control of the whole or part of the business,
affairs or property of the institution and require any person
in the premises to account for and deliver up to the Bank or
the receiver and manager, possession and control of the
whole or such part of the business or property;

(b) subject to paragraph (c), to sell or otherwise dispose of the
whole or part of the business or property of the institution on
such terms and conditions as determined by the Bank;

(c) to sell or otherwise dispose of any property of the institution
that is subject to an agreement creating a security interest to
any person who agrees to assume the obligation secured by
the security interest;

(d) to arrange for the assumption of all or any part of the
liabilities of the institution by any person;

(e) to carry on the whole or such part of the business of the
institution to the extent that the receiver and manager deems
it necessary or beneficial;

(f) to sue for, defend, compromise and settle, in the name of the
institution, any claim made by or against it;

(g) in the name of the institution, to do all acts and execute all
receipts and other documents and for that purpose, when
necessary, use its common seal; and

(h) to do all such other things as may be necessary or incidental
to the exercise of the rights and powers of the receiver and
manager.

Subdivision 4 - Compulsory transfer of business, assets or liabilities

Page 103 of 187

Interpretation 187.   For the purposes of this Subdivision—

   “residual institution” means a licensed person whose business,
assets or liabilities have been vested in the transferee in accordance
with section 188;

   “transacted price” means the price at which the whole or part of the
business, assets or liabilities of a licensed person referred to in
section 188 is vested in the transferee;

   “transferee” means a bridge institution or any other person, as the
case may be, in which is vested under this Subdivision the whole or
part of the business, assets or liabilities of the licensed person
referred to in section 188;

   “transferor” means the licensed person under this Subdivision
referred to in section 188;

   “transferred business” means the whole or part of the business,
assets or liabilities of the licensed person that has been vested in the
transferee.

Order for compulsory
transfer of business,

assets or liabilities

188.   (1)   The Minister shall, on the recommendation of the Bank,
designate in writing a body corporate established or acquired by the
Bank under paragraph 48(1)(da) of the Central Bank of Malaysia Act
2009 as a bridge institution for the purposes of vesting in such body
corporate the business, assets or liabilities of a licensed person
referred to in subsection (2).

  (2)   Where any of the circumstances set out in section 177 exist in
respect of a licensed person, the Bank may, with the prior approval
of the Minister, by an order in writing, vest in a bridge institution or
any other person, the whole or part of the business, assets or
liabilities of such licensed person.

  (3)   For purposes of subsection (2), the Third Schedule of the
Central Bank of Malaysia Act 2009 shall apply in relation to an order
of the Bank under this Subdivision and such order shall be binding
on all persons to whom the order is made or who are affected by the
order.

Additional provisions
relating to compulsory

transfer

189.   (1)   The Third Schedule of the Central Bank of Malaysia Act
2009 shall apply in relation to an order of the Bank under this
Subdivision, with modifications, as provided in Schedule 13 and the
Minister may prescribe any other modification as may be necessary
to give effect to such order.

  (2)   Where the Bank makes an order under this Subdivision to a
licensed person, the Bank shall—

(a) notify that fact in the Gazette; and

(b) give notice of such order as soon as is practicable by
publication in at least two daily newspapers published in
Malaysia, one of which shall be in the national language.

  (3)   The notice under paragraph (2)(b) shall include the transacted
price of the transfer and the right of any aggrieved person to appeal
on the transacted price to the Assessor Committee.

  (4)   The transacted price referred to in subsection (3) shall be
determined by an independent valuer.

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  (5)   Subject to subsection (9), the transferee and the transferor shall
mutually agree on the person to be appointed by the Bank as the
independent valuer referred to in subsection (4).

  (6)   Where an agreement under subsection (5) cannot be reached
between the transferee and the transferor within a period the Bank
determines to be reasonable, the Bank shall refer the matter to the
Minister and the appointment of an independent valuer shall be made
by the Minister.

  (7)   The remuneration of the independent valuer appointed under
subsection (5) or (6) shall be payable out of the transacted price
unless otherwise determined by the Bank.

  (8)   In determining the transacted price under subsection (4) for the
business, assets or liabilities of the transferor, the independent valuer
shall—

(a) have regard to matters which the independent valuer
considers relevant including the prevailing market conditions
for sale or disposal of similar business, assets or liabilities of
the transferor; and

(b) disregard any benefit derived from any special financial
assistance provided directly or indirectly by the Bank or the
Government to the transferor.

  (9)   Where the vesting under this Subdivision is to be in a bridge
institution, the independent valuer referred to in subsection (4) shall
be appointed by the Minister.

  (10)   Where any person aggrieved by the transacted price appeals
on the transacted price to the Assessor Committee, section 221 shall
apply.

Continuity obligations 190.   (1)   The Bank may direct the residual institution and any
person who has been providing services and facilities to the
transferor for the operation of its business, to continue to provide to
the transferee, such services and facilities as may be required to
enable a transferee to operate the transferred business effectively.

  (2)   The duty to provide services and facilities in pursuance of the
direction of the Bank in subsection (1) is subject to a right to receive
reasonable consideration from the transferee.

  (3)   Any residual institution or person who fails to comply with a
direction under subsection (1) commits an offence and shall, on
conviction, be liable to imprisonment for a term not exceeding eight
years or to a fine not exceeding twenty-five million ringgit or to
both.

Subdivision 5 - Provisions relating to bridge institution

Designation of bridge
institution

191.   (1)   Where the Minister designates a bridge institution under
section 188—

(a) the designation shall expire two years after it is made, unless
the designation is—

(i) extended under paragraph (b); or

(ii) terminated under paragraph (c);

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(b) the Minister may, on the recommendation of the Bank,
extend the designation for one or more periods each of
which may not exceed one year; and

(c) the designation shall terminate on the earlier of the date of
occurrence of any one of the following events:

(i) the Bank ceases to hold shares in the bridge institution;

(ii) all or a substantial amount of the assets of the bridge
institution are acquired, or all or a substantial amount of
the liabilities of the bridge institution are assumed, or
both, by a person that is not a bridge institution; or

(iii) the Minister, on the recommendation of the Bank,
decides that the designation shall be terminated.

  (2)   Where a bridge institution changes its company name within
twelve months before or after such designation, the bridge institution
shall be exempt from stating or otherwise showing the former name
on any seal, document or instrument whatsoever.

Publication of notice 192.   Upon the designation of a bridge institution or where such
designation is extended under paragraph 191(1)(b) or terminated
under paragraph 191(1)(c), the Bank shall as soon as practicable
publish a notice, specifying the date on which that event occurred in
at least two daily newspapers in Malaysia, one of which shall be in
the national language.

Bridge institution
authorized to carry on

business

193.   (1)   Upon its designation as such, and for so long as the
designation continues, a bridge institution shall be deemed to be
licensed to carry on the business of the licensed person whose
business, assets or liabilities have been vested in the bridge
institution.

  (2)   The Bank may exempt the bridge institution from such
requirements, or grant such approvals, under this Act as may be
necessary to facilitate the carrying on of its licensed business.

Bridge institution not
liable for past obligations

in respect of officers

194.   Where a bridge institution becomes the employer of any
individual who is an officer or a former officer of a licensed person,
the bridge institution shall not—

(a) be liable for any obligation of the licensed person or its
predecessor in respect of such individual existing prior to the
bridge institution becoming the employer of the individual or
in respect of any pension plan or other post-employment
benefit plan for such individual or his survivors, or in respect
of any collective agreement with a trade union or a council
of trade unions; or

(b) be liable for any wages or salary calculated by reference to a
period of time prior to the bridge institution becoming the
employer of the individual in question.

Stay in respect of bridge
institution

195.   During the period of ninety days following the designation of a
bridge institution—

(a) no action, suit or proceeding in any court or tribunal, may be

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commenced or continued against the bridge institution or in
respect of its assets;

(b) no attachment, garnishment, execution or other method of
enforcement of a judgement, award or order against the
bridge institution or its assets may take place or continue;
and

(c) no creditor of the bridge institution has any remedy against
the bridge institution or its assets.

Financial assistance to
bridge institution

196.   Notwithstanding section 76 of the Central Bank of Malaysia
Act 2009, the Bank may provide a bridge institution with such
financial assistance as the Bank thinks appropriate and the bridge
institution shall, on demand or at such other time as the Bank
specifies, repay or reimburse to the Bank, the financial assistance on
such terms and conditions as determined by the Bank.

Subdivision 6 - Restructuring of share capital

Interpretation 197.   For the purposes of this Subdivision, “institution” refers to a
licensed person or an operator of a designated payment system.

Power to reduce share
capital of institution

198.   (1)   Notwithstanding any constituent documents of an
institution, the Bank may apply to the High Court for an order—

(a) where the paid-up capital of the institution is lost or
unrepresented by available assets, to cancel such paid-up
capital of the institution which is lost or unrepresented by
available assets; or

(b) where a call has been made by the institution on its members
to pay on the unpaid portion of their respective shares, if
any, and payment has not been made within the time
specified in the call, to consolidate the paid up portion of the
shares as fully paid up and to cancel any shares which
remain unpaid.

  (2)   Where the Bank applies for the cancellation of share capital
under subsection (1), the institution shall not be required to notify or
obtain the approval of its members or creditors in a general meeting
or otherwise.

  (3)   Subject to subsections (1) and (2), the provisions of section 64
of the Companies Act 1965 shall apply.

Subdivision 7 - Financial assistance

Interpretation 199.   For the purposes of this Subdivision, “institution” refers to a
licensed person or an operator of a designated payment system.

Liquidity or financial
assistance to institution

200.   Notwithstanding section 76 of the Central Bank of Malaysia
Act 2009 and subject to subsection 172(1)—

(a) the Bank may provide liquidity assistance upon such terms

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and conditions as the Bank deems fit, to an institution which
in the opinion of the Bank is about to or is likely to suspend
payment to any extent; or

(b) where any of the circumstances set out in section 177 exist in
respect of an institution, the Bank may, with the prior
approval of the Minister, provide financial assistance to
another institution or any other person to purchase any
shares, or the whole or any part of the business, assets or
liabilities, of the first-mentioned institution.

Subdivision 8 - Moratorium

Interpretation 201.   For the purposes of this Subdivision, “institution” refers to a
licensed person or an operator of a designated payment system.

Application for
moratorium

202.   (1)   Where the Bank, in the interests of the depositors,
investment account holders or takaful participants of an institution or
participants, has issued a direction prohibiting an institution from
carrying on all or part of its business under this Act, the Bank may
apply to the High Court and the High Court may, on the application
of the Bank, make an order staying for a period not exceeding six
months, the commencement or continuance of any proceedings of a
civil nature by or against the institution with respect to any of its
business and the High Court may, upon hearing an ex parte
originating summons filed by the Bank, make the order.

  (2)   Where an order has been made under subsection (1), the Bank
shall notify that fact in the Gazette.

Division 3

Winding up

Subdivision 1 - General provisions on winding up

Interpretation 203.   For the purposes of this Division—

   “institution” refers to a licensed person or an operator of a
designated payment system;

   “liquidator” includes a provisional liquidator, wherever applicable.

Application of Companies
Act 1965 in relation to

winding up of institution

204.   The provisions of the Companies Act 1965 in relation to the
winding up of companies shall apply to the winding up of an
institution, unless specifically provided otherwise in this Division.

Bank to apply for winding
up

205.   Subject to section 273, where any of the circumstances
specified in section 177 exist in respect of an institution, the Bank
may recommend to the Minister and the Minister may on such
recommendation, authorize the Bank to file an application to the
High Court for the winding up of an institution and the High Court

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may order the winding up of an institution pursuant to the
application filed by the Bank under this Division.

Restriction on voluntary
winding up

206.   (1)   An institution, whether or not its licence or designation
has been revoked, or an approved person, shall not be wound up
voluntarily without the prior written approval of the Bank.

  (2)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Winding up by High
Court on application by
persons other than Bank

207.   (1)   No application for the winding up of an institution or
approved person may be presented to the High Court by any person
without the prior written approval of the Bank.

  (2)   Subject to subsection (1), where an application for the winding
up of an institution or approved person is presented to the High
Court by a person other than the Bank—

(a) that person shall deliver a copy of the application to the
Bank at the same time as it is presented; and

(b) the Bank shall be party to the winding up proceedings and
shall be entitled to appear and be heard in all proceedings
relating to the application and to call, examine and cross-
examine any witness.

  (3)   Any person who contravenes subsection (1) or paragraph (2)
(a) commits an offence and shall, on conviction, be liable to
imprisonment for a term not exceeding five years or to a fine not
exceeding ten million ringgit or to both.

Appointment and
remuneration of liquidator

208.   (1)   The High Court, where a winding up order is made in
respect of an institution pursuant to section 205, shall appoint as
liquidator such person as the Bank may specify in its application and
shall specify that the remuneration of the liquidator shall be
determined by the Bank.

  (2)   On an application by the Bank, the High Court shall appoint as
liquidator such person as the Bank may specify in its application—

(a) to fill a vacancy; or

(b) to remove and replace a liquidator appointed under
subsection (1).

Control of liquidator 209.   Subject to an order of the High Court, a liquidator, other than
the Official Receiver, appointed under section 208 shall carry out his
functions under the direction and supervision of the Bank.

Statement of affairs 210.   The statement of affairs of an institution as at the date of the
winding up order made pursuant to section 234 of the Companies
Act 1965 shall be submitted to the Bank at the same time as it is
submitted to the Official Receiver.

Offences by officers of

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institution 211.   Section 300 of the Companies Act 1965 shall apply to an
institution as if references in that section to an “officer or a
contributory” are references to a director, officer, agent or
contributory of an institution.

Subdivision 2 - Provisions specific to licensed takaful operators

Valuation of assets and
liabilities

212.   In the winding up of a licensed takaful operator, whether or
not its licence is revoked and whether its shareholders’ fund or any
takaful fund managed by it is insolvent or not, the value of the assets
and liabilities of the shareholders’ fund and takaful fund, including
liabilities in respect of takaful certificates, shall be ascertained on
such basis as the Bank may determine and the law relating to
bankruptcy or insolvency shall not apply to the valuation of the
liabilities.

Termination of takaful
certificate

213.   (1)   A takaful certificate of a licensed takaful operator shall
cease to remain in force with effect from the date a winding up order
has been made in respect of the licensed takaful operator.

  (2)   Where a takaful certificate ceases to be in force under
subsection (1), the takaful participant shall only be eligible to claim
as a debt due to him—

(a) in the case of a general takaful certificate, a refund of a
portion of the takaful contribution that is commensurate with
the remaining period of the takaful certificate;

(b) in the case of a family takaful certificate, the value of that
family takaful certificate;

(c) the value of the investments or savings held separately in
respect of the takaful certificate; or

(d) any other refund or amount,

which shall be ascertained on such basis as may be prescribed by the
Bank.

  (3)   The liquidator shall notify each takaful participant and, in the
case of a group takaful certificate, the group takaful participant,
about the cessation of the takaful certificate by registered post to his
last known address of residence or office and by publication in such
newspapers as may be specified by the Bank.

Waiver of strict proof of
debt

214.   Where it appears to the liquidator that by reason of the
inadequacy of its documents, or any other circumstances, hardship
would be caused if he requires strict proof of debt, he may act on
such evidence as he thinks fit and payment of a debt made by the
liquidator in good faith to any person as being the person entitled to
it shall discharge the liquidator from all liabilities in respect of that
debt.

Prohibition against
issuance of takaful

certificate

215.   No director, officer, agent or contributory, past or present, of a
licensed takaful operator which is being wound up after its cessation
of takaful business, shall continue to issue a takaful certificate.

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Continuation of family
takaful business

216.   (1)   Notwithstanding paragraph 236(1)(a) of the Companies
Act 1965, the liquidator of a licensed takaful operator carrying on
family takaful business—

(a) may carry on the licensed takaful operator’s family takaful
business with a view to such business being transferred as a
going concern to another licensed takaful operator but shall
not effect a new takaful certificate; and

(b) subject to subsection (2), may transfer the licensed takaful
operator’s assets and liabilities to another licensed takaful
operator, including liabilities under family takaful
certificates attributable to the first-mentioned licensed
takaful operator and the takaful funds managed by it and
Division 4 of Part VII shall apply to the transfer.

  (2)   The liquidator may, for the purpose of a transfer under
paragraph (1)(b), apply to the High Court for an order to reduce—

(a) the amount of liabilities under family takaful certificates of
the licensed takaful operator; or

(b) the amount of other liabilities of the takaful fund,

and the High Court may reduce the liabilities to the extent necessary
taking into consideration the value of available assets in the takaful
funds and shareholders’ fund subject to such condition as it considers
fit.

Subdivision 3 - Priority of payments in winding up

Priority of payments in
winding up of licensed

Islamic bank

217.   (1)   In the winding up of a licensed Islamic bank in or outside
Malaysia—

Act 359. (a) the assets of the licensed Islamic bank, subject to paragraph
(b), shall be available to meet all liabilities of that licensed
Islamic bank in respect of its Islamic deposits in Malaysia in
priority to all other unsecured liabilities of that licensed
Islamic bank other than the preferential debts set out in
subsection 292(1) of the Companies Act 1965 in the order
set out in that subsection and the debts due and claims owing
to the Government under section 10 of the Government
Proceedings Act 1956 [Act 359]; and

(b) notwithstanding subsection 292(1) of the Companies Act
1965, but subject to any costs and expenses of the winding
up set out in paragraph 292(1)(a) of the Companies Act 1965
directly incurred in realising the assets of the investment
accounts and any tax set out in paragraph 292(1)(f) of the
Companies Act 1965 which is attributable to the investment
accounts, the assets of the investment accounts managed by
the licensed Islamic bank in Malaysia, shall be available, in
the order set out as follows:

(i) to pay outstanding costs or expenses of the investment
accounts;

(ii) to pay any profit, fees, gains or other remuneration due to
the licensed Islamic bank; and

(iii) to meet the liabilities to the investment account holders.

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  (2)   For purposes of paragraph (1)(a), regulations may be made
under section 271 to prescribe the order of priority for payments of
different categories of Islamic deposits.

  (3)   Without limiting the generality of subsection (1), in the
winding up of a licensed international Islamic bank which is a
foreign institution, the assets of such licensed international Islamic
bank generated from the funds received by its office in Malaysia—

(a) shall be available to meet all liabilities of the licensed
international Islamic bank in Malaysia; and

(b) with effect from the date of the winding up of the licensed
international Islamic bank, shall not be sold, removed,
dissipated, alienated, transferred, assigned, encumbered,
distributed or otherwise dealt with in any manner whatsoever
without the prior written approval of the Bank.

  (4)   Notwithstanding anything to the contrary in section 340 of the
Companies Act 1965 or the winding up order for a licensed
international Islamic bank which is a foreign institution, the
provisions of this section shall prevail and have full force and effect.

  (5)   Any person who contravenes paragraph (3)(b) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding ten years or to a fine not exceeding fifty million
ringgit or to both.

Priority of payments in
winding up of licensed

takaful operator

218.   (1)   In the winding up of a licensed takaful operator, the assets
of a takaful fund for any class or description of takaful business
established under section 90 shall be applied to meet the liabilities to
takaful participants or proper claimants in respect of that takaful fund
and such liabilities shall have priority over all unsecured liabilities of
that takaful fund including any qard or other forms of financial
support referred to in section 95, other than any tax set out in
paragraph 292(1)(f) of the Companies Act 1965 which is attributable
to the takaful fund.

  (2)   In the winding up of a licensed takaful operator—

(a) where the assets of a takaful fund managed by a licensed
takaful operator is in surplus, after payment has been made
to meet its liabilities under subsection (1), such surplus
assets of the takaful fund shall be applied in the following
order:

(i) first, to meet the liabilities of other takaful funds
managed by the licensed takaful operator which are
deficient and if for this purpose there are two or more
takaful funds which are—

(A) in surplus, such surpluses shall be applied in
proportion to the surplus in each takaful fund to meet
the liabilities of the takaful fund which is deficient; or

(B) in deficit, the surplus shall be applied in proportion to
the amounts of the deficiencies to meet the liabilities
of the takaful funds which are deficient; and

(ii) second, any other purposes as may be prescribed by the
Bank;

(b) any deficiency in the assets of a takaful fund to meet its
liabilities under subsection (1) will be met—

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(i) first, as provided in paragraph (a), by the surplus assets
of other takaful funds; and

(ii) if such surplus assets are insufficient to meet those
liabilities then the balance of such liabilities shall be met
by the surplus assets of the shareholders’ fund after
payment has been made to meet the shareholders’ fund’s
liabilities under subsection (3); or

(c) pursuant to subparagraph (2)(b)(ii), where the assets of the
shareholders’ fund is in surplus, the surplus assets shall be
applied to meet the liabilities of any takaful fund which is in
deficit, and if the surplus assets are applied to meet the
liabilities of two or more takaful funds the assets of which
are in deficit, they shall be applied proportionately to the
amount of the deficiencies.

Act 359.   (3)   In the winding up of a licensed takaful operator, the assets of
its shareholders’ fund shall be applied to meet the liabilities to
takaful participants to the extent that it is attributable to the
shareholders’ fund and such liabilities shall have priority over all
unsecured liabilities of that licensed takaful operator, other than
preferential debts set out in subsection 292(1) of the Companies Act
1965 and the debts due and claims owing to the Government under
section 10 of the Government Proceedings Act 1956 [Act 359].

  (4)   Without limiting the generality of subsections (1), (2) and (3),
where the Bank under section 90 has specified that a licensed takaful
operator which is a foreign institution shall establish and maintain
separate takaful funds for its Malaysian takaful certificate, in the
winding up of the licensed takaful operator, the assets of—

(a) such takaful fund shall be applied to meet the liabilities of
the fund;

(b) the shareholders’ fund shall be applied to meet the liabilities
to takaful participants in respect of the Malaysian takaful
certificate to the extent that it is attributable to the
shareholders’ fund; and

(c) with effect from the date of the winding up of the licensed
takaful operator, shall not be sold, removed, dissipated,
alienated, transferred, assigned, encumbered, distributed or
otherwise dealt with in any manner whatsoever without the
prior written approval of the Bank.

  (5)   Notwithstanding anything to the contrary in section 340 of the
Companies Act 1965 or the winding up order for a licensed takaful
operator which is a foreign institution, the provisions of this section
shall prevail and have full force and effect.

  (6)   Any person who contravenes paragraph (4)(c) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding ten years or to a fine not exceeding fifty million
ringgit or to both.

Division 4

General provisions in relation to actions taken by Bank

Power of Bank to take
action under this Part

219.   Nothing in this Part shall preclude the Bank from taking any

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one or more actions that it is empowered to take under this Part.

Qualified financial
agreement

220.   (1)   For the purposes of this section, “institution” refers to a
licensed person, an approved issuer of a designated Islamic payment
instrument or operator of a designated payment system.

  (2)   The parties under a qualified financial agreement may continue
to enforce their rights under the qualified financial agreement and
shall not be affected by—

(a) the assumption of control of a licensed person or an operator
of a designated payment system pursuant to section 179;

(b) the appointment of a receiver and manager of the business,
affairs or property of any institution pursuant to section 184;
or

(c) the making of an order for the compulsory transfer of the
business, assets or liabilities of a licensed person pursuant to
section 188,

except during such period as may be prescribed in regulations made
under section 271 upon the commencement of the assumption of
control or the appointment of a receiver and manager.

  (3)   Where a qualified financial agreement is transferred to any
person pursuant to the exercise of the powers under subsection 180
(6) or section 186 or to a bridge institution or any other person under
section 188—

(a) the acquiring person or bridge institution shall assume all the
rights and obligations under such qualified financial
agreement of the institution from which such agreement was
transferred; and

(b) the enforcement by the parties of their rights under such
qualified financial agreement shall be in accordance with the
terms of such agreement as if the acquiring person or bridge
institution had always been a party to such agreement.

  (4)   If the qualified financial agreement is not transferred to a
bridge institution or another person, the parties to such qualified
financial agreement shall be entitled to enforce their rights under
such agreement at the expiry of the period referred to in subsection
(2).

  (5)   Where the qualified financial agreement of an institution is
transferred to an acquiring person or a bridge institution during the
period prescribed by the Bank under subsection (2), and where a
person is a counterparty to two or more qualified financial
transactions under that agreement with the same institution, all or
none of such qualified financial transactions shall be transferred to
the acquiring person or bridge institution.

  (6)   If a qualified financial agreement relating to financial collateral
that applies to any property of the institution is transferred, that
property shall also be transferred to the acquiring person or bridge
institution.

Assessor Committee 221.   (1)   Any person aggrieved by the transacted price as a result
of—

(a) a sale or disposal of the whole or part of the business or

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property of a licensed person or an operator of a designated
payment system by the Bank or the appointed person under
subsection 180(6); or

(b) a compulsory transfer of the whole or part of the business,
assets or liabilities of a licensed person pursuant to section
188,

may, within twenty-one days from the date of such sale, disposal or
transfer, appeal on the transacted price to the Assessor Committee by
submitting an appeal in writing to the Bank.

  (2)   Where any person appeals under subsection (1), the Bank shall
constitute an Assessor Committee consisting of three independent
persons as members of the Assessor Committee, drawn from a panel
of ten persons appointed by the Minister on the recommendation of
the Bank and refer the appeal to the Assessor Committee to assess
the reasonableness of the transacted price.

  (3)   The Assessor Committee constituted under subsection (2) may
determine its own procedures.

  (4)   In assessing the reasonableness of the transacted price, the
Assessor Committee shall have regard to such matters it considers
relevant including the prevailing market conditions for the sale or
transfer of similar property, business, assets or liabilities of the
licensed person or operator of a designated payment system.

  (5)   Where the Assessor Committee decides that—

(a) the transacted price is less than the price that in its opinion is
the reasonable price for the property, business, assets or
liabilities, it shall advise the Bank to pay the difference
between the transacted price and the reasonable price; or

(b) the transacted price is in its opinion the reasonable price, it
shall advise the Bank accordingly.

  (6)   The Bank shall notify the aggrieved person in writing of the
Assessor Committee’s decision under subsection (5).

  (7)   Notwithstanding subsection (5), where the institution is
insolvent and the whole of the property, business, assets or liabilities
of the licensed person or an operator of a designated payment system
is sold or disposed of by the Bank or the appointed person under
subsection 180(6), or transferred by the Bank under section 188, a
consideration of one ringgit shall be deemed to be reasonable as the
transacted price.

  (8)   The sale or disposal of the whole or part of the business or
property under subsection 180(6) or the transfer of the whole or part
of the business, assets or liabilities under section 188 shall take effect
despite any appeal to or any decision made by, the Assessor
Committee.

  (9)   A decision of the Assessor Committee is final and binding on
the parties to the appeal.

PART XV

OTHER POWERS OF BANK

Division 1

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Regulation of prescribed Islamic financial institutions

Interpretation 222.   For the purposes of this Division, “Islamic financial
intermediation activities” includes—

(a) the accepting of Islamic deposits or money under an
investment account;

(b) the giving of any advance, financing or other facility in
whatever form or by whatever name called in accordance
with Shariah;

(c) Islamic leasing business;

(d) Islamic factoring business;

(e) the purchase of bills of exchange, certificates of Islamic
deposit, Islamic securities or other negotiable instruments;

(f) the acceptance of, or the giving of any guarantee in relation
to, liability, obligation or duty of any person;

(g) Islamic hire-purchase;

(h) acquiring rights or interests in an Islamic hire-purchase,
Islamic leasing or other similar transaction;

(i) any activity that is incidental, ancillary or otherwise
facilitates or is closely related to the activities referred to in
paragraphs (a) to (h) above; and

(j) such other business or activity as prescribed under section 3.

Power of Minister to
prescribe Islamic

financial institutions

223.   (1)   The Minister may prescribe any person which is not under
the supervision or oversight of the Bank and engaging in Islamic
financial intermediation activities as a prescribed Islamic financial
institution—

(a) on the joint recommendation by the Bank and the relevant
authority which is responsible for the regulation and
supervision of such person; or

(b) on the recommendation by the Bank, in any other case,

if such person, in the opinion of the Bank, poses or is likely to pose a
risk to financial stability arising from—

(i) its Islamic financial intermediation activities which may
include the generation of maturity or liquidity
transformation, involve imperfect credit risk transfers,
create or facilitate excessive leverage or raise concerns of
regulatory arbitrage;

(ii) the nature, scope, size, scale or concentration of its
Islamic financial intermediation activities; or

(iii) its interconnectedness with an authorized person or any
other person regulated by the Bank under any written law
enforced by the Bank.

  (2)   For the purpose of making a recommendation under subsection
(1), the Bank may, with the approval of the Minister, exercise its
examination powers under Part XII on a person referred to in
subsection (1) as if the references in such provisions to an
“authorized person” is a reference to the person referred to in

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subsection (1).

  (3)   The Minister may, on the recommendation of the Bank, apply
all or any provisions of this Act to a prescribed Islamic financial
institution from a date specified in the order under subsection (1) and
with such amendments as the Minister, on the recommendation of
the Bank, deems necessary, as if the references in such provisions to
an “authorized person”, a “licensed person”, “licensed Islamic
bank”, “licensed takaful operator”, an “institution” and a “financial
service provider”, as the case may be, is a reference to such
prescribed Islamic financial institution.

  (4)   With effect from the date specified in the order made under
subsection (1), the prescribed Islamic financial institution concerned
shall comply with, and be subject to, the provisions of this Act as
specified in the order notwithstanding anything to the contrary in any
written law.

  (5)   The Minister may, at any time, amend or revoke an order made
under subsection (1)—

(a) on the joint recommendation by the Bank and the relevant
authority, in the case of an order made under paragraph (1)
(a); or

(b) on the recommendation by the Bank, in any other case.

  (6)   A prescribed Islamic financial institution which contravenes
any provision of this Act or any standards, notice, direction,
condition, specification or requirement specified or issued by the
Bank under any provision of this Act applied to it under subsection
(1) commits an offence under such provision and shall be liable to
the same penalty applicable to a licensed person convicted of an
offence under such provision and if no offence is provided for such
contravention, the prescribed Islamic financial institution commits a
breach and the Bank may take an action under paragraph 245(3)(b)
in addition to other enforcement actions that the Bank is empowered
to take under this Act.

  (7)   This section shall not apply to—

(a) a person licensed, approved or recognized by the Securities
Commission under securities laws; or

Act 704.
Act 705.

(b) a licensed entity under the Labuan Financial Services and
Securities Act 2010 [Act 704] and Labuan Islamic Financial
Services and Securities Act 2010 [Act 705].

  (8)   For the purposes of this section, in the case of a registered
person under the Capital Markets and Services Act 2007, the Bank
shall—

(a) consult with the Securities Commission in forming an
opinion under subsection (1);

(b) notify the Securities Commission before conducting an
examination under subsection (2); and

(c) regularly review the status of such prescribed Islamic
financial institution, together with the Securities
Commission, to determine whether the circumstances under
subsection (1) no longer applies.

Division 2

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International and domestic transactions

Interpretation 224.   (1)   For the purposes of section 225, unless the context
otherwise requires—

   “designated account” means an account opened in favour of any
person by a financial institution as determined by the Bank;

   “foreign currency” includes—

(a) currency notes or coins which are legal tender in any
country, territory or place outside Malaysia;

(b) any right to receive foreign currency—

(i) in respect of any credit or balance at a licensed Islamic
bank or any other similar institution in or outside
Malaysia; or

(ii) from any person in or outside Malaysia; or

(c) any document or device of a kind intended to enable the
person to whom the document or device is issued to obtain
foreign currency from another person on the credit of the
person issuing it, and in particular, any traveller’s cheque or
other draft or letter of credit so intended;

   “giving or obtaining of guarantee” includes a renewal or extension
of such guarantee;

   “gold” means—

(a) gold in whatever state or form other than gold which has
been materially increased in value by skilled craftsmanship;
or

(b) any right to receive gold—

(i) in respect of any credit or balance at a licensed Islamic
bank or any other similar institution in or outside
Malaysia; or

(ii) from any person in or outside Malaysia;

   “guarantee” includes the pledging of any Islamic security issued or
registered in Malaysia or any other property in Malaysia to secure
the repayment of a debt, obligation or liability;

   “Islamic financial instrument” includes Islamic derivatives;

   “Islamic securities” means shares, stock, bonds, notes (other than
promissory notes), debentures, debentures stock, units under a unit
trust scheme, shares in an oil royalty, a secondary security and
returns, which are in compliance with Shariah, whether in scripless
form or in bearer certificates, including certificates of title to Islamic
securities or any letter of allotment which may be renounced, any
letter of rights, any warrants conferring an option to acquire an
Islamic security, any deposit certificate in respect of Islamic
securities and such other documents conferring, or containing
evidence of, rights to Islamic securities as may be specified by the
Bank;

   “issue” in relation to Islamic securities or Islamic financial
instrument, means to bring or cause to be brought into existence
those Islamic securities or Islamic financial instrument, and the word
“issued” or “issuance” shall be construed accordingly;

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   “non-resident” means—

(a) any person other than a resident;

(b) an overseas branch, a subsidiary, regional office, sales office
or representative office of a resident company;

(c) Embassies, Consulates, High Commissions, supranational or
international organizations; or

(d) a Malaysian citizen who has obtained permanent resident
status of a country or territory outside Malaysia and is
residing outside Malaysia;

   “payment” includes the act of transferring to, or placing to the
credit of, a person, ringgit, foreign currency, Islamic financial
instrument, gold, other precious metals or other valuable
consideration, as the case may be, whether under an obligation or
otherwise;

   “person” means a natural person, any corporation, statutory body,
local authority, society, trade union, co-operative society, partnership
or any other body, organization, association or group of persons,
whether corporate or unincorporate and in addition includes the
Government, any State Government or any other government;

   “resident” means—

(a) a citizen of Malaysia, excluding a citizen who has obtained
permanent resident status in a country or a territory outside
Malaysia and is residing outside Malaysia;

(b) a non-citizen of Malaysia who has obtained permanent
resident status in Malaysia and is ordinarily residing in
Malaysia;

(c) a body corporate incorporated or established, or registered
with or approved by any authority, in Malaysia;

(d) an unincorporated body registered with or approved by any
authority in Malaysia; or

(e) the Government or any State Government;

   “ringgit” means currency notes or coins which are legal tender in
Malaysia and includes any right to receive ringgit in such form as
may be specified by the Bank;

   “settlement of a property” includes the making of any disposition,
covenant, agreement or arrangement whereby the property becomes
subject to a trust;

   “transfer of Islamic securities” includes the buying, selling,
borrowing or lending of Islamic securities.

  (2)   Where under this Division, power is given to the Bank to
require any person, or where any person is required under this
Division, to submit to the Bank any document or information—

(a) the Bank may specify that the document or information shall
be submitted, within a period, at such intervals, in the
manner or form as may be specified by the Bank; and

(b) such person shall not submit any document or information—

(i) which he knows, or has reason to believe to be false or
misleading in a material particular; or

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(ii) which is inaccurate or incomplete in respect of which
there is a material error or omission, or any recurring
error or omission.

Measures relating to
international and

domestic transactions

225.   (1)   The Bank is empowered under this section to safeguard
the balance of payments position and the value of the currency of
Malaysia.

  (2)   No person shall undertake or engage in any transaction set out
in Schedule 14 except with the written approval of the Bank.

  (3)   Subject to any direction issued by the Bank under paragraph
(6)(e), the prohibition in subsection (2) in respect of the transactions
in paragraph 1 of Schedule 14 shall not apply to any licensed Islamic
bank.

  (4)   Unless otherwise expressly provided in this section and
Schedule 14, subsection (2) shall apply to—

(a) all persons, classes, categories or descriptions of persons
including their nominees or any person acting on their behalf
notwithstanding that they are not in Malaysia; and

(b) all acts that are committed in or outside Malaysia including
any act which involves, is in association with, or is
preparatory to, the transactions set out in Schedule 14.

  (5)   The Bank in granting any written approval under subsection
(2) may impose any requirement, restriction or condition in respect
of the transactions in Schedule 14.

  (6)   The Bank may issue direction to—

(a) declare that a person is to be treated as a resident or a non-
resident notwithstanding the definition of “resident” or “non-
resident” in section 224;

(b) require any person to submit any document or information to
the Bank or any person as may be specified by the Bank;

(c) require any payment to be made into a designated account
and direct the use of such fund in the designated account as
may be specified by the Bank;

(d) require any person who is entitled to sell, or to procure the
sale of, any foreign currency, gold or other precious metals,
to offer it, or cause it to be offered, for sale to a licensed
Islamic bank or any person as may be specified by the Bank;

(e) require a licensed Islamic bank to undertake or engage in the
transactions in paragraph 1 of Schedule 14 on such terms as
may be specified by the Bank;

(f) require a licensed Islamic bank, or any other person to
administer or ensure compliance with this section on such
terms as may be specified by the Bank; or

(g) require any person to do or refrain from doing any act for the
purpose of securing compliance with this section.

  (7)   Any written approval granted under subsection (2) and any
direction issued under subsection (6) shall apply to such persons,
classes, categories or descriptions of persons as may be specified by
the Bank in that written approval and direction, as the case may be.

  (8)   Subsection (2) shall not affect the enforcement by the parties

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of their rights under a qualified financial agreement.

  (9)   Except for paragraph 7 in Schedule 14, any person who
contravenes subsection (2) or fails to comply with any requirement,
restriction or condition imposed under a written approval granted
under subsection (2) or any direction issued under subsection (6)
commits an offence under this Act and shall, on conviction, be liable
to imprisonment for a term not exceeding ten years or to a fine not
exceeding fifty million ringgit or to both.

Act 235.   (10)   Any ringgit, foreign currency, gold, other precious metals,
Islamic security or Islamic financial instrument or any other article
which is subject to a prohibition under subsection (2) in respect of
the transactions in paragraph 7 of Schedule 14 shall be deemed to be
prohibited goods under the Customs Act 1967 [Act 235] and any
person who fails to comply with such prohibition or any
requirement, restriction or condition imposed under a written
approval granted under subsection (2) commits an offence under that
Act and shall, on conviction, be liable to the penalty provided in that
Act.

Power of Bank to impose
levies or charges

226.   (1)   For the purposes of safeguarding the balance of payments
position or the value of currency of Malaysia, regulations may be
made under section 271 to impose levies or charges in respect of any
transaction specified in Schedule 14, either generally or with
conditions or in circumstances set out in the regulations.

  (2)   Levies or charges imposed pursuant to the regulations referred
to in subsection (1) may be—

(a) specific;

(b) a minimum or maximum amount; or

(c) a percentage or proportion of the amount which is the
subject matter of the transaction in Schedule 14.

Power of Bank, with
approval of Minister, to

issue directions

227.   (1)   The Bank may, with the approval of the Minister, in the
national interest, issue directions to any person in Malaysia, to
prohibit, restrict or require the doing of any act as may be specified
by the Bank, with or without conditions, in relation to dealings or
transactions, with any person resident in a country or territory, or in
any currency, as may be specified by the Bank.

  (2)   Any person for whom the directions are issued under
subsection (1) shall comply with the directions notwithstanding any
other duty imposed on that person by any contract or international
agreement.

  (3)   No person shall, in carrying out any act in compliance with the
directions made under subsection (1), be treated as being in breach of
any such contract or international agreement.

  (4)   Any person who fails to comply with any direction or
condition referred to in subsection (1) commits an offence and shall,
on conviction, be liable to imprisonment for a term not exceeding ten
years or to a fine not exceeding fifty million ringgit or to both.

Division 3

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Holiday for licensed person

Power of Minister to
declare holiday for

licensed person

228.   (1)   The Minister may, on the recommendation of the Bank,
by notice in the Gazette, declare any day to be a holiday for all
licensed persons, or for any class, category or description of licensed
persons, or for such offices of such licensed persons, throughout, or
in any part of, Malaysia, as may be specified in the notice.

  (2)   No licensed person, or the office of the licensed person
specified in the notice, shall carry on any business on any day
declared as a holiday for such licensed person under subsection (1)
unless the Minister, on the recommendation of the Bank, otherwise
approves.

  (3)   Where a day is declared to be a holiday under subsection (1)—

(a) the licensed person or its office specified in the notice is not
compellable on such holiday to make a payment or to do any
other act that it would not be compellable to do on any day
which is public holiday within the meaning of any law
relating to public holidays; and

(b) no person shall be compellable to make any payment on
such holiday in or at a licensed person or its office specified
in the notice, or to do in or at a licensed person or its office
specified in the notice any act requiring the services of such
licensed person,

and the obligation to make the payment or to do the act shall be
deemed to be an obligation to make the payment or to do the act on
the next day which is not a public holiday within the meaning of any
law relating to public holidays.

  (4)   A day declared as a holiday for a licensed person or its office
under subsection (1) shall not necessarily be a public holiday and
nothing in this section shall affect the operation of any law relating
to public holidays.

  (5)   Any declaration of a holiday made under subsection (1) shall
not—

(a) invalidate any contract, agreement, transaction or
arrangement entered into by the licensed person with any
person; and

(b) affect any right, obligation or liability arising under such
agreement, transaction or arrangement.

PART XVI

ENFORCEMENT AND PENALTIES

Division 1

Investigation powers

Investigation by Bank 229.   Where the Bank is satisfied or has any reason to believe that
any person has committed an offence under this Act, the Bank may
cause an investigation to be made and for such purpose may exercise

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all the powers of investigation provided under this Act.

Appointment of
investigating officer

230.   The Bank may appoint an officer of the Bank or any other
person appointed under subsection 7(6) to be an investigating officer
to conduct an investigation under this Division.

Powers of investigating
officer

231.   (1)   An investigating officer appointed under section 230 shall
have all the powers and functions conferred on the Bank under this
Part, and where such investigating officer is not an officer of the
Bank, he shall, in relation to such powers and functions—

(a) be subject to; and

(b) enjoy such rights, privileges, protection, immunities and
indemnities as may be specified in,

the provisions of this Act, the Central Bank of Malaysia Act 2009 or
any other written law applicable to an officer of the Bank as if he
was an officer of the Bank.

  (2)   An investigating officer, in exercising his powers and
performing his functions, shall be subject to and comply with the
directions, controls, instructions, conditions, restrictions or
limitations as may be specified by the Bank, orally or in writing,
either generally, or in any particular case or circumstance.

  (3)   The Governor shall have all the powers and functions of an
investigating officer.

  (4)   An investigating officer conducting any examination of any
person under this Division shall have the power to administer an oath
or affirmation to the person who is being examined.

Powers of entry, search
and seizure with warrant

232.   (1)   Where it appears to a Magistrate, upon written
information on oath and after such inquiry as he considers necessary,
that there is reasonable cause to believe that—

(a) any premises have been used or are about to be used for; or

(b) there is in any premises evidence necessary to the conduct of
an investigation into,

the commission of an offence under this Act, the Magistrate may
issue a warrant authorizing an investigating officer named in the
warrant, at any reasonable time, by day or by night and with or
without assistance, to enter the premises and if need be by force.

  (2)   A warrant under subsection (1) may authorize the investigating
officer to—

(a) enter any premises and search for, seize and detain any
property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document or
information;

(b) have access to, inspect, make copies of, or take extracts
from, any computer, computer output, system, data, books,
document or information so seized and detained, including
access to any program or data held in any computer or have
access to, inspect or check the operation of any computer
and any associated apparatus or material;

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(c) take possession of, and remove from the premises, any
property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document or
information so seized and detained;

(d) search any person who is in, or on, such premises, and for
the purpose of such search, detain such person, subject to
section 236, and remove him to such place as may be
necessary to facilitate the search, and seize and detain any
property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document or
information found on such person;

(e) break open, examine, and search, any article, container or
receptacle, including assessing into a computer; or

(f) stop, detain or search any conveyance.

  (3)   An investigating officer may if it is necessary so to do—

(a) break open any outer or inner door of such premises or other
obstruction to the premises, in order to effect entry into the
premises;

(b) forcibly enter the premises and every part of the premises;

(c) remove by force any obstruction to entry, search, seizure,
detention or removal as he is empowered to effect under this
section; or

(d) detain, subject to section 236, any person found in any
premises, or in any conveyance, searched under subsection
(1) until such premises or conveyance have been searched.

  (4)   An investigating officer shall for the purposes of this section
be provided with the necessary password, encryption code,
decryption code, software or hardware and any other means required
to enable comprehension of any program or data held in any
computer including in a form in which the information contained in a
computer can be taken away and in which it is visible and legible.

  (5)   Any computer output, data, books, document, information or
statement obtained by or provided to an investigating officer in the
course of a search under this section shall, notwithstanding any law
to the contrary, be admissible in evidence in any proceedings under
this Act.

Powers of entry, search
and seizure without

warrant

233.   If the investigating officer is satisfied upon information
received that he has reasonable cause to believe that by reason of
delay in obtaining a search warrant under section 232 the
investigation would be adversely affected or evidence of the
commission of an offence is likely to be tampered with, removed,
damaged or destroyed, the investigating officer may enter the
premises and exercise in, upon and in respect of the premises all the
powers referred to in section 232 in as full and ample a manner as if
he was authorized to do so by a warrant issued under that section.

List of seized property,
etc.

234.   (1)   An investigating officer, in the course of his investigation
or search, shall—

(a) prepare and sign a list of all property, apparatus, equipment,
machinery, computer, computer output, system, data, books,

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document or information seized; and

(b) state in the list the location in which, or the person on whom,
the property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document or
information is found or obtained.

  (2)   The occupant of the premises entered under subsection 232(1)
or section 233 in the course of investigation, or any person on his
behalf, shall in every instance be permitted to attend during the
search, sign the search list or affix his thumb print thereon, and be
given a copy of the search list prepared and signed or affixed thumb
print under this section.

  (3)   Where such occupant or person acting on behalf of the
occupant under subsection (2) refuses to sign the search list or affix
his thumb print on the search list, the investigating officer shall
endorse on the search list, under his name, the fact of and reasons for
such refusal, if any, stated by such occupant or person acting on
behalf of the occupant.

Release of seized
property, etc.

235.   (1)   An investigating officer shall, unless otherwise ordered
by any court—

(a) on the close of investigations or any proceedings arising
from such investigations; or

(b) with the prior written consent of the Bank at any time before
the close of investigations,

release any property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document or information
seized, detained or removed by him or any other investigating officer
under this Part, to such person as he determines to be lawfully
entitled to the property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document or information if he
is satisfied that it is not required for the purpose of any prosecution
or proceedings under this Act, or for the purpose of any prosecution
under any other written law.

  (2)   A record in writing shall be made by the investigating officer
effecting any release of any property, apparatus, equipment,
machinery, computer, computer output, system, data, books,
document or information under subsection (1) in respect of such
release specifying therein in detail the circumstances of, and the
reason for, such release.

  (3)   Where an investigating officer is unable to locate the person
who is lawfully entitled to the property, apparatus, equipment,
machinery, computer, computer output, system, data, books,
document or information the investigating officer shall cause to be
published a notice in the Bank’s website calling upon any person
who is lawfully entitled to the property, apparatus, equipment,
machinery, computer, computer output, system, data, books,
document or information to claim such property, apparatus,
equipment, machinery, computer, computer output, system, data,
books, document or information within the period stipulated in the
notice.

  (4)   Where no claim is made upon the expiry of the period
specified in the notice published under subsection (3), the
investigating officer shall make an application in writing to the court
as to the disposal of such property, apparatus, equipment, machinery,

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computer, computer output, system, data, books, document or
information.

  (5)   The court upon receiving the application under subsection (4)
and being satisfied that the person under subsection (1) who is
lawfully entitled to the property, apparatus, equipment, machinery,
computer, computer output, system, data, books, document or
information cannot be located shall order the same to be forfeited or
disposed of by the Bank in accordance with the order made by the
court.

Search of person 236.   (1)   An investigating officer may search any person whom he
has reason to believe has on his person any property, apparatus,
equipment, machinery, computer, computer output, system, data,
books, document or information, or other article necessary, in his
opinion, for the purpose of investigation into any offence under this
Act.

Act 593.   (2)   For the purpose of a search of a person under subsection (1) or
section 232 or 233, an investigating officer may, subject to the
provisions of the Criminal Procedure Code [Act 593], detain such
person as may be necessary to have the search carried out, and may
remove him in custody to such place as may be necessary to
facilitate such search.

  (3)   An investigating officer making a search of a person under
subsection (1) may seize, detain or take possession of any property,
apparatus, equipment, machinery, computer, computer output,
system, data, books, document, information or article, found upon
such person for the purpose of the investigation being carried out by
him.

  (4)   Any search of a person conducted under this Part shall be in
accordance with the provisions in the Criminal Procedure Code.

  (5)   No person shall be searched except by a person who is of the
same gender, and such search shall be conducted with strict regard to
decency.

Obstruction to exercise of
powers by investigating

officer

237.   (1)   No person shall—

(a) refuse any investigating officer exercising his powers under
section 232, 233 or 236, access to any premises or any part
of such premises, or fail to submit to the search of his
person;

(b) assault, obstruct, hinder or delay any investigating officer in
the exercise of his powers under this Part;

(c) fail to comply with any lawful demand of any investigating
officer in the execution of his duties under section 232, 233
or 236;

(d) refuse to give to an investigating officer any information
which may reasonably be required of him and which he has
it in his power to give;

(e) fail to produce to, or conceal or attempt to conceal from, an
investigating officer any property, books, other document or
article in relation to which the investigating officer has

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reasonable grounds for suspecting that an offence or breach
has been or is being committed under this Act;

(f) retrieve or endeavour to retrieve any thing which has been
duly seized;

(g) furnish to an investigating officer as true, information which
he knows or has reason to believe to be false, misleading,
inaccurate or incomplete; or

(h) before or after any seizure, break or otherwise destroy any
thing to prevent the seizure thereof, or the securing of such
thing.

  (2)   Any person who contravenes subsection (1) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Requirement to provide
translation

238.   (1)   Where an investigating officer finds, seizes, detains or
takes possession of any computer, computer output, system, data,
books, document or information, in the exercise of any power under
this Part, and such books, other document or information or any part
thereof is in a language other than the national language or the
English language, or in any sign or code, the investigating officer
may, orally or in writing, require the person who had the possession,
custody or control of such computer, computer output, system, data,
books, document or information, to furnish to the investigating
officer a translation in the national language or the English language
of such computer output, system, data, books, document or
information within such reasonable period as the investigating
officer may specify, having regard to the length of the computer
output, system, data, books, document or information, or other
circumstances relating to it.

  (2)   No person shall knowingly furnish a translation under
subsection (1) which is not an accurate, faithful and true translation,
or knowingly make a translation under that subsection which is not
accurate, faithful and true.

  (3)   Where the person required to furnish a translation under
subsection (1) is not the person who is suspected to have committed
the offence or breach under investigation, the Bank shall pay him
reasonable fees for the translation.

  (4)   Any person who contravenes subsection (1) or (2) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding one year or to a fine not exceeding five million ringgit
or to both.

Power to examine persons 239.   (1)   Where an investigating officer suspects any person to
have committed an offence or a breach under this Act, he may, if in
his opinion it is reasonably necessary to do so for the purposes of an
investigation into such offence—

(a) order any person in writing to attend before him for the
purpose of being examined orally in relation to any matter
which may assist in the investigation into the offence or
breach;

(b) order any person in writing to produce before him, within the

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time specified by such officer, any property, apparatus,
equipment, machinery, computer, computer output, system,
data, books, document, information, article or thing which
may assist in the investigation into the offence or breach; or

(c) by notice in writing require any person to furnish a statement
in writing made on oath or affirmation setting out therein all
such information which may be required under the notice,
being information which would be of assistance in the
investigation into the offence or breach.

  (2)   A person to whom an order under paragraph (1)(a) or (b), or a
notice under paragraph (1)(c), has been given shall comply with the
terms of such order or notice, as the case may be, and, in particular—

(a) a person to whom an order under paragraph (1)(a) has been
given shall—

(i) attend in accordance with the terms of the order to be
examined, and shall continue to so attend from day to
day as directed by the investigating officer until the
examination is completed; and

(ii) during such examination disclose all information which
is within his knowledge, or which is available to him, or
which is capable of being obtained by him, in respect of
the matter in relation to which he is being examined,
whether or not any question is put to him with regard
thereto, and where any question is put to him he shall
answer the question truthfully and to the best of his
knowledge and belief, and shall not refuse to answer any
question on the ground that it tends to incriminate him or
his spouse;

(b) a person to whom an order has been given under paragraph
(1)(b) shall not conceal, hide, destroy, alter, remove from or
send out of Malaysia, or deal with, expend, or dispose of,
any property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document,
information, article or thing specified in the order, or alter or
deface any entry in any such computer output, system, data,
books, document or information, or cause such acts to be
done, or assist or conspire to do such acts; and

(c) a person to whom a notice has been given under paragraph
(1)(c) shall, in his statement made on oath or affirmation,
furnish and disclose truthfully all information required under
the notice which is within his knowledge, or which is
available to him, or which is capable of being obtained by
him, and shall not fail to furnish or disclose the same on the
ground that it tends to incriminate him or his spouse.

  (3)   A person to whom an order or a notice is given under
subsection (1) shall comply with such order or notice and with the
provisions of subsection (2) in relation thereto, notwithstanding any
law, whether enacted before or after the commencement of this Act,
or of any oath, undertaking or requirement of secrecy, or of any
obligation under any contract, agreement or arrangement, whether
express or implied, to the contrary.

  (4)   Where any person discloses any information or produces any
property, equipment, apparatus, machinery, computer, computer
output, system, data, books, document, information, article or thing,
pursuant to subsections (1) and (2), neither the first-mentioned

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person, nor any other person on whose behalf or direction or as
whose agent or officer the first-mentioned person may be acting,
shall, on account of such disclosure or production, be liable to any
prosecution for any offence under or by virtue of any law, or to any
proceeding or claim in any form or of any description by any person
under or by virtue of any agreement or arrangement, or otherwise.

  (5)   An investigating officer may seize, take possession of and
retain for such duration as he deems necessary, any property,
apparatus, equipment, machinery, computer, computer output,
system, data, books, document, information, article or thing
produced before him in the course of an investigation under
subsection (1), or search the person who is being examined by him
under paragraph (1)(a), or who is producing anything to him under
paragraph (1)(b), for ascertaining whether anything relevant to the
investigation is concealed, or is otherwise upon such person.

  (6)   An examination under paragraph (1)(a) shall be reduced into
writing by the investigating officer and shall be read to and signed by
the person being examined or affixed with his thumb print, and
where such person refuses to sign the record or affix his thumb print,
the investigating officer shall endorse thereon under his hand the fact
of such refusal and the reasons thereof, if any, stated by the person
examined.

  (7)   The record of an examination under paragraph (1)(a), or a
written statement on oath or affirmation made pursuant to paragraph
(1)(c), or any property, apparatus, equipment, machinery, computer,
computer output, system, data, books, document, information, article
or thing produced under paragraph (1)(b) or otherwise in the course
of an examination under paragraph (1)(a) or under a written
statement on oath or affirmation made pursuant to paragraph (1)(c)
shall be admissible in evidence in any proceedings in any court for,
or in relation to—

(a) an offence or breach under this Act;

(b) any other matter under this Act; or

(c) any offence under any other written law,

regardless whether such proceedings are against the person who was
examined, or who produced the property, apparatus, equipment,
machinery, computer, computer output, system, data, books,
document, information, article or thing, or who made the written
statement on oath or affirmation, or against any other person.

  (8)   Any person who contravenes subsection (1) or (2) or furnishes
to an investigating officer any information or statement that is false
or misleading in any material particular, commits an offence and
shall, on conviction, be liable to imprisonment for a term not
exceeding eight years or to a fine not exceeding twenty-five million
ringgit or to both.

Service of orders or
notices generally, etc.

240.   (1)   Any order or notice that is given under this Part, shall,
where it is required to be served on an individual, be served by—

(a) delivering it personally to the person for whom it is
intended;

(b) delivering it to an adult person at the last-known place of
residence, occupation or business of the person for whom it
is intended; or

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(c) sending it by registered post to the person for whom it is
intended.

  (2)   Any order or notice that is given under this Part shall, where it
is required to be served on a body corporate or unincorporate, be
served by delivering the order or notice to an officer or agent of the
body corporate or unincorporate at its registered address or business
address.

  (3)   If the officer effecting any order or notice under subsection (1)
or (2) is satisfied, for reasons to be recorded by him in writing, that
the order or notice cannot be served in the manner provided in
subsection (1) or (2), the order or notice may be served by affixing
the order or notice on a conspicuous part of the premises—

(a) in which the individual for whom the order or notice is
intended is known to have last resided, to have been last
employed or to have last carried on business; or

(b) at the last known registered address or business address of
the body corporate or unincorporate for whom the order or
notice is intended,

and in such case the order or notice shall be deemed to have been
duly served.

  (4)   If upon an investigation made under this Act, it appears to the
investigating officer that there is sufficient evidence or reasonable
grounds for suspicion to justify the commencement or continuance
of any proceedings against any person, the investigating officer shall
require a complainant, if any, and so many of the persons who
appear to such investigating officer to be acquainted with the
circumstances of the case as he thinks necessary, to execute a bond
to appear before any court therein named or to give evidence in any
court proceedings.

  (5)   If any complainant or person referred to in subsection (4)
refuses to execute a bond under that subsection, the investigating
officer shall report such refusal to the court which may thereupon in
its discretion issue a warrant or summons to secure the attendance of
such complainant or person.

Surrender of travel
documents

241.   (1)   Notwithstanding any written law to the contrary, an
investigating officer may, by notice in writing, require any person
who is the subject of an investigation for an offence under this Part,
to surrender his travel documents including passport or exit permit in
his possession, within such period as specified in the notice.

  (2)   A notice under subsection (1) shall be served personally to the
person to whom it is addressed in accordance with section 240.

  (3)   A person to whom a notice under subsection (1) is served shall
comply with such notice, failing which he may be arrested and taken
before a magistrate.

  (4)   Where a person is taken before a magistrate, unless such
person complies with the notice under subsection (1) or satisfies the
magistrate that he does not possess a travel document, the magistrate
shall by warrant commit such person to prison—

(a) until the expiry of a period of fourteen days from the date of
his committal; or

(b) until he complies with the notice under subsection (1),

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whichever occurs earlier.

  (5)   For the purpose of subsection (4), a certificate signed by the
Public Prosecutor to the effect that the person has complied with the
written notice under subsection (1) shall be sufficient warrant for the
Superintendent of Prison to discharge such person.

  (6)   An investigating officer may, with the written approval of the
Bank, by notice in writing issued to any immigration officer, request
that any person who is the subject of an investigation in respect of an
offence under this Act be prevented from leaving Malaysia.

  (7)   The immigration officer may, upon being notified of a written
notice made under subsection (6), require the person who is the
subject of an investigation in respect of an offence under this Act, to
surrender his passport, exit permit or any other travel document in
his possession to an immigration officer.

Act 155.   (8)   Subject to any order issued or made under any written law
relating to immigration, “immigration officer” means any person
appointed under section 3 of the Immigration Act 1959/63 [Act 155].

Agent provocateur 242.   Notwithstanding any law or rule of law to the contrary, in any
proceedings against any person for an offence under this Act—

(a) no agent provocateur, whether he is an officer of the Bank
or not, shall be presumed to be an accomplice or be
unworthy of credit by reason only of his having attempted to
commit or to abet, or having abetted or having been engaged
in a criminal conspiracy to commit, such offence if the main
purpose of such attempt, abetment or engagement was to
secure evidence against such person;

(b) any statement whether oral or in writing made to an agent
provocateur by any person, including any person who is
subsequently charged with an offence under this Act, shall
be admissible in evidence and given due weight and
consideration at any trial for an offence under this Act; and

(c) a conviction for any offence under this Act solely on the
uncorroborated evidence of any agent provocateur shall not
be illegal and no such conviction shall be set aside merely
because the court which tried the case has failed to refer in
the grounds of its judgment to the need to warn itself against
the danger of convicting on such evidence.

Assistance to police or
other public officer

243.   The Bank may at its own initiative, or on the request of a
public officer—

(a) supply to a police officer or any other public officer a copy
of any books, computer output, data, document or
information seized, detained or taken possession of under
section 232, 233 or 236, or of any record of examination
under paragraph 239(1)(a), or of any written statement on
oath or affirmation made under paragraph 239(1)(c) or of
any books, computer output, data, document or information
produced under paragraph 239(1)(b), or otherwise in the
course of any examination under paragraph 239(1)(a), or
under any written statement on oath or affirmation made
pursuant to paragraph 239(1)(c), and such police officer or
other public officer may make such use of such copy of such

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record, statement, books, computer output, data, document
or information as may be necessary or expedient in relation
to the exercise of his powers, the performance of his
functions, or the discharge of his duties, in respect of any
person; or

(b) allow a police officer or any other public officer to have
access to and inspect any property, apparatus, equipment,
machinery, computer, computer output, system, data, books,
document, information, article or thing which had been
produced before, or seized, detained or taken possession of,
by an investigating officer under this Part, and such police or
other public officer may make such use of any knowledge
gained by such access or inspection as may be necessary or
expedient in relation to the exercise of his powers, the
performance of his functions, or the discharge of his duties,
in respect of any person.

Investigating officer
deemed to be public

servant and public officer
Act 574.

244.   An investigating officer shall be deemed to be a public servant
for the purposes of the Penal Code [Act 574], and to be a public
officer for the purposes of the Criminal Procedure Code and the
Evidence Act 1950 or any other written law which the Minister may,
on the recommendation of the Bank, prescribe.

Division 2

Administrative actions

Power of Bank to take
action

245.   (1)   A person has committed a breach under this Act if the
person fails to comply with or give effect to—

(a) any provision of this Act;

(b) any regulations made under this Act;

(c) any order made or any direction issued under this Act by the
Bank including an order made under section 106 or a
direction issued under section 128 or 168, subsection 225(6)
or section 227; or

(d) any standards, condition, restriction, specification,
requirement or code under this Act.

  (2)   The Bank shall have regard to the following matters in
determining the appropriate action to be taken in each case:

(a) the effectiveness of the enforcement action to be taken under
this Act;

(b) the proportionality of the action to be taken with the breach
committed;

(c) deterrence of future breaches of similar nature by other
persons; and

(d) any other matter that is considered as relevant in the opinion
of the Bank.

  (3)   If the Bank is of the opinion that a person has committed a
breach and it is appropriate to take action against that person, the
Bank may, subject to section 273 take any one or more of the

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following actions:

(a) make an order in writing requiring the person in breach—

(i) to comply with or give effect to; or

(ii) to do or not to do any act in order to ensure compliance
with,

such provisions, regulations, order, direction, standards,
condition, restriction, specification, requirement or code
referred to in subsection (1);

(b) subject to subsection (4), impose a monetary penalty—

(i) in accordance with the order published in the Gazette
made under section 247 or if no such order has been
made, such amount as the Bank considers appropriate,
but in any event not exceeding five million ringgit in the
case of a breach that is committed by a body corporate or
unincorporate or one million ringgit in the case of a
breach that is committed by any individual, as the case
may be;

(ii) which shall not exceed three times the gross amount of
pecuniary gain made or loss avoided by such person as a
result of the breach; or

(iii) which shall not exceed three times the amount of money
which is the subject matter of the breach,

whichever is greater for each breach or failure to comply;

(c) reprimand in writing the person in breach or require the
person in breach to issue a public statement in relation to
such breach, if it is in the opinion of the Bank that such
breach is relevant for the information of the general public;

(d) make an order in writing requiring the person in breach to
take such steps as the Bank may direct to mitigate the effect
of such breach; or

(e) make an order in writing requiring an authorized person,
operator of a designated payment system or a market
participant to remedy the breach including making restitution
to any other person aggrieved by such breach.

  (4)   The Bank may impose a monetary penalty under paragraph (3)
(b) only in respect of the following:

(a) breach of any provision set out in Schedule 15;

(b) breach of any requirement under any other provision of this
Act where no offence is provided for non-compliance of that
requirement;

(c) failure to comply with any requirement imposed under
regulations made under this Act where no provision for
imposition of penalty is provided for in accordance with
paragraph 271(2)(d); or

(d) failure to comply with any standards, code, order, direction,
requirement, condition, specification, restriction or otherwise
made or imposed pursuant to any provision set out in
Schedule 15.

  (5)   If a breach is committed by a body corporate or unincorporate,
any action under subsection (3) can be taken against a person—

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(a) who is its director, controller, officer or partner, or was
purporting to act in any such capacity; or

(b) who is concerned in the management of its affairs,

at the time of the breach unless that person demonstrates that the
breach was committed without his consent or connivance and that he
exercised such diligence to prevent the breach as he ought to have
exercised, having regard to the nature of his function in that capacity
and to the circumstances.

  (6)   If a breach is committed by a person—

(a) who is a director, controller, officer or partner of a body
corporate or unincorporate, or was purporting to act in any
such capacity; or

(b) who is concerned in the management of the affairs of a body
corporate or unincorporate,

an action under subsection (3) can be taken against the body
corporate or unincorporate.

  (7)   For the purposes of paragraph (3)(e), in determining whether
or not any amount is to be paid by a person in breach, the Bank shall
have regard to—

(a) whether or not one or more persons have suffered loss or
been otherwise adversely affected as a result of the breach;
or

(b) the profits that have accrued to such person in breach.

  (8)   Any monetary penalty paid by a person in accordance with
paragraph (3)(b) shall be paid into and form part of the Federal
Consolidated Fund.

  (9)   Where a person fails to pay a monetary penalty imposed by the
Bank under paragraph (3)(b) within the period specified by the Bank,
the penalty imposed by the Bank may be sued for and recovered as a
civil debt due to the Government.

  (10)   Where a person fails to remedy the breach including making
restitution to any other person aggrieved by the breach under
paragraph (3)(e), notwithstanding any other written law, the Bank
may sue for and recover such sum as a civil debt due to the person
aggrieved by the breach.

  (11)   Nothing in this section shall preclude the Bank from taking
any of the actions that it is empowered to take under this Act, in
particular, section 106, 128 or 168, or any written law.

Lodgment of amount of
not distributed with

Registrar of Unclaimed
Moneys

Act 370.

246.   To the extent that any of the amount paid under paragraph 245
(3)(e) or subsection 245(10) has not been distributed by the person in
breach after reasonable efforts to notify the aggrieved persons have
failed due to the difficulty of notifying the aggrieved persons, such
amount shall be lodged with the Registrar of Unclaimed Moneys in
accordance with the provisions of the Unclaimed Moneys Act 1965
[Act 370].

Power of Bank to
prescribe monetary

penalty

247.   The Bank may, for giving full effect to or for convenient
implementation of subparagraph 245(3)(b)(i), or for the purposes of
regulatory objectives of this Act, prescribe the following matters as it

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deems necessary:

(a) classify or designate the breaches under this Act into
different categories of breaches; and

(b) fix, in accordance with paragraph (a), a monetary penalty, or
a range of monetary penalties, in respect of each category.

Application for appeal of
decisions

248.   (1)   Any person who is aggrieved by a decision of the Bank
under paragraph 245(3)(b) or (e) may within twenty-one days after
the person has been notified of the decision, appeal by filing a notice
in writing to the Monetary Penalty Review Committee.

  (2)   The decision of the Bank under paragraph 245(3)(b) or (e), as
the case may be, shall not take effect until the appeal is disposed of.

  (3)   The Monetary Penalty Review Committee may decide to
confirm the decision of the Bank or require the Bank to reconsider
and reach a decision in accordance with the findings of the
Committee.

Monetary Penalty Review
Committee

249.   (1)   There shall be established a committee to be known as the
Monetary Penalty Review Committee for the purposes of section
248.

  (2)   The Monetary Penalty Review Committee shall consist of not
less than three but not more than five members appointed by the
Minister from amongst non-executive directors of the Bank or other
persons.

  (3)   The Monetary Penalty Review Committee may determine its
own procedures.

Division 3

Civil actions

Civil action by Bank 250.   Where it appears to the Bank that there is a reasonable
likelihood that any person will contravene or has contravened or will
breach or has breached or is likely to fail to comply with or has
failed to comply with any—

(a) provisions of this Act;

(b) provisions of any regulations made pursuant to this Act;

(c) order made or direction issued by the Bank under this Act
including an order made under section 106 or a direction
issued under section 128 or 168, subsection 225(6) or section
227;

(d) standards, condition, restriction, specification, requirement
or code made or issued pursuant to any provision of this Act;
or

(e) action taken by the Bank under subsection 245(3),

the Bank may institute civil proceedings in the court seeking any
order specified under subsection 251(1) against that person whether
or not that person has been charged with an offence in respect of the

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contravention or breach or whether or not a contravention or breach
has been proved in a prosecution.

Orders by court 251.   (1)   The court may, on an application by the Bank under
section 250, make one or more of the following orders:

(a) an order requiring the person to pay an amount which shall
not exceed three times—

(i) the gross amount of pecuniary gain made or loss avoided
by such person as a result of the contravention, breach or
non-compliance; or

(ii) the amount of money which is the subject matter of the
contravention, breach or non-compliance,

as the case may be;

(b) an order requiring the person to pay a civil penalty in such
amount as the court considers appropriate having regard to
the severity or gravity of the contravention, breach or non-
compliance, but in any event not exceeding twenty-five
million ringgit;

(c) an order—

(i) restraining the person from engaging in any specific
conduct; or

(ii) requiring the cessation of the contravention, breach or non-
compliance;

(d) an order directing a person to do a certain act;

(e) an order directing the person, or any other person who
appears to have been involved in the contravention, breach
or non-compliance to take such steps as the court may direct
to mitigate the effect of such contravention, breach or non-
compliance;

(f) an order directing the authorized person, operator of a
designated payment system or market participant to remedy
the contravention, breach or non-compliance including
making restitution to any other person aggrieved by such
contravention, breach or non-compliance;

(g) where a person has refused or failed to comply with any
action taken by the Bank under subsection 245(3), an order
directing the person to comply with such action that is taken
by the Bank; and

(h) any other order deemed appropriate by the court including
any ancillary order deemed desirable in consequence of the
making of an order under any provision in this subsection.

  (2)   The court may make an order under subsection (1) against a
person—

(a) who is the director, controller, officer or partner, or was
purporting to act in any such capacity; or

(b) who is concerned in the management of the affairs,

of a body corporate or unincorporate in the event where the
contravention, breach or non-compliance has been committed by the
body corporate or unincorporate unless that person proves that the

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contravention, breach or non-compliance was committed without his
consent or connivance and that he exercised such diligence to
prevent the commission of the contravention, breach or non-
compliance as he ought to have exercised, having regard to the
nature of his function in that capacity and to the circumstances.

  (3)   If a contravention, breach or non-compliance is committed by
a person—

(a) who is a director, controller, officer or partner of a body
corporate or unincorporate, or was purporting to act in any
such capacity; or

(b) who is concerned in the management of the affairs of a body
corporate or unincorporate,

an order under subsection (1) can be made against the body
corporate or unincorporate.

  (4)   Any sum ordered by the court under subsection (1), shall be
applied—

(a) firstly, to reimburse the Bank for all costs of the proceedings
in respect of the contravention, breach or non-compliance;
and

(b) secondly, to pay persons aggrieved by the contravention,
breach or non-compliance in the case of an order under
paragraph (1)(f); or

(c) thirdly, to pay into and form part of the Federal Consolidated
Fund unless the court orders for such sums or part thereof to
be used to compensate persons who have suffered loss as a
result of the contravention, breach or non-compliance.

  (5)   If the authorized person, operator of a designated payment
system or market participant considers that it is not practicable to
provide a remedy to the persons referred to in paragraph (1)(f), in
view of the amount of any potential distribution to each person or the
difficulty of ascertaining or notifying the person whom it is
appropriate to provide a remedy, the authorized person, operator of a
designated payment system or market participant shall lodge such
amount with the Registrar of Unclaimed Moneys in accordance with
the provisions of the Unclaimed Moneys Act 1965.

  (6)   The court may revoke or vary an order made by it under this
section or suspend the operation of such an order.

  (7)   The powers conferred on the court under this section are in
addition to any of its other powers, and do not derogate from its
other powers provided under any other written law.

  (8)   Applications under this section may be commenced at any time
within six years from the date on which the Bank discovered the
contravention, breach or non-compliance.

Civil action to seek
compensation

252.   (1)   Where any person—

(a) has been convicted of an offence under this Act or under any
other written law; or

(b) has had any offence committed by him compounded under
section 264,

and such offence has resulted in, or caused, or subsequent to its

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commission, results in, or causes, any loss or damage of any nature
or in any form to a licensed person, the Bank may institute civil
proceedings in court for the purposes of seeking indemnity from the
persons referred to in subsection (2).

  (2)   The following persons shall be jointly and severally liable to
indemnify the licensed person in full for any loss or damage to the
licensed person:

(a) the person convicted of the offence, or the person whose
offence has been compounded under section 264; and

(b) any director, officer or controller of the licensed person, any
other person purporting to act in any such capacity, or any
person who is in any manner or to any extent responsible for
the management of the affairs of the licensed person, or any
person who is assisting in such management.

  (3)   The court may, upon reviewing an application by the Bank,
make an order specifying the amount of moneys the persons referred
to in subsection (2) are liable to indemnify the licensed person.

  (4)   The persons referred to in subsection (2) shall not be liable to
so indemnify the licensed person if—

(a) the offence was committed without his knowledge, consent
or connivance; and

(b) he took all reasonable precautions and had exercised due
diligence to prevent the commission of the offence as he
ought to have taken precautions or to have exercised, having
regard to the nature of his functions and to all the
circumstances in which the offence was committed.

  (5)   An amount ordered by the court under subsection (3) shall be
applied—

(a) firstly, to reimburse the Bank for all costs of the proceedings
to seek the indemnity; and

(b) secondly, to compensate the licensed person.

  (6)   Civil proceedings under subsection (1) may be commenced at
any time within six years from the date on which the person has been
convicted of the offence under this Act or other written law or
compounded under section 264.

Interim orders 253.   If an application is made to a court for an order under
subsection 251(1) or 252(1), the court may, if it deems appropriate,
before considering the application, make an interim order of the kind
applied for and such order shall be expressed to have effect pending
the determination of the application.

Contravention of court
order

254.   (1)   Any person who contravenes an order of the court under
subsection 251(1), 252(3) or section 253 commits an offence and
shall, on conviction be liable to imprisonment for a term not
exceeding eight years or to a fine not exceeding twenty-five million
ringgit or to both.

  (2)   Subsection (1) does not affect the powers of the court in
relation to the punishment of contempt of court.

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No undertaking as to
damages

255.   Where the Bank makes an application for an order under
subsection 251(1) or 252(1), the court shall not, as a condition of the
grant of the order, require any undertaking as to damages to be given
by or on behalf of the Bank.

Other actions 256.   An application made pursuant to subsection 251(1) or 252(1),
shall not prejudice any other action that may be taken by the Bank,
aggrieved person or licensed person, as the case may be, under this
Act or any other law.

Evidence obtained in
investigations may be

used in civil proceedings

257.   (1)   Notwithstanding any law, any document or information
obtained by the Bank in the exercise of its investigation powers
against—

(a) an authorized person, operator of a designated payment
system or a market participant;

(b) any director or officer of the persons referred to in paragraph
(a);

(c) any agent of the persons referred to in paragraph (a); or

(d) any other person,

may be used by the Bank in a civil action instituted by the Bank.

  (2)   For the avoidance of doubt, any document or information
referred to in subsection (1) shall not be inadmissible in any civil
proceedings under this Part to which the Bank is a party by reason
only that it was obtained by the Bank in the exercise of its
investigation powers and the admissibility thereof shall be
determined in accordance with the rules of evidence under any law.

Division 4

Criminal offences

Imprisonment 258.   Where the penalty of imprisonment has been provided for an
offence under this Act, such penalty shall not apply to a body
corporate convicted of the offence.

Offences in relation to
entries in documents

259.   (1)   No person shall—

(a) make or cause to be made a false entry;

(b) omit to make, or cause to be omitted, any entry; or

(c) alter, extract, conceal or destroy, or cause to be altered,
extracted, concealed or destroyed, any entry,

in any book or record, or in any report, slip, statement or other
document whatsoever, relating to the business, affairs, transactions,
condition, property, assets, liabilities or accounts, of an authorized
person or operator of a designated payment system.

  (2)   No person shall evade the provisions of this Act by altering,
forging, destroying, mutilating, defacing, concealing or removing
any document.

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  (3)   Any person who contravenes subsection (1) or (2) commits an
offence and shall, on conviction, be liable to imprisonment for a term
not exceeding eight years or to a fine not exceeding twenty-five
million ringgit or to both.

Offence committed by
any person acting in

official capacity

260.   (1)   Where an offence is committed by a body corporate or
unincorporate, a person—

(a) who is its director, controller, officer or partner, or was
purporting to act in any such capacity; or

(b) who is concerned in the management of its affairs,

at the time of the commission of the offence is deemed to have
committed that offence unless that person proves that the offence
was committed without his consent or connivance and that he
exercised such diligence to prevent the commission of the offence as
he ought to have exercised, having regard to the nature of his
function in that capacity and to the circumstances.

  (2)   An individual may be prosecuted for an offence under
subsection (1) notwithstanding that the body corporate or
unincorporate has not been convicted of the offence whether or not a
prosecution has been initiated or a conviction has been obtained
against the body corporate or unincorporate.

  (3)   Subsection (1) shall not affect the criminal liability of the body
corporate or unincorporate for the offence referred to in that
subsection.

  (4)   The penalty of imprisonment for an offence applies to an
individual convicted of an offence by virtue of subsection (1),
notwithstanding that the imprisonment does not apply to the body
corporate or unincorporate by virtue of section 258.

Offence by employees,
etc.

261.   Where a person is liable under this Act to a penalty for any act,
omission, neglect or default, such person shall be liable to the same
penalty for the act, omission, neglect or default of his employee,
director, controller or agent if the act, omission, neglect or default
was committed by—

(a) his employee in the course of the employee’s employment;

(b) his director in carrying out the function of a director;

(c) his controller in carrying out the function of a controller; or

(d) his agent when acting on his behalf.

Seizable offence 262.   Every offence punishable under this Act shall be a seizable
offence, and a police officer not below the rank of Inspector, or an
investigating officer appointed under section 230 may arrest without
warrant a person whom he reasonably suspects to have committed or
is committing the offence.

Duty of investigating
officer to make over

arrested person to police

263.   An investigating officer who makes an arrest under section
262 shall make over the arrested person to a police officer without
unnecessary delay and the arrested person shall be dealt with
according to the law relating to criminal procedure as if he had been

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arrested by a police officer.

Power to compound 264.   (1)   The Governor may, with the consent in writing of the
Public Prosecutor, offer in writing to compound any offence
punishable under this Act or any regulations made under this Act, by
accepting from the person reasonably suspected of having committed
the offence, such sum of money not exceeding the amount of the
maximum fine to which that person would have been liable if he had
been convicted of the offence, within such time as may be specified
in the offer.

  (2)   An offer under subsection (1) may be made at any time after
the offence has been committed, but before any prosecution for it has
been instituted, and if the amount specified in the offer is not paid
within the time specified in the offer or within such extended period
as the Governor may grant, prosecution for the offence may be
instituted at any time after that against the person to whom the offer
was made.

  (3)   Where an offence has been compounded under subsection (1),
no prosecution shall be instituted in respect of the offence against the
person to whom the offer to compound was made, and any document
or thing seized in connection with the offence may be released by the
Bank, subject to such terms and conditions as the Bank thinks fit.

  (4)   All sums of money accepted under subsection (1) shall be paid
into the Federal Consolidated Fund.

Attempts, abetments and
conspiracies

265.   (1)   Any person who—

(a) attempts to commit an offence under this Act;

(b) does an act preparatory to, or in furtherance of, the
commission of an offence under this Act; or

(c) abets or is engaged in a criminal conspiracy to commit (as
those terms are defined in the Penal Code) an offence under
this Act, whether or not the offence is committed in
consequence of it,

commits an offence and is liable to the penalty for that offence.

  (2)   A provision of this Act which refers to an offence under a
specific provision of this Act shall be read as including a reference to
an offence under subsection (1) in relation to the offence under that
specific provision.

Prosecution 266.   No prosecution for an offence under this Act shall be instituted
except with the written consent of the Public Prosecutor.

Division 5

General matters

Protection in relation to
disclosure of information

to Bank

267.   (1)   Where a person discloses in good faith to the Bank, his
knowledge or belief or any document or information that a breach or
contravention has been committed or is about to be committed under

Page 141 of 187

this Act—

(a) such person shall not be liable for a breach of a duty of
confidentiality imposed by any law, contract or rules of
professional conduct;

(b) it shall be a defence in an action, a suit, prosecution or
proceeding that is brought, instituted or maintained in any
court or before any other authority against the person who
made the disclosure to the Bank that in his belief the
disclosure was necessary for the carrying into effect the
provisions of this Act; or

(c) no contractual or other rights or remedy may be enforced
against the person on the basis of disclosure.

  (2)   Any document or information disclosed to the Bank under
subsection (1) and the information and identity of the person making
the disclosure shall be secret between the Bank and the person who
made the disclosure.

Evidential provision 268.   In any criminal or civil proceedings under this Act—

(a) any statement purporting to be signed by the Governor or
any other person authorized to perform the functions of the
Bank on its behalf, which forms part of or is annexed to any
letter, register, record or document, however expressed,
described or represented; or

(b) the production of a printed copy of a standard, specification,
order in writing, direction, instruction, notice, requirement,
condition or restriction, letter, register, record, document or
any other instrument specified or issued pursuant to this Act,

shall, until the contrary is proved, be evidence of any fact stated
therein.

Power of Bank to publish
information

269.   The Bank may, where it thinks necessary, publish in such form
and manner as it thinks fit, any information in relation to—

(a) any enforcement action taken under this Act including
criminal proceedings, compounding, civil actions and
administrative actions; and

(b) the outcome of actions referred to in paragraph (a) including
the outcome of any proceedings, settlement in or out of court
in relation to any breach or contravention of provisions of
this Act.

PART XVII

GENERAL PROVISIONS

Enforceable undertakings 270.   (1)   The Minister or the Bank may accept a written
undertaking given by a person in connection with a matter in relation
to which the Minister or the Bank, as the case may be, has a power
or function under this Act.

  (2)   The written undertaking accepted under subsection (1) may be
varied or withdrawn by the person giving the undertaking with the

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consent of the Minister or the Bank, as the case may be.

  (3)   If the Bank considers that a person who has given a written
undertaking has breached any of the terms of the undertaking—

(a) given to the Bank, the Bank may apply; or

(b) given to the Minister, the Bank may recommend to the
Minister to apply,

to the High Court for an order under subsection (4) by way of
originating summons.

  (4)   If the High Court is satisfied that a person has breached a term
of the undertaking, the High Court may make any or all of the
following orders:

(a) an order directing the person to comply with the
undertaking;

(b) an order directing the person to pay to the Federal
Consolidated Fund an amount up to the amount of any
financial benefit that the person obtained (whether directly
or indirectly) and that is reasonably attributable to the
breach;

(c) any order that the High Court considers appropriate directing
the person to compensate any other person who has suffered
loss or damage as a result of the breach; or

(d) any other order that the High Court considers appropriate.

  (5)   The Bank shall be entitled to be heard in proceedings relating
to an application made to the High Court in respect of a breach of
undertaking given to the Minister.

Regulations 271.   (1)   The Minister may, on the recommendation of the Bank,
make such regulations as may be necessary or expedient for—

(a) giving full effect to the provisions of this Act;

(b) carrying out or achieving the regulatory objectives and
purposes of this Act;

(c) the further, better or more convenient implementation of the
provisions of this Act; or

(d) providing for any supplemental, incidental or consequential
matters in relation to this Act.

  (2)   Without limiting the generality of subsection (1), regulations
may be made—

(a) to provide for control by the Bank by supervision,
regulation, restriction, prohibition, or otherwise howsoever,
with respect to the provision of finance, Islamic financial
intermediation activities as defined in section 222, Islamic
banking services or takaful services supplied or carried on by
persons other than an authorized person;

(b) to provide for forms in respect of any matter under this Act,
or under any regulations made under this section;

(c) to provide for fees to be paid to the Bank in respect of any
matter under this Act or under any regulations made under
this section; and

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(d) to provide for the imposition of penalties for any offence
under the regulations which shall not exceed imprisonment
for a term not exceeding five years or a fine not exceeding
ten million ringgit or to both.

  (3)   Regulations made under this section may relate to all or any
class, category or description of persons, and may make different
provisions for different classes, categories or descriptions of persons.

Provisions relating to
approvals, consents,

standards, codes,
specifications, notices,

requirements, directions
or measures

272.   (1)   Unless otherwise expressly provided, any approval or
consent granted, or any standards, code, specification, notice,
requirement, direction or measures specified or issued, under this
Act—

(a) may be either general or specific;

(b) may be amended or revoked by the Bank or the Minister, as
the case may be; or

(c) shall be issued or communicated in such manner as the Bank
thinks appropriate and shall be valid for all purposes.

  (2)   Any approval or consent under subsection (1) may be—

(a) absolute or conditional; or

(b) limited so as to expire on a specified date, unless renewed.

Opportunity to make
representations

273.   (1)   Where—

(a) the Minister, on the recommendation of the Bank, proposes
to take any action against any person under subsection 13(1),
18(1) or (2), 39(3) or section 205; or

(b) the Bank proposes to take any action against any person
under subsection 13(1), 18(1), (2) or (3), 33(4) or 39(3),
section 44 or 49, subsection 106(2), 128(2) or (3), 132(1),
152(5) or 168(1), section 174, subsection 179(1) or 184(1),
or against any person in breach referred to in subsection 245
(1),

the Bank shall serve on such person a written notice of the proposed
action.

  (2)   The written notice under subsection (1) shall set out—

(a) the action that the Minister or the Bank, as the case may be,
proposes to take and the grounds for such action;

(b) the period within which the person referred to in subsection
(1) may make a written representation to the Minister or the
Bank, as the case may be;

(c) in the case of any proposed action under subsection 106(2),
152(5) or 245(3), the non-compliance or breach committed
by the person; and

(d) where the Bank proposes to impose a monetary penalty
under paragraph 245(3)(b), the right of the person in breach
to pay, within a period specified in the notice, the monetary
penalty stated in such notice.

  (3)   The person referred to in subsection (1) shall be given a

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reasonable opportunity to make a written representation to the
Minister or the Bank, as the case may be, by submitting such
representation to the Bank within fourteen days from the date of the
notice by the Bank.

  (4)   After the expiry of the period of fourteen days from the date of
the notice by the Bank and considering any written representation
under subsection (3), the Minister, on the recommendation of the
Bank, or the Bank, as the case may be, shall decide whether to—

(a) proceed with the proposed action or a variation of such
action; or

(b) take no further action.

  (5)   The Minister or the Bank, as the case may be, shall give the
person referred to in subsection (1) a written notice of the decision
under subsection (4) and the decision shall take effect from the date
specified in the notice.

  (6)   Notwithstanding subsection (1), the Minister or the Bank may,
as the case may be, first take the proposed action and the opportunity
to make representations shall be given immediately after the action
has been taken if any delay in taking the proposed action would be
detrimental to the interests of any authorized person, operator of a
designated payment system, depositors, investment account holders,
takaful participants, participants, creditors, the financial system or
the public generally.

  (7)   The Minister or the Bank may, as the case may be, confirm,
amend or revoke the exercise of action taken under subsection (6) in
consequence of representations made under that subsection.

  (8)   Subsection (6) shall not apply to any action taken under
section 245.

  (9)   This section shall not apply to—

(a) a proposed action under subsection 13(1) unless the
proposed action is likely to prejudice the interest of the
person referred to in subsection (1); and

(b) a revocation of a licence under paragraph 18(1)(f), (g) or (h).

Exemptions 274.   The Minister may, on the recommendation of the Bank and
provided that it is consistent with the objects and functions of the
Bank under the Central Bank of Malaysia Act 2009 or the regulatory
objectives of this Act, by an order published in the Gazette, exempt
any particular person or any class, category or description of persons,
from all or any of the provisions of this Act, for such duration, and
subject to such conditions, as may be specified by the Minister in the
order.

Power of Minister to
amend Schedule

275.   The Minister may, on the recommendation of the Bank, from
time to time, by an order published in the Gazette, amend any
provision in Schedules 1, 2, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13 of this
Act and upon such publication, such provision as amended shall
come into full force and effect and shall be deemed to be an integral
part of this Act as from the date of such publication or from such
later date as may be specified in the order.

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Decision of Minister to be
final

276.   Any decision made by the Minister under this Act shall be
final.

Power of Bank to issue
guidance

277.   The Bank may issue guidance in writing to any person or to
any class, category or description of persons consisting of such
information, advice or recommendation as it considers appropriate—

(a) with respect to the provisions of this Act;

(b) for the purpose of carrying out or achieving the regulatory
objectives of this Act; or

(c) with respect to any other matter which, in the opinion of the
Bank, is desirable to give information, advice or
recommendation.

Protection against suits
and legal proceedings

278.   (1)   No action, suit, prosecution or other proceeding shall lie
or be brought, instituted, or maintained in any court or before any
other authority against—

(a) the Minister;

(b) the Bank;

(c) the Governor;

(d) the Deputy Governor; or

(e) any of its directors, officers or employees or any person
acting on behalf of the Bank,

for or on account of, or in respect of, any act done or statement made
or omitted to be done or made, or purporting to be done or made or
omitted to be done or made, in pursuance or in execution of, or
intended pursuance or execution of, this Act, or any order in writing,
direction, instruction, notice or other thing issued under this Act, if
such act or such statement was done or made, or was omitted to be
done or made, in good faith.

Application of Companies
Act 1965

279.   (1)   Where an authorized person, operator of a designated
payment system or a person prescribed as a prescribed Islamic
financial institution under section 223 is a corporation to which all or
any of the provisions of the Companies Act 1965 apply, such
provisions shall be in addition to the provisions of this Act and not in
derogation thereof, but where there is any conflict or inconsistency
between the provisions of the Companies Act 1965 and this Act in
their respective application to the person or operator, the provisions
of this Act shall prevail.

  (2)   Where any difficulty or doubt arises in the application of
subsection (1) in relation to any particular authorized person or
operator of a designated payment system, or any particular matter or
circumstance, or generally, the Minister may on the reference of the
difficulty or doubt to him by the Bank, resolve the same by a
direction in writing.

Application of certain
provisions of Act to

Labuan entities
Act 545.

280.   (1)   For the purpose of this section, “Labuan Financial
Services Authority” means Labuan Financial Services Authority
established under section 3 of the Labuan Financial Services
Authority Act 1996 [Act 545].

Page 146 of 187

  (2)   Without prejudice to the generality of Division 2 of Part XV,
the provisions in such Division shall apply to any person who is
under the supervision or oversight of the Labuan Financial Services
Authority and the Bank may exercise such powers and perform such
functions under this Act to ensure compliance with Division 2 of
Part XV by such person.

  (3)   For the purposes of the Bank exercising oversight over a
financial group, a reference to—

(a) “subsidiary” in sections 127 and 128; and

(b) “related corporation” in Parts XI and XII,

shall be deemed to include a person who is under the supervision or
oversight of the Labuan Financial Services Authority where such
person is within the financial group.

  (4)   Sections 178 and 185 of the Labuan Financial Services and
Securities Act 2010 and sections 139 and 146 of the Labuan Islamic
Financial Services and Securities Act 2010 shall not restrict the Bank
in the exercise of powers or performance of functions under section
127 or 128, or Part XI or XII, and the Bank may exercise such
powers and perform such functions under this Act to ensure
compliance with section 127 or 128, or Part XI or XII.

  (5)   Section 146 of the Labuan Islamic Financial Services and
Securities Act 2010 shall not restrict the application of this Act to
any person under the supervision or oversight of the Labuan
Financial Services Authority who, under this Act—

(a) operates a payment system, is a participant, or issues an
Islamic payment instrument; or

(b) is a market participant.

Breach or contravention
not to affect contract,

agreement or arrangement

281.   Except as otherwise provided in this Act, or in pursuance of
any provision of this Act, no contract, agreement or arrangement,
entered into in breach or contravention of any provision of this Act
shall be void solely by reason of such breach or contravention:

   Provided that nothing contained in this section shall affect any
liability of any person for any administrative, civil or criminal
actions under this Act in respect of such breach or contravention.

PART XVIII

REPEAL, SAVINGS AND TRANSITIONAL

Repeal 282.   The Islamic Banking Act 1983 and the Takaful Act 1984 are
repealed.

Savings and transitional 283.   Notwithstanding section 282—

(a) any rule, regulation, order, notification or other subsidiary
legislation made and any approval, authority, consent,
decision, direction, exemption, notice, order, permission,
recommendation, requirement, specification or other
executive act granted or done under the repealed Acts and in
force or having effect before the appointed date, shall be

Page 147 of 187

deemed to have been made, granted or done under a
corresponding provision in this Act or a corresponding
provision in any direction issued pursuant to section 168,
subsection 225(6) or section 227, and shall continue to
remain in full force and effect in relation to the person to
whom it applied until amended or revoked, except those
subsidiary legislation set out in Schedule 16 which are
deemed to have been revoked;

(b) every guideline, direction, circular or notice under the
repealed Acts in relation to any matter which corresponds
with any provision of this Act, issued before the appointed
date and in force immediately before the appointed date,
shall be deemed to be standards which have been lawfully
specified under such provisions of this Act and shall remain
in full force and effect in relation to the person to whom it
applied until amended or revoked;

(c) any application for a licence, approval, authorization,
notification, acknowledgment, consent, permission or for
any other purpose whatsoever made by any person under the
repealed Acts before the appointed date and pending before
the appointed date, shall—

(i) if there is a corresponding provision in this Act or in any
direction issued under subsection 225(6) or section 227,
be dealt with as if it was made under that provision;

(ii) if a different provision has been made for the application
under this Act or in any direction issued under subsection
225(6) or section 227, be dealt with in accordance with
such provision; and

(iii) if there is no corresponding provision in this Act or a
different provision has not been made for the application
under this Act or in any direction issued under subsection
225(6) or section 227, lapse on the appointed date and
any fees or other payment received with the application
shall be refunded to such person;

(d) all transactions, financing facilities, dealings, contracts,
powers of attorney or arrangements lawfully executed or
entered into and all business lawfully done under the
repealed Acts with any person shall be deemed to have been
lawfully and validly executed, entered into or done under
this Act, and accordingly, any right or liability under such
transaction, dealing, business existing before the appointed
date shall be deemed to continue to be lawful and valid
under this Act;

(e) without limiting the generality of paragraph (d), all takaful
certificates issued, all transactions or dealings lawfully
executed or entered into, and all business lawfully done,
under the repealed Takaful Act 1984 by a person who was
licensed or registered under that repealed Act and who is
authorized or deemed to be authorized under this Act with
any takaful participant, customer, creditor, debtor or other
person shall be deemed to have been lawfully and validly
executed, entered into, or done, under and in accordance
with this Act, and any right or liability under the transaction,
dealing or business existing before the appointed date shall
be deemed to continue to be lawful and valid under this Act;

Page 148 of 187

(f) nothing shall affect any person’s liability to be investigated,
prosecuted or punished for offences committed under the
repealed Acts before the appointed date;

(g) any pending legal proceedings, criminal prosecution or
investigation under the repealed Acts shall be continued
under the repealed Acts as if the repealed Acts are in force;

(h) subject to paragraph (i), any reference to the repealed Acts in
any written law shall be construed as a reference to this Act
and any reference to any specific provision of the repealed
Acts in any written law shall be construed as a reference to a
provision of this Act which corresponds closely to such
specific provision;

Act 17. (i) any reference to the Exchange Control Act 1953 [Act 17]
repealed under the Financial Services Act 2012 or exchange
control or any specific provision, or generally to the
provisions, of the repealed Exchange Control Act 1953 in
any written law shall be construed as a reference to section
225 or 227 of this Act or a corresponding provision in any
direction issued under subsection 225(6) or section 227;

Act 731. (j) any reference to an “authorized dealer” in subsection 1(3) of
the Money Services Business Act 2011 [Act 731] shall be
construed as a reference to a licensed Islamic bank under this
Act and the interpretation of an “authorized dealer” in
section 2 of that Act shall be construed accordingly;

(k) any right, benefit, privilege, obligation or liability acquired,
accrued or incurred under the repealed Acts, shall continue
to remain in force under this Act; and

(l) all other acts or things done under the repealed Acts shall be
deemed to have been done under this Act and accordingly,
shall continue to be valid and lawful under this Act.

Savings in respect of
licences granted and

registrations made under
repealed Acts

284.   (1)   Subject to the provisions of subsection (2)—

(a) a licence granted to a person by the Minister under section 3
and section 30B of the repealed Islamic Banking Act 1983 to
carry on Islamic banking business or international Islamic
banking business, as the case may be, under that Act shall be
deemed to be a licence granted under section 10 authorizing
such person to carry on Islamic banking business or
international Islamic banking business, as the case may be;

(b) a registration of a takaful operator under section 8 and
international takaful operator under section 40B of the
repealed Takaful Act 1984 to carry on takaful business or
international takaful business, as the case may be, under that
Act shall be deemed to be a licence granted under section 10
authorizing such person to carry on takaful business or
international takaful business, as the case may be;

(c) a licence granted to a person by the Bank under section 37 of
the repealed Takaful Act 1984 to carry on takaful broking
business shall be deemed to be an approval granted under
section 11 authorizing such person to carry on takaful
broking business; and

Page 149 of 187

(d) an adjuster licensed by the Bank under section 38 of the
repealed Takaful Act 1984 to carry on adjusting business
shall be deemed to be a registered person under subsection
18(1) of the Financial Services Act 2012.

  (2)   The persons referred to in subsection (1) shall continue to be
subject to the conditions applicable to it before the appointed date as
if such conditions were imposed under this Act.

Savings and transitional
provision in respect of
specific provisions of
repealed Takaful Act

1984

285.   Notwithstanding the repeal of the Takaful Act 1984 under
section 282, a takaful fund established and maintained under section
16 of the repealed Act shall be deemed to have been established and
maintained under section 90.

Conversion to single
takaful business

286.   A licensed takaful operator, other than a licensed professional
retakaful operator, lawfully carrying on both family takaful business
and general takaful business under the repealed Takaful Act 1984
shall comply with subsection 16(1) within five years of the appointed
date or such longer period as may be specified by the Minister, on
the recommendation of the Bank, by notice in writing to the licensed
takaful operator upon its written application before the expiry of the
five years.

Licensed takaful operator
which is a private

company to convert to
public company

287.   A registered takaful operator under the repealed Takaful Act
1984 which is a private company and is deemed to be a licensed
takaful operator under paragraph 284(1)(b), shall be converted into a
public company in accordance with the Companies Act 1965 within
twelve months from the appointed date or such longer period as may
be specified by the Minister, on the recommendation of the Bank, by
notice in writing to the licensed takaful operator upon its written
application before the expiry of the twelve months.

Savings in respect of
Islamic deposits under

repealed Islamic Banking
Act 1983

288.   Islamic deposits accepted by an Islamic bank or international
Islamic bank from a depositor under the repealed Islamic Banking
Act 1983 which do not fall within the definition of Islamic deposits
under this Act shall be deemed to be Islamic deposits as defined
under this Act until such date as may be prescribed by the Minister
on the recommendation of the Bank.

Savings in respect of
approvals for designated

Islamic payment
instruments under
repealed Payment
Systems Act 2003

Act 627.

289.   An issuer of a designated Islamic payment instrument who has
obtained a written approval under subsection 25(1) of the Payment
Systems Act 2003 [Act 627] repealed under the Financial Services
Act 2013 shall be deemed to have been approved under section 11 in
respect of the issuance of that designated Islamic payment
instrument.

Savings in respect of
financial holding

company

290.   (1)   A company which has lawfully held more than fifty per
cent of interest in shares of a licensed Islamic bank under the
repealed Islamic Banking Act 1983 or a registered takaful operator
under the repealed Takaful Act 1984, shall submit an application to
the Bank for it to be approved as a financial holding company within
a period of twelve months from the appointed date or such longer
period as may be specified by the Bank.

Page 150 of 187

  (2)   An application made under subsection (1) shall be dealt with
as if it was made under section 122 and a company referred to in
subsection (1) which fails to submit an application after the expiry of
the twelve months or such longer period as may be specified by the
Bank under subsection (1) commits a breach and the Bank may take
any action under subsection 245(3).

Savings in respect of
Islamic deposits accepted
by co-operative societies

291.   (1)   Subject to the provision of this section, nothing contained
in sections 149 and 150 shall render invalid any Islamic deposit
accepted lawfully by a co-operative society from a person who is not
a member of such co-operative society before the appointed date
provided that such co-operative society shall, within six months from
the appointed date or such longer period as may be specified by the
Bank, submit an application to the Bank together with such
documents or information as may be specified by the Bank for it to
continue accepting Islamic deposits from non-members.

  (2)   The Bank may approve, with or without conditions, or reject
the application referred to in subsection (1) and a co-operative
society so approved shall comply with any condition imposed on it
by the Bank.

  (3)   The Bank may grant an approval under subsection (2) if the
Bank is satisfied that such co-operative society has given a written
undertaking that it will comply with such conditions as may be
imposed by the Bank under subsection (2).

  (4)   Section 270 shall apply to a written undertaking given under
this section.

  (5)   The Bank may, at any time, in writing amend or revoke any
existing condition imposed on such approval under subsection (2) or
impose any new condition thereto.

SCHEDULE 1

[Subsection 2(1), sections 8, 43, 45, 46 and 168]

APPROVED BUSINESS

PART 1

Businesses which require approval

1. Operation of a payment system which—

(a) enables the transfer of funds from one Islamic banking
account to another, which includes any debit transfer, credit
transfer or standing instructions but does not include the
operation of a remittance system approved under section 40
of the Money Services Business Act 2011; or

(b) provides Islamic payment instrument network operation
which enables payments to be made through the use of an
Islamic payment instrument.

2. Issuance of a designated Islamic payment instrument.

3. Takaful broking business.

4. Islamic financial advisory business.

PART 2

Page 151 of 187

Persons who do not require approval for Islamic financial advisory
business

5. A licensed person or an approved takaful broker under this Act.

6. A takaful agent.

Act 100. 7. A company registered under the Trust Companies Act 1949 [Act
100].

SCHEDULE 2

[Paragraphs 2(1)(iv) and 148(iv)]

OTHER EXCLUSIONS FROM DEFINITION OF “ISLAMIC
DEPOSIT”

PART 1

Money paid by any person to—

(a) the Government or any State Government;

(b) the Bank;

(c) a statutory body or local authority which is authorized to
accept, receive or take the same under any written law;

(d) a co-operative society which is authorized under the Co-
operative Societies Act 1993 to accept deposits, provided
that, where such person is not a member of the co-operative
society as defined in the Co-operative Societies Act 1993,
the co- operative society has obtained both—

(i) the approval of the Malaysia Co-operative Societies
Commission under the Co-operative Societies Act 1993;
and

(ii) the approval of the Bank and complies with such
conditions as may be imposed by the Bank;

Act 109.
Act 44.

(e) a farmers’ organization registered under the Farmers’
Organization Act 1973 [Act 109] or a fishermen’s
association registered under the Fishermen’s Association Act
1971 [Act 44];

(f) its related or associate corporation;

(g) another person, in relation to any instrument or transaction
falling within paragraphs (a) to (e) of the definition of
“debenture” under subsection 2(1) of the Capital Markets
and Services Act 2007 provided that such other person
obtains the approval of the Bank and complies with such
conditions as may be imposed by the Bank;

(h) another person, in relation to any issue of, offer for
subscription or purchase of, or invitation to subscribe for or
purchase, Islamic securities in accordance with the Capital
Markets and Services Act 2007;

(i) another person who issues or offers to the public for
subscription or purchase, or invites the public to subscribe
for or purchase, any interest under an approved deed in
accordance with Division 5 of Part IV of the Companies Act
1965;

Page 152 of 187

(j) an approved issuer of a designated Islamic payment
instrument, or an approved issuer of a designated payment
instrument approved under subsection 15(1) of the Financial
Services Act 2013, issuing electronic money in the course of
carrying on its authorized business;

(k) another person who accepts such money bona fide under a
commodity murabahah arrangement for the purposes of
investment or in the course of trading; or

(l) another person, where both persons are individuals, in the
course of customary, social, friendly or family relationship
and the total number of such individuals who make the
payments to the other person does not at any time exceed
ten.

PART 2

Money paid to any person, other than a licensed Islamic bank, by—

(a) the Government or any State Government;

(b) the Bank;

(c) a statutory body, local authority or any other person which is
authorized to make such payment under any written law;

(d) a co-operative society which is authorized under the Co-
operative Societies Act 1993;

(e) a licensed person or an approved issuer of a designated
Islamic payment instrument issuing electronic money, in the
course of carrying on its authorized business;

Act 618. (f) a prescribed institution as defined in subsection 3(1) of the
Development Financial Institutions Act 2002 [Act 618], in
the course of its lawful business;

Act 81. (g) a pawnbroker licensed under the Pawnbrokers Act 1972 [Act
81], in the ordinary course of its lawful business;

Act 400. (h) a moneylender licensed under the Moneylenders Act 1951
[Act 400], in the ordinary course of its lawful business;

(i) any person lawfully carrying on any Islamic financial
intermediation activity as defined in section 222 in the
course of its ordinary business; or

(j) its related or associate corporations.

PART 3

Money paid by a licensed Islamic bank, to any person in the course
of buying or borrowing Islamic securities from that person where the
Islamic securities will be repurchased or returned as part of the same
transaction.

SCHEDULE 3

[Subsection 2(1)]

INTEREST IN SHARES

Direct interest in shares 1.   Where a person holds shares or has entered into a contract to
acquire shares in a body corporate or has a right to have the shares in
a body corporate to be transferred to him or otherwise has any legal

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or beneficial interest in the shares of the body corporate, he shall be
taken to have a direct interest in shares of the body corporate.

Effective interest in
shares

2.   Where a series of body corporates hold shares in succession in
the subsequent level body corporate one after the other, and if a
person has a direct interest in shares of a body corporate in that
series (hereinafter referred to as “first level body corporate”)—

(a) such person shall be taken to have an effective interest in
shares of any other body corporate (hereinafter referred to as
“second level body corporate”) in which the first level body
corporate has a direct interest in shares; and

(b) such person shall be taken to have an effective interest in
shares in each subsequent level body corporate in that series
following the second level body corporate, provided each
preceding level body corporate in the series has a direct
interest in shares of each subsequent level body corporate in
that series.

Computation of effective
interest in shares

3.   The effective interest in shares of a person in a body corporate X
in the series of body corporates referred to in paragraph 2 shall be
derived by multiplying the percentage of his direct interest in the
first level body corporate in the series and the direct interest of each
subsequent level body corporate down to the direct interest in shares
held by the preceding body corporate, in that body corporate X as
follows:

EFx = DI¹ x DI² x DI³ ... x DIx

Where—

EFx represents the effective interest in shares of the person in the
body corporate X;

DI¹ represents the percentage of direct interest in shares of the
person in the first level body corporate;

DI² represents the percentage of direct interest in shares of the
first level body corporate in the second level body corporate;

DI³ represents the percentage of direct interest in shares of the
second level body corporate in the third level body
corporate; and

DIx represents the percentage of direct interest in shares of the
preceding level body corporate in the series in body
corporate X.

Aggregate interest in
shares

4.   Where in this Act, a reference is made to an aggregate interest in
shares held by any person in a body corporate, the aggregate interest
shall be computed by adding the legal, beneficial, direct and
effective interest held by the person in that body corporate.

5.   In computing the aggregate interest in shares held by a person in
a body corporate, the holding of his spouse, child, family corporation
or persons acting in concert with him shall be added to his holding.

Family corporation 6.   For the purpose of paragraph 5, “family corporation” means a
corporation in which—

(a) the individual;

(b) that individual’s spouse; or

(c) that individual’s child,

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holds, or any two or more of the persons mentioned in paragraphs
(a), (b) and (c) hold, severally or jointly, interests in shares of more
than fifty per cent of the shares of the corporation.

Legal and beneficial
interest in shares

7.   A person shall be taken to have an interest in shares of a body
corporate if the person has any legal or beneficial interest in those
shares.

8.   A person is taken to have an interest in shares if—

(a) the person has entered into a contract or arrangement to
acquire the share; or

(b) the person has a right (otherwise than because of having an
interest under a trust) to have the share transferred to the
person or to the person’s order (whether the right is
exercisable presently or in the future and whether or not on
the fulfilment of a condition).

9.   A person is taken to have an interest in shares if the person holds
the interest in the share jointly with another person.

10.   For the purpose of determining whether a person holds an
interest in shares, it is immaterial that the interest cannot be related
to a particular share.

11.   An interest in shares is not to be disregarded only because of—

(a) its remoteness;

(b) the manner in which it arose; or

(c) the fact that the exercise of a right conferred by the interest
is, or is capable of being made, subject to restraint or
restriction.

Certain interest to be
disregarded

12.   There shall be disregarded—

(a) an interest in shares held by a person whose ordinary
business includes the provision of finance if the person holds
the interest as security;

(b) an interest in shares if the interest is that of a person who
holds the shares as bare trustee;

(c) an interest in shares held by a person, being an interest held
by the person because the person holds an office as may be
prescribed by the Bank; and

(d) an interest of a prescribed kind in a share, being an interest
held by such persons as may be prescribed by the Bank.

13.   Paragraphs 8 to 12 shall not by any implication limit the
generality of paragraph 7.

SCHEDULE 4

[Paragraph 5(5)(c)]

BUSINESS WHICH IS NOT TAKAFUL BUSINESS

1.   The operation by an employer, otherwise than for profit, of a
scheme or arrangement in accordance with Shariah making financial
provision for his employees’ retirement, or future termination of
service through death or disability.

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2.   The business carried on in accordance with Part II of the
Societies Act 1966 that is in accordance with Shariah by a mutual
benefit society as defined in section 2 of that Act.

3.   Export credit or other credit guarantee takaful business carried on
by Export-Import Bank of Malaysia Berhad.

4.   Administration, management and operation of a scheme or an
arrangement in accordance with Shariah, for the provision of benefits
consisting of the supply of funeral or burial services, with or without
the supply of goods connected with any such service or the payment
of money, upon the death of a person for the purpose of meeting the
whole or a part of the expenses of, and incidental to the funeral or
burial of that person, but no other benefits except benefits incidental
to the scheme or arrangement.

5.   A scheme in accordance with Shariah for members under which
assistance for an accident to or breakdown of a vehicle is provided
whereby such assistance is in the form of—

(a) repairs to the vehicle at the place where the accident or
breakdown has occurred and may include the delivery of
parts, fuel, oil, water or keys to that vehicle; or

(b) removal of the vehicle to the nearest or most appropriate
place at which repairs may be carried out or to the home or
point of departure or original destination of the driver and
passengers.

SCHEDULE 5

[Sections 10 and 11]

FACTORS FOR CONSIDERATION IN ASSESSING
APPLICATION FOR LICENCE UNDER SECTION 10 OR

APPROVAL UNDER SECTION 11

PART 1

1.   The aims and operation of the business which is desired to be
carried on by the person to be authorized will not involve any
element which is contrary to Shariah.

2.   The character and integrity of the applicant or, if the applicant is
a body corporate, its reputation for being operated in a manner that is
consistent with the standards of good governance and integrity.

3.   The business of the person to be authorized is not detrimental to
the interests of its future depositors, investment account holders,
takaful participants, participants, users or the public generally.

4.   The soundness and feasibility of the plans of the applicant for the
future conduct and development of the business of the person to be
authorized.

5.   The nature and sufficiency of the financial resources of the
applicant as a source of continuing financial support for the person to
be authorized.

6.   The business record and experience of the applicant.

7.   The person to be authorized will be operated responsibly by
persons with the competence and experience suitable for
involvement in the operation of the person to be authorized.

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8.   Whether the application will be in the best interest of Malaysia,
having regard to—

(a) the effect of the investment on the level and nature of
economic activity in Malaysia, including the effect on
productivity, efficiency, and quality of financial services;

(b) the contribution towards enhancing international trade and
investment linkages between Malaysia and other countries;

(c) the effect of the investment on the stability of the financial
system, including on conduct and behaviours that could pose
a risk to the financial system; or

(d) the degree and significance of participation of Malaysians in
the financial sector.

PART 2

9.   Whether the nature, scale and activities of the corporate group of
the applicant applying for a licence will impede the effective
regulation and supervision of the person to be licensed, including
having regard to the nature and degree of regulation and supervision
of any financial institution within that corporate group.

SCHEDULE 6

[Subsections 102(2), 103(1) and 124(2)]

FACTORS FOR CONSIDERATION IN ASSESSING
SHAREHOLDER SUITABILITY

1.   The character and integrity of the applicant, or if the applicant is
a body corporate, its reputation for being operated in a manner that is
consistent with the standards of good governance and integrity.

2.   The soundness and feasibility of the plans of the applicant for the
future conduct and development of the business of the licensed
person.

3.   The nature and sufficiency of the financial resources of the
applicant as a source of continuing financial support to the licensed
person.

4.   The business record and experience of the applicant.

5.   Whether the nature, scale and activities of the corporate group of
the applicant will impede the effective regulation and supervision of
the licensed person, including having regard to the nature and degree
of regulation and supervision of any financial institution within that
corporate group.

6.   Whether the application will be in the best interest of Malaysia,
having regard to—

(a) the effect of the investment on the level and nature of
economic activity in Malaysia, including the effect on
productivity, efficiency and quality of financial services;

(b) the contribution towards enhancing international trade and
investment linkages between Malaysia and other countries;

(c) the effect of the investment on the stability of the financial
system, including on conduct and behaviours that could pose
a risk to the financial system; or

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(d) the degree and significance of participation of Malaysians in
the financial sector.

SCHEDULE 7

[Subsection 136(1)]

LIST OF PROHIBITED BUSINESS CONDUCT

1.   Engaging in conduct that is misleading or deceptive, or is likely
to mislead or deceive in relation to the nature, features, terms or
price of any financial service or product.

2.   Inducing or attempting to induce a financial consumer to do an
act or omit to do an act in relation to any financial service or product
by—

(a) making a statement, illustration, promise, forecast or
comparison which is misleading, false or deceptive;

(b) dishonestly concealing, omitting or providing material facts
in a manner which is ambiguous; or

(c) recklessly making any statement, illustration, promise,
forecast or comparison which is misleading, false or
deceptive.

3.   Exerting undue pressure, influence or using or threatening to use
harassment, coercion, or physical force in relation to the provision of
any financial service or product to a financial consumer, or the
payment for any financial service or product by a financial
consumer.

4.   Demanding payments from a financial consumer in any manner
for unsolicited financial services or products including threatening to
bring legal proceedings unless the financial consumer has
communicated his acceptance of the offer for such financial services
or products either orally or in writing.

5.   Exerting undue pressure on, or coercing, a financial consumer to
acquire any financial service or product as a condition for acquiring
another financial service or product.

6.   Colluding with any other person to fix or control the features or
terms of any financial service or product to the detriment of any
financial consumer, except for any tariff or takaful contribution rates
or takaful certificate terms which have been approved by the Bank.

SCHEDULE 8

[Section 140]

PROVISIONS RELATING TO TAKAFUL CERTIFICATES

Paragraph

1.   Misstatement of age

2.   Objection to family takaful certificate

3.   Permissible takaful interest

4.   Capacity of minor to enter into contract of takaful

5.   Family takaful benefits to be paid without deduction

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6.   Surrender of family takaful certificate

7.   Non-payment of family takaful contributions

8.   Election for paid-up takaful certificate

9.   Additional rights conferred by paragraphs 6, 7 and 8

10.   Disclosure requirements

11.   Requirements relating to group takaful certificates

12.   Refund of takaful contribution

Misstatement of age 1.   (1)   A licensed family takaful operator shall not avoid a family
takaful certificate or refuse a claim under a family takaful certificate
by reason only of a misstatement of the age of the person covered.

  (2)   Where the true age as shown by the proof is greater than that
on which a family takaful certificate is based, the licensed family
takaful operator may vary the sum covered by, and the surplus or
profit allotted to, the family takaful certificate so that, as varied, they
bear the same proportion to the sum covered by, and the surplus or
profit allotted to, the family takaful certificate before variation as the
amount of the takaful contribution that has been paid under the
family takaful certificate as issued bears to the amount of the takaful
contribution that would have become payable if the family takaful
certificate had been based on the true age.

  (3)   Where the true age as shown by the proof is less than that on
which the family takaful certificate is based, the licensed family
takaful operator shall either—

(a) vary the sum covered by, and the surplus or profit allotted to,
the family takaful certificate so that, as varied, it bears the
same proportion to the sum covered by, and the surplus or
profit allotted to, the family takaful certificate before
variation as the amount of the takaful contribution that has
been paid under the family takaful certificate as issued bears
to the amount of the takaful contribution that would have
become payable if the family takaful certificate had been
based on the true age; or

(b) reduce the takaful contribution as from the date of issue of
the family takaful certificate, to the amount that would have
been payable if the family takaful certificate had been based
on the true age and repay the takaful participant the amount
of over-payments of takaful contribution less any amount
that has been allotted as surplus or profit in excess of the
surplus or profit that would have been allotted if the family
takaful certificate had been based on the true age.

  (4)   Where the period of coverage of a family takaful certificate is
calculated by reference to the age of the person covered, and such
age is not the true age of the person covered as shown by the proof,
the licensed family takaful operator may instead of, or in addition to,
effecting subparagraph (2) or (3) as the case may be, vary the family
takaful certificate by changing its period of coverage to the period
that would have been the period of coverage if the family takaful
certificate had been based on the true age of the person covered.

  (5)   Nothing in this paragraph shall prevent the licensed family
takaful operator from calling for proof of age at any time and no
family takaful certificate shall be deemed to be disputed merely
because the terms of the family takaful certificate are adjusted in

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accordance with subparagraph (2), (3) or (4).

Objection to family
takaful certificate

2.   (1)   A takaful participant may, within fifteen days or such longer
period as may be specified by the Bank after the delivery of a family
takaful certificate of any description to him, return the family takaful
certificate to the licensed family takaful operator and it shall
immediately refund any takaful contribution which has been paid in
respect of the family takaful certificate subject only to the deduction
of expenses incurred for the medical examination of the person
covered.

  (2)   Upon refund of takaful contribution under subparagraph (1),
the family takaful certificate shall be deemed cancelled and the
liability of the licensed family takaful operator shall cease.

  (3)   For the purposes of subparagraph (1), in respect of a family
takaful certificate which is an investment-linked takaful certificate,
the licensed family takaful operator shall refund—

(a) any unallocated takaful contribution;

(b) the value of any units allocated at the unit price at the next
valuation date; and

(c) any takaful charges and fees which have been deducted,

less any expenses incurred for the medical examination of the person
covered.

  (4)   For the purposes of subparagraph (1)—

(a) a family takaful certificate is deemed to be delivered to the
takaful participant on the date he received it, if personally
delivered;

(b) where a family takaful certificate is delivered to the takaful
participant in such manner other than by personal delivery,
the licensed family takaful operator shall take reasonable
steps to ensure that the family takaful certificate is delivered
to the takaful participant; and

(c) a family takaful certificate shall be deemed to be returned to
a licensed family takaful operator by the takaful participant
on the date the family takaful certificate is received by the
licensed family takaful operator or on the date of posting if it
is sent by registered post or on the date of transmission if it
is electronically transmitted.

  (5)   In respect of a group takaful certificate covering the lives of
three or more persons from whom takaful contribution is payable—

(a) a person covered under the group takaful certificate may
notify the group takaful participant to cancel his cover within
fifteen days or such longer period as may be specified by the
Bank after the delivery of his certificate of takaful; and

(b) the group takaful participant shall immediately inform the
licensed family takaful operator to cancel the cover for that
person covered referred to in subsubparagraph (a), and the
licensed family takaful operator shall immediately refund
any takaful contribution paid by that person covered subject
only to the deduction of expenses incurred for the medical
examination of that person covered directly to him and upon
the refund of takaful contribution, the liability of the licensed
family takaful operator shall cease only in respect of the
cover for that person covered.

Page 160 of 187

  (6)   For the purposes of subparagraph (5), where a group family
takaful certificate is an investment-linked takaful certificate, the
licensed family takaful operator shall refund—

(a) any unallocated takaful contribution;

(b) the value of any units allocated at the unit price at the next
valuation date; and

(c) any takaful charges and fees which have been deducted,

less any expenses incurred for the medical examination of the person
covered.

Permissible takaful
interest

3.   (1)   This paragraph applies to a family takaful certificate issued
in respect of a contract of family takaful entered into by a takaful
participant on a person covered other than the takaful participant
himself.

  (2)   A takaful participant entering into a contract of family takaful
under subparagraph (1) shall have a permissible takaful interest in
the person covered at the time such contract of takaful is entered into
and at the time the takaful benefits are payable.

  (3)   Where a takaful participant entering into a contract of family
takaful under subparagraph (1) does not have a permissible takaful
interest in the person covered at the time such contract is entered
into, the contract shall be void.

  (4)   Where a takaful participant who has entered into a contract of
family takaful under subparagraph (1) does not have a permissible
takaful interest in the person covered at the time the benefits are
payable, such contract shall not be void by reason only that the
takaful participant did not have such permissible takaful interest but
shall be subject to subparagraph (5).

  (5)   Where at any time after a contract of family takaful under
subparagraph (1) is entered, the licensed takaful operator becomes
aware that a takaful participant no longer has a permissible takaful
interest in the person covered, where there is no claim made or there
is a claim made or on the maturity of such takaful certificate, as the
case maybe, the licensed family takaful operator shall—

(a) pay to the takaful participant such moneys payable under the
contract of family takaful as may be specified by the Bank;
and

(b) upon such payment to the takaful participant, the contract of
family takaful shall be deemed to be terminated.

  (6)   Subject to subparagraph (8), a person shall be deemed to have
a permissible takaful interest in the person covered if that other
person is—

(a) his spouse or child;

(b) his ward under the age of majority at the time the person
entered into the contract of takaful;

(c) his employee; or

(d) a person on whom he is wholly or partly dependent for
maintenance or education at the time he entered into the
contract of takaful.

  (7)   In this paragraph, entered or entering into a contract of family
takaful on the person covered means participating in the payment of

Page 161 of 187

takaful benefits on that person’s death or on the happening of any
contingency dependent upon his death or survival and includes
granting an annuity to commence on his death or at a time referred to
in the annuity.

  (8)   A person entering into a contract of family takaful on a person
covered pursuant to this paragraph shall, unless the person covered is
a minor, obtain the prior written consent of that person.

  (9)   The person covered may revoke his consent by informing the
licensed family takaful operator in writing.

  (10)   Where the person covered revokes his consent under
subparagraph (9), the person entering into the contract of takaful no
longer has a permissible takaful interest on that person covered.

  (11)   A family takaful certificate issued in respect of a contract of
takaful entered into by a person where the person covered is his
spouse shall not be void only on the ground of dissolution of
marriage between the person and his spouse.

  (12)   A group takaful certificate shall not be void by reason only
that the group takaful participant did not have, at the time when the
contract of takaful was entered into and at the time the takaful
benefits are payable, a permissible takaful interest in each person
covered under the takaful certificate.

  (13)   For the purposes of this paragraph, a licensed family takaful
operator shall obtain a declaration from the takaful participant to
ensure that the takaful participant has permissible takaful interest in
the person covered in the manner as may be specified by the Bank.

  (14)   This paragraph shall not affect a family takaful certificate
issued before the appointed date.

Capacity of minor to enter
into contract of takaful

4.   (1)   Notwithstanding any law to the contrary, a minor who has
attained the age of ten years but has not attained the age of sixteen
years, with the consent in writing of his parent or guardian—

(a) may participate in a family takaful arrangement in respect of
a family takaful certificate upon his life or upon the life of
another person in which he has a permissible takaful interest;
or

(b) may assign the family takaful certificate on his life or take an
assignment of a family takaful certificate.

  (2)   A minor who has attained the age of sixteen years—

(a) may participate in a family takaful arrangement in respect of
a family takaful certificate upon his life or upon the life of
another person in which he has a permissible takaful interest;
or

(b) may assign the family takaful certificate on his life or take an
assignment of a family takaful certificate,

and is as competent in all respects to have and exercise the powers
and privileges of a takaful participant in relation to the family takaful
certificate of which he is the takaful participant as he would be if he
had attained the age of majority.

  (3)   A minor who has attained the age of sixteen years shall obtain
the consent in writing of his parent or guardian to assign a family
takaful certificate on his life under subsubparagraph (2)(b).

Family takaful benefits to 5.   (1)   Takaful benefits payable under a family takaful certificate,

Page 162 of 187

be paid without deduction or takaful benefits payable on the surrender of a family takaful
certificate, shall be paid without any deduction for moneys not due
under the family takaful certificate or under an assignment of the
family takaful certificate, unless the deduction is made with the
consent of the person entitled to the takaful benefits.

  (2)   A provision contained in a family takaful certificate or an
agreement relating to deduction of moneys not due under the family
takaful certificate shall be void to the extent it entitles the licensed
family takaful operator to deduct the moneys from takaful benefits
payable under, or moneys payable on the surrender of the family
takaful certificate without the consent of the person entitled to the
takaful benefits.

  (3)   Subparagraphs (1) and (2) apply to a Malaysian family takaful
certificate but shall not apply to a family takaful certificate issued
before the appointed date.

  (4)   In any proceedings for the recovery of takaful benefits due
under, or payable on the surrender of, a family takaful certificate, no
set-off or counter-claim shall be allowed except for moneys due
under the family takaful certificate or under an agreement charging
the moneys on the family takaful certificate.

Surrender of family
takaful certificate

6.   (1)   At any time after inception of a family takaful certificate
which provides for surrender value, the takaful participant may, by
notice in writing to the licensed family takaful operator, surrender
the family takaful certificate, and he shall be entitled to receive the
surrender value of the family takaful certificate, which shall be
determined—

(a) in accordance with generally accepted actuarial principles;

(b) in a manner ensuring the fair treatment of takaful
participants; and

(c) in compliance with standards on business conduct or fair
treatment of takaful participants specified by the Bank.

  (2)   A licensed family takaful operator shall disclose to a proposer
for a family takaful certificate, at the time of marketing, the
surrender value payable under the family takaful certificate including
the cost of any applicable surrender charge, and where no surrender
value is payable, the licensed family takaful operator shall provide a
written statement to that effect.

  (3)   The surrender value of any family takaful certificate issued on
or before the appointed date shall be determined in accordance with
the terms set out on surrender value in that family takaful certificate.

  (4)   Where the Bank is of the opinion that a licensed family takaful
operator has not determined the surrender value of a family takaful
certificate as required under subsubparagraphs (1)(a), (b) and (c), the
Bank may—

(a) require the licensed family takaful operator to determine the
surrender value of the family takaful certificate on a basis
approved by the Bank; and

(b) require the basis under subsubparagraph (a) or a different
basis approved by the Bank to be applied retrospectively to a
family takaful certificate already issued.

  (5)   A family takaful certificate shall remain in force until the
licensed family takaful operator has effected payment of the

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surrender value of the family takaful certificate.

Non-payment of family
takaful contributions

7.   (1)   Where a family takaful certificate provides for surrender
value, it shall not lapse or be forfeited by reason of non-payment of
takaful contributions but shall have effect subject to such
modification as to the period for which it is to be in force, or of the
takaful benefits receivable under it, or both.

  (2)   A modification made under subparagraph (1) shall be
determined in accordance with the established policies of the
licensed takaful operator applicable to the family takaful certificate.

Election for paid-up
takaful certificate

8.   (1)   Where a family takaful certificate provides for surrender
value, the takaful participant may, by notice in writing to the
licensed family takaful operator, elect to exchange the family takaful
certificate for a paid-up family takaful certificate for a sum covered
which shall be determined—

(a) in accordance with generally accepted actuarial principles;

(b) in a manner ensuring the fair treatment of takaful
participants;

(c) in a manner consistent with the surrender value payable
under paragraph 6; and

(d) in compliance with standards on business conduct or fair
treatment of takaful participants specified by the Bank.

  (2)   Where the Bank is of the opinion that a licensed family takaful
operator has not determined the paid-up value of a family takaful
certificate as required under subsubparagraphs (1)(a), (b), (c) and
(d), the Bank may—

(a) require the licensed family takaful operator to determine the
paid-up value of the family takaful certificate on a basis
approved by the Bank; and

(b) require the basis under subsubparagraph (a) or a different
basis approved by the Bank to be applied retrospectively to a
family takaful certificate already issued.

  (3)   A family takaful certificate shall be deemed to remain in force,
in the event of an election for conversion to a paid-up family takaful
certificate, until the date on which the next takaful contribution for
the original takaful certificate is due.

  (4)   A family takaful certificate issued in place of an earlier family
takaful certificate shall be treated as having come into force on the
date the earlier family takaful certificate came into force.

Additional rights
conferred by paragraphs

6, 7 and 8

9.   The rights conferred by paragraphs 6, 7 and 8 shall be in addition
to, and not in derogation of, any other rights available to the takaful
participant under the terms of the family takaful certificate or
otherwise.

Disclosure requirements 10.   (1)   No person shall invite any person to make an offer or
proposal to enter into a contract of takaful without disclosing—

(a) the name of the licensed takaful operator;

(b) his relationship with the licensed takaful operator; and

(c) the takaful contribution charged by the licensed takaful
operator.

  (2)   No person shall arrange a group takaful certificate for persons
in relation to whom he has no permissible takaful interest without

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disclosing to that person—

(a) the name of the licensed takaful operator;

(b) his relationship with the licensed takaful operator;

(c) the conditions of the group takaful certificate, including the
remuneration payable to him; and

(d) the takaful contribution charged by the licensed takaful
operator.

Requirements relating to
group takaful certificates

11.   (1)   A licensed takaful operator shall be liable to a person
whose life is covered under a group takaful certificate if the group
takaful participant has no permissible takaful interest in the life of
that person and if that person has paid the takaful contribution to the
group takaful participant regardless that the licensed takaful operator
has not received the takaful contribution from the group takaful
participant.

  (2)   The licensed takaful operator of a group takaful certificate,
where the group takaful participant has no permissible takaful
interest in the person whose life is covered under a group takaful
certificate, shall pay the moneys due under the takaful certificate to
that person covered or any person entitled through him.

  (3)   Where the takaful contribution is paid by a person whose life is
covered under a group takaful certificate, such person covered or any
person entitled through him, may, upon written notification to the
group takaful participant, take all necessary steps to recover moneys
due under the takaful certificate from the licensed takaful operator in
either of their own names as the case may be, or adding the group
takaful participant as a party to a recovery action or proceedings in
which event—

(a) if the group takaful participant is added as a party to the
recovery action or proceedings, the person covered or any
person entitled through him shall indemnify the group
takaful participant in respect of all legal costs and expenses
including party and party costs incurred in the conduct of the
recovery action or proceedings;

(b) upon receipt of the notice by the person covered or any
person entitled through him, the group takaful participant
may notify the licensed takaful operator of any indebtedness
due and owing by the person covered to the group takaful
participant;

(c) if the licensed takaful operator agrees to pay the moneys due
under the takaful certificate or is required to pay such
moneys by a court of law or dispute resolution body, the
licensed takaful operator shall deduct moneys due and owing
under subsubparagraph (b) to the group takaful participant
and pay any balance directly to the person covered or any
person entitled through him; and

(d) for purposes of subsubparagraphs (a), (b) and (c), any person
entitled through the person covered shall include a trustee,
assignee, nominee or lawful executor or administrator, as the
case may be.

Refund of takaful
contribution

12.   A licensed general takaful operator shall pay directly to a
takaful participant any refund of takaful contribution in relation to a
takaful certificate which may become due to the takaful participant
for any reason including the cancellation of the takaful certificate or

Page 165 of 187

alteration in its terms and conditions and such refund shall under no
circumstances be paid or credited to any takaful agent.

SCHEDULE 9

[Section 141]

[w.e.f. 30 June 2013, except
paragraphs 1 to 10 and
paragraphs 13 to 19.]

PRE-CONTRACTUAL DISCLOSURE AND
REPRESENTATIONS, AND REMEDIES FOR

MISREPRESENTATIONS

PART 1

Preliminary

Paragraph

1.   Application of Schedule and other laws [Nyf.]

2.   Interpretation [Nyf.]

3.   Contracting out [Nyf.]

PART 2

Pre-contractual disclosure and representations

4. Pre-contractual duty of disclosure for takaful contracts other
than consumer takaful contracts

[Nyf.]

5. Pre-contractual duty of disclosure for consumer takaful
contracts

[Nyf.]

6. Duty to take reasonable care [Nyf.]

7. Misrepresentation in respect of takaful contracts [Nyf.]

8. Group takaful certificates [Nyf.]

9. Entering into contract of takaful on another person whose life is
covered

[Nyf.]

10. Warranties and representations [Nyf.]

11. Takaful operator’s, etc. pre-contractual duty of disclosure

12. Knowledge of, and statement by takaful agent

PART 3

Non-contestability and remedies for misrepresentations

Division 1

Non-contestability

13. Non-contestability for family takaful contracts [Nyf.]

Division 2

Remedies for misrepresentation

14. Application of Division [Nyf.]

15. Remedies for deliberate or reckless misrepresentation [Nyf.]

16. Remedies for careless or innocent misrepresentation [Nyf.]

17. Future treatment of contract [Nyf.]

Page 166 of 187

18. Variations [Nyf.]

Division 3

Modifications for group takaful certificates

19. Modifications for group takaful certificates [Nyf.]

PART 1

Preliminary

Application of Schedule
and other laws

1.   (1)   This Schedule shall not affect a contract of takaful entered
into, varied or renewed before the date on which section 141 and this
Schedule come into operation.

[Nyf.]

Act 136.   (2)   Where there is a conflict or inconsistency between a provision
of this Schedule and the Contracts Act 1950 [Act 136], the provision
of this Schedule shall prevail.

  (3)   Notwithstanding any other written law, the provisions of this
Schedule shall apply to determine whether a licensed takaful
operator may avoid a contract of takaful and in particular a contract
covering third party risks in respect of death or bodily injury to any
person caused by or arising out of the use of a motor vehicle or land
implement drawn on a road, for misrepresentation.

Interpretation 2.   In this Schedule— [Nyf.]

   “consumer” means the individual who enters into, varies or renews
a consumer takaful contract, or proposes to do so with a licensed
takaful operator;

   “consumer takaful contract” means a contract of takaful entered
into, varied or renewed by an individual wholly for purposes
unrelated to the individual’s trade, business or profession.

Contracting out 3.   (1)   A term of a consumer takaful contract, or of any other
contract, is rendered void to the extent that it would put the
consumer in a worse position in respect of the matters mentioned in
subparagraph (2) than he would be in by virtue of the provisions of
this Schedule.

[Nyf.]

  (2)   The matters referred to in subparagraph (1) are—

(a) disclosure and representations by the consumer to the
licensed takaful operator before the contract is entered into,
varied or renewed; and

(b) the non-contestability of contracts of family takaful and any
of the remedies for consumer takaful contracts provided in
Part 3 of this Schedule.

  (3)   This paragraph does not apply in relation to a contract for the
settlement of a claim arising under a consumer takaful contract.

PART 2

Pre-contractual disclosure and representations

Pre-contractual duty of
disclosure for takaful

contracts other than
consumer takaful

contracts

4.   (1)   Before a contract of takaful other than a consumer takaful
contract is entered into, varied or renewed, a proposer shall disclose
to the licensed takaful operator a matter that—

[Nyf.]

(a) he knows to be relevant to the decision of the licensed
takaful operator on whether to accept the risk or not and the

Page 167 of 187

rates and terms to be applied; or

(b) a reasonable person in the circumstances could be expected
to know to be relevant.

  (2)   The duty of disclosure shall not require the disclosure of a
matter that—

(a) diminishes the risk to the licensed takaful operator;

(b) is of common knowledge;

(c) the licensed takaful operator knows or in the ordinary course
of his business ought to know; or

(d) in respect of which the licensed takaful operator has waived
any requirement for disclosure.

  (3)   Where a proposer fails to answer or gives an incomplete or
irrelevant answer to a question contained in the proposal form or
asked by the licensed takaful operator and the matter was not
pursued further by the licensed takaful operator, compliance with the
proposer’s duty of disclosure in respect of the matter shall be
deemed to have been waived by the licensed takaful operator.

  (4)   A licensed takaful operator shall, before a contract of takaful is
entered into, varied or renewed, clearly inform a proposer in writing
of the proposer’s pre-contractual duty of disclosure under this
paragraph, and that this duty of disclosure shall continue until the
time the contract is entered into, varied or renewed.

Pre-contractual duty of
disclosure for consumer

takaful contracts

5.   (1)   Before a consumer takaful contract is entered into or varied,
a licensed takaful operator may request a proposer who is a
consumer to answer any specific questions that are relevant to the
decision of the licensed takaful operator whether to accept the risk or
not and the rates and terms to be applied.

[Nyf.]

  (2)   It is the duty of the consumer to take reasonable care not to
make a misrepresentation to the licensed takaful operator when
answering any questions under subparagraph (1).

  (3)   Before a consumer takaful contract is renewed, a licensed
takaful operator may either—

(a) request a consumer to answer one or more specific questions
in accordance with subparagraph (1); or

(b) give the consumer a copy of any matter previously disclosed
by the consumer in relation to the contract and request the
consumer to confirm or amend any change to that matter.

  (4)   It is the duty of the consumer to take reasonable care not to
make a misrepresentation to the licensed takaful operator when
answering any questions under subsubparagraph (3)(a), or
confirming or amending any matter under subsubparagraph (3)(b).

  (5)   If the licensed takaful operator does not make a request in
accordance with subparagraph (1) or (3) as the case may be,
compliance with the consumer’s duty of disclosure in respect of
those subparagraphs, shall be deemed to have been waived by the
licensed takaful operator.

  (6)   Where the consumer fails to answer or gives an incomplete or
irrelevant answer to any request by the licensed takaful operator
under subparagraph (1) or subsubparagraph (3)(a), or fails to confirm
or amend any matter under subsubparagraph (3)(b), or does so
incompletely or provides irrelevant information, as the case may be,

Page 168 of 187

and the answer or matter was not pursued further by the licensed
takaful operator, compliance with the consumer’s duty of disclosure
in respect of the answer or matter shall be deemed to have been
waived by the licensed takaful operator.

  (7)   A licensed takaful operator shall, before a consumer takaful
contract is entered into, varied or renewed, clearly inform the
consumer in writing of the consumer’s pre-contractual duty of
disclosure under this paragraph, and that this duty of disclosure shall
continue until the time the contract is entered into, varied or
renewed.

  (8)   Subject to subparagraphs (1) and (3), a consumer shall take
reasonable care to disclose to the licensed takaful operator any
matter, other than that in relation to subparagraph (1) or (3), that he
knows to be relevant to the decision of the licensed takaful operator
on whether to accept the risk or not and the rates and terms to be
applied.

  (9)   Nothing in this Schedule shall affect the duty of utmost good
faith to be exercised by a consumer and licensed takaful operator in
their dealings with each other, including the making and paying of a
claim, after a contract of takaful has been entered into, varied or
renewed.

Duty to take reasonable
care

6.   (1)   In determining whether a consumer has taken reasonable
care not to make a misrepresentation under subparagraph 5(2) or (4),
the relevant circumstances may be taken into account including—

[Nyf.]

(a) the consumer takaful contract in question and the manner in
which the contract was marketed to the consumer;

(b) any relevant explanatory material or publicity produced or
authorized by the licensed takaful operator; and

(c) how clear and specific, the licensed takaful operator’s
questions were.

  (2)   Subject to subparagraph (3), the standard of care required of
the consumer under subparagraphs 5(2) and (4) shall be what a
reasonable consumer in the circumstances would have known.

  (3)   If the licensed takaful operator was, or ought to have been,
aware of any particular characteristics or circumstances of the
consumer, the licensed takaful operator shall take into account such
characteristics or circumstances.

Misrepresentation in
respect of takaful

contracts

7.   (1)   Part 3 of this Schedule— [Nyf.]

(a) in Division 1, makes provision for a misrepresentation made
in relation to a contract of family takaful, whether or not a
consumer takaful contract, which has been effected for a
period of more than two years; and

(b) in Division 2, sets out the remedies available to a licensed
takaful operator for a misrepresentation made in respect of—

(i) a consumer takaful contract of family takaful which has
been effected for a period of two years or less; and

(ii) a consumer takaful contract of general takaful.

  (2)   The remedies set out in Division 2 shall be available to a
licensed takaful operator for a misrepresentation made by a
consumer before a consumer takaful contract referred to in

Page 169 of 187

subsubparagraph (1)(b) was entered into, varied or renewed if—

(a) the consumer has made a misrepresentation in breach of his
duty under subparagraph 5(2) or (4); and

(b) the licensed takaful operator shows that had it known the
true facts, it would not have entered into the contract, or
agreed to the variation or renewal, or would only have done
so on different terms.

  (3)   For the purposes of this Schedule, a misrepresentation for
which a licensed takaful operator has a remedy in Division 2 against
a consumer may be classified as—

(a) deliberate or reckless;

(b) careless; or

(c) innocent.

  (4)   A misrepresentation is deliberate or reckless if the consumer
knew that—

(a) it was untrue or misleading, or did not care whether or not it
was untrue or misleading; and

(b) the matter to which the misrepresentation related was
relevant to the licensed takaful operator, or did not care
whether or not it was relevant to the licensed takaful
operator.

  (5)   A misrepresentation made dishonestly is to be regarded as
having being made deliberately or recklessly.

  (6)   A misrepresentation is careless or innocent, as the case may
be, if it is not deliberate or reckless.

  (7)   It is for the licensed takaful operator to show that a
misrepresentation was deliberate or reckless on a balance of
probability.

  (8)   Unless the contrary is shown, it is to be presumed that the
consumer knew that a matter about which the licensed takaful
operator asked a clear and specific question was relevant to the
licensed takaful operator.

Group takaful certificates 8.   (1)   This paragraph shall apply to a group takaful certificate
which so far as the cover for a person covered under that group
takaful certificate is concerned, such takaful certificate, if entered
into, varied or renewed by the person covered instead of the group
takaful participant, would have been a consumer takaful contract
referred to in subsubparagraph 7(1)(b).

[Nyf.]

  (2)   So far as the cover for a person covered referred to in
subparagraph (1) is concerned—

(a) paragraph 5 shall apply in relation to any disclosure, answer
or representation made by the person covered to the licensed
takaful operator as if the person covered was proposing to
enter into, vary or renew a consumer takaful contract for the
relevant cover with the licensed takaful operator; and

(b) subject to subparagraphs (3) and (4) and the modifications
set out in Division 3 of Part 3 of this Schedule to the
licensed takaful operator’s remedies in Division 2 of Part 3
of this Schedule, the remaining provisions of this Schedule
shall apply in relation to the cover for the person covered as

Page 170 of 187

if the person covered had entered into, varied or renewed a
consumer takaful contract for that cover with the licensed
takaful operator.

  (3)   Subsubparagraph 7(2)(b) shall apply to a group takaful
certificate as if it reads as follows:

   “the licensed takaful operator shows that had it known the
true facts, it would not have provided cover for the person
covered, agreed to the variation or renewal or would only
have done so on different terms.”.

  (4)   A breach of the duty to take reasonable care not to make a
misrepresentation under paragraph 5 on the part of one of any of the
persons whose life is covered under a group takaful certificate shall
not affect the takaful certificate so far as it relates to the other
persons whose life are covered under that takaful certificate.

  (5)   Nothing in this paragraph shall affect any duty owed by the
group takaful participant to the licensed takaful operator, or any
remedy which the licensed takaful operator may have against the
group takaful participant for breach of such a duty.

Entering into contract of
takaful on another person

whose life is covered

9.   Where a consumer enters into a consumer takaful contract on
another person whose life is covered who is not a party to the
contract, any information provided to the licensed takaful operator
by the person whose life is covered, whether requested or otherwise,
is to be treated for purposes of this Schedule as if it was provided by
the consumer and shall be subject to paragraph 5.

[Nyf.]

Warranties and
representations

10.   Any representation made before a consumer takaful contract
was entered into, varied or renewed shall not be converted into a
warranty by means of any provision of the consumer takaful contract
or of any terms of the variation or of any other contract, whether by
declaring the representation to form the basis of the contract or
otherwise.

[Nyf.]

Takaful operator’s, etc.
pre-contractual duty of

disclosure

11.   (1)   No licensed takaful operator, takaful agent, approved
takaful broker, approved Islamic financial adviser or Islamic
financial adviser’s representative in order to induce a person to enter
into, vary or renew, or offer to enter into, vary or renew, a contract of
takaful, whether or not a consumer takaful contract, with it or
through him—

(a) shall make a statement which is misleading, false or
deceptive, whether fraudulently or otherwise;

(b) shall fraudulently conceal a material fact; or

(c) in the case of a takaful agent, use any marketing brochure or
product illustration not authorized by the licensed takaful
operator.

  (2)   Where a person is induced to enter into, vary or renew a
contract of takaful in a manner described in subparagraph (1), the
contract of takaful shall be voidable and the person shall be entitled
to rescind it.

Knowledge of, and
statement by takaful agent

12.   (1)   A person who is authorized by a licensed takaful operator
to be its takaful agent and who solicits or negotiates a contract of
takaful in that capacity shall be deemed, for the purpose of the
formation or variation of the contract of takaful, to be the agent of
the licensed takaful operator and the knowledge of that takaful agent
shall be deemed to be the knowledge of the licensed takaful operator.

Page 171 of 187

  (2)   A statement made, or an act done, by the takaful agent shall be
deemed, for the purpose of the formation or variation of the contract
of takaful, to be a statement made, or act done, by the licensed
takaful operator notwithstanding the takaful agent’s contravention of
subparagraph 11(1) or any other provision of this Act.

  (3)   Subparagraph (1) shall not apply—

(a) where there is collusion or connivance between the takaful
agent and the proposer in the formation or variation of the
contract of takaful; or

(b) where a person has ceased to be a takaful agent of a licensed
takaful operator and the licensed takaful operator has taken
all reasonable steps to inform, or bring to the knowledge of
takaful participants of the fact of such cessation.

PART 3

Non-contestability and remedies for misrepresentations

Division 1

Non-contestability

Non-contestability for
family takaful contracts

13.   (1)   This paragraph shall apply to contracts of family takaful,
whether or not consumer takaful contracts.

[Nyf.]

  (2)   Where a contract of family takaful has been in effect for a
period of more than two years during the lifetime of the person
whose life is covered, such a contract shall not be avoided by a
licensed family takaful operator on the ground that a statement made
or omitted to be made in the proposal for takaful or in a report of a
doctor, referee, or any other person, or in a document leading to the
issue of the family takaful certificate, was inaccurate or false or
misleading unless the licensed family takaful operator shows that the
statement was on a material matter or suppressed a material fact and
that it was fraudulently made or omitted to be made by the takaful
participant or the person whose life is covered.

  (3)   Where a licensed family takaful operator avoids a contract of
takaful under subparagraph (2), the licensed family takaful operator
shall return such moneys due under such contract of takaful as may
be specified by the Bank.

  (4)   For the purposes of subparagraph (2), “material matter” or
“material fact” means a matter or fact which, if known by the
licensed family takaful operator, would have led to its refusal to
issue a family takaful certificate to the takaful participant or would
have led it to impose terms less favourable to the takaful participant
than those imposed in the family takaful certificate.

Division 2

Remedies for misrepresentation

Application of Division 14.   This Division sets out the remedies available to a licensed
takaful operator for a misrepresentation by a consumer made in
respect of—

[Nyf.]

(a) a consumer takaful contract of family takaful which has been
effected for a period of two years or less; and

(b) a consumer takaful contract of general takaful.

Remedies for deliberate 15.   (1)   If a misrepresentation was deliberate or reckless, a licensed [Nyf.]

Page 172 of 187

or reckless
misrepresentation

takaful operator may avoid the consumer takaful contract and refuse
all claims.

  (2)   Where the licensed takaful operator avoids a contract under
subparagraph (1), the licensed takaful operator shall return such
moneys due under such contract as may be specified by the Bank.

Remedies for careless or
innocent

misrepresentation

16.   (1)   If a misrepresentation was careless or innocent, the
licensed takaful operator’s remedies shall be based on what it would
have done if the consumer had complied with the duty set out in
paragraph 5 and subparagraphs (2) to (4) are to be read accordingly.

[Nyf.]

  (2)   If the licensed takaful operator would not have entered into or
renewed the consumer takaful contract on any terms, the licensed
takaful operator may avoid the contract and refuse all claims, but
shall return to the consumer such moneys due under such contract as
may be specified by the Bank.

  (3)   If the licensed takaful operator would have entered into, or
renewed the consumer takaful contract, but on different terms
excluding terms relating to the takaful contributions, the contract is
to be treated as if it had been entered into or renewed on those
different terms if the licensed takaful operator so requires.

  (4)   In addition, if the licensed takaful operator would have entered
into or renewed the consumer takaful contract, whether the terms
relating to matters other than the takaful contributions would have
been the same or different, but would have charged a higher takaful
contribution, the licensed takaful operator may reduce
proportionately the amount to be paid on a claim as may be specified
by the Bank.

Future treatment of
contract

17.   (1)   This paragraph shall apply if a misrepresentation was
careless or innocent but does not relate to any outstanding claim.

[Nyf.]

  (2)   Where a licensed takaful operator discovers a
misrepresentation that was careless or innocent and if the licensed
takaful operator would not have entered into or renewed the
consumer takaful contract on any terms, subparagraph 16(2) will
apply.

  (3)   If the licensed takaful operator would have entered into or
renewed the consumer takaful contract, but on different terms or for
a higher takaful contribution or both, the licensed takaful operator
shall either notify the consumer that it intends to treat the contract as
subsisting on different terms or it may terminate the contract by
giving reasonable notice to the consumer.

  (4)   Where the consumer receives notice that the licensed takaful
operator intends to continue the consumer takaful contract on
different terms, the consumer has a choice of either continuing the
contract on those amended terms or terminating the contract by
giving reasonable notice to the licensed takaful operator.

  (5)   Where either the licensed takaful operator or the consumer
terminates the contract under this paragraph, the licensed takaful
operator shall refund such moneys due under such contract as may
be specified by the Bank.

  (6)   Termination of a consumer takaful contract under this
paragraph does not affect the treatment of any claim arising under
the contract in the period before termination and any such claim
arising shall be dealt with accordingly under paragraph 16.

  (7)   Nothing in this paragraph shall affect any contractual right of

Page 173 of 187

the parties to terminate the consumer takaful contract.

Variations 18.   (1)   Where a misrepresentation is made by a consumer in
respect of a variation to an existing consumer takaful contract, it is
necessary to ascertain whether the subject matter of the variation can
reasonably be treated separately from the subject matter of the rest of
the contract.

[Nyf.]

  (2)   If the subject matter of the variation can reasonably be treated
separately from the subject matter of the rest of the consumer takaful
contract, the remedies set out in this Division shall apply only in
relation to that variation as it applies in relation to a contract.

  (3)   If the subject matter of the variation cannot be treated
separately from the subject matter of the rest of the consumer takaful
contract, the misrepresentation shall be treated as if it had been made
in relation to the whole contract and the remedies set out in this
Division shall apply in relation to the whole of the contract of takaful
rather than merely in relation to the variation.

Division 3

Modifications for group takaful certificates

Modifications for group
takaful certificates

19.   This Division provides for the application of Division 2 of this
Part to a group takaful certificate in accordance with the following
modifications:

[Nyf.]

(a) reference to consumer takaful contract, however described in
Division 2, shall be references to that part of the group
takaful certificate which provides for cover for the person
covered who made the misrepresentation;

(b) reference to claims and takaful contribution shall be
references to claims and takaful contribution in relation to
the cover for the person covered who made the
misrepresentation;

(c) any refund of takaful contribution under subparagraph 16(2)
or 17(5) shall be made to the person covered if he had paid
the takaful contribution for his cover; and

(d) in respect of the cover for the person covered, the right to
terminate his cover wherever referred to in Division 2, shall
be that of the group takaful participant.

SCHEDULE 10

[Section 142]

PAYMENT OF TAKAFUL BENEFITS UNDER FAMILY
TAKAFUL CERTIFICATE AND PERSONAL ACCIDENT

TAKAFUL CERTIFICATE

Paragraph

1. Application of this Schedule

2. Power to make nomination

3. Effect of nomination

4. Revocation of nomination

5. Payment of takaful benefits where there is nomination

Page 174 of 187

6. Nominee who receives takaful benefits

7. Assigned or pledged takaful benefits

8. Payment of takaful benefits where there is no nomination

9. Payment to person incompetent to contract

10. Distribution of takaful benefits in due course of administration

11. Licensed takaful operator not bound to see application of takaful
benefits

12. Compensation on claim amount

13. Schedule to prevail over takaful certificate and any other written
law

Application of Schedule 1.   In this Schedule, a reference to a takaful certificate is a reference
to a family takaful certificate and a personal accident takaful
certificate, effected by a takaful participant upon his life providing
for the payment of takaful benefits upon his death.

Power to make
nomination

2.   (1)   A takaful participant who has attained the age of sixteen
years may nominate an individual to receive takaful benefits payable
upon his death under the takaful certificate, either as an executor, or
as a beneficiary under a conditional hibah by notifying the licensed
takaful operator in writing the name, date of birth, national
registration identity card number or birth certificate number and
address of the nominee.

  (2)   A nomination under subparagraph (1) may be made—

(a) at the time the takaful certificate is issued; or

(b) if the takaful certificate has already been issued, by notifying
the licensed takaful operator in writing or by submitting the
takaful certificate for an endorsement of the nomination by
the licensed takaful operator.

  (3)   A nomination made under subparagraph (1) shall be witnessed
by a person of sound mind who has attained the age of eighteen
years and who is not a nominee named under that subparagraph.

  (4)   The licensed takaful operator—

(a) shall prominently display in the nomination form that the
takaful participant may—

(i) assign the takaful benefits to a nominee or designate the
nominee to receive the takaful benefits as a beneficiary
under conditional hibah; or

(ii) designate the nominee to receive the takaful benefits as
an executor;

(b) shall record the nomination and the particulars of the
nominee in its register of takaful certificates; and

(c) shall return the takaful certificate to the takaful participant
after endorsing the nomination on the takaful certificate or
by issuing an endorsement to the original takaful certificate
by registered mail to the takaful participant and the
nomination shall take effect from the date the nomination is
registered by the licensed takaful operator.

  (5)   A failure to comply with subparagraph (4) shall not affect the
validity of the nomination if it is otherwise proved that the

Page 175 of 187

nomination was made by the takaful participant and given to the
licensed takaful operator.

  (6)   A nomination made under subparagraph (1) may be in favour
of one person or several persons and where there is more than one
nominee, the takaful participant may direct that specified shares be
paid to the nominees and in the absence of such direction by the
takaful participant, the licensed takaful operator shall pay the
nominees in equal shares.

Effect of nomination 3.   (1)   A nominee under subparagraph 2(1) shall receive the takaful
benefits payable under a takaful certificate either as an executor or as
a beneficiary under a conditional hibah, as the case may be, as stated
in the nomination form by the takaful participant.

  (2)   A nomination by a takaful participant pursuant to
subparagraph 2(1) for a nominee to be a beneficiary under a
conditional hibah, shall, notwithstanding any written law, have the
effect of transferring ownership, and shall transfer ownership, of the
takaful benefits payable to the nominee upon the death of the takaful
participant and such takaful benefits so transferred shall not form
part of the estate of the deceased takaful participant or be subject to
his debts.

  (3)   Where the takaful benefits are paid under a conditional hibah,
if it is proved that the takaful certificate was effected and the takaful
contributions were paid with intent to defraud a creditor of the
takaful participant, the creditor shall be entitled to receive from the
takaful benefits payable under the takaful certificate a sum equal to
the takaful contributions paid under that takaful certificate.

  (4)   Notwithstanding subparagraph (3), if a beneficiary received
the takaful benefits in good faith, and such benefits have been
utilised by the beneficiary, the creditor shall receive a sum equal to
the unutilised benefits if such unutilised benefits are less than the
takaful contributions paid.

Revocation of nomination 4.   (1)   A nomination shall be revoked—

(a) upon the death of the nominee, or where there is more than
one nominee, upon the death of all the nominees, during the
lifetime of the takaful participant;

(b) by a notice in writing given by the takaful participant to the
licensed takaful operator; or

(c) by any subsequent nomination.

  (2)   Subject to subparagraph (1), a nomination shall not be revoked
by a will or by any other act, event or means.

  (3)   Where there is more than one nominee and any particular
nominee who is nominated as a beneficiary under conditional hibah
predeceases the takaful participant, the licensed takaful operator shall
pay the share of the deceased nominee, upon the death of the takaful
participant to the estate of the deceased takaful participant unless the
takaful participant has made a subsequent nomination in place of the
deceased nominee.

Payment of takaful
benefits where there is

nomination

5.   (1)   Subject to subparagraph (2), where a takaful participant dies
having made a nomination, the licensed takaful operator shall pay
the takaful benefits according to the direction of the nomination upon
receipt of a claim by the nominee together with proof of death of the
takaful participant.

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  (2)   Where a nominee fails to claim the takaful benefits within
sixty days of the licensed takaful operator becoming aware of the
death of the takaful participant, the licensed takaful operator shall
immediately notify the nominee in writing at his last known address
of his entitlement to claim the takaful benefits.

  (3)   Where a nominee fails to claim the takaful benefits within
twelve months of the licensed takaful operator becoming aware of
the death of the takaful participant despite notification under
subparagraph (2)—

(a) in the case of a nominee who is nominated as an executor,
paragraph 8 shall apply as though no nomination was made;
or

Act 370. (b) in the case of a nominee who is nominated as a beneficiary
under conditional hibah, the takaful benefits payable to such
nominee shall be lodged with the Registrar of Unclaimed
Moneys in accordance with the provisions of the Unclaimed
Moneys Act 1965 [Act 370].

  (4)   Where a nominee dies after the death of the takaful participant
but before any takaful benefits has been paid to him as nominee, the
licensed takaful operator shall pay the takaful benefits to—

(a) the estate of the deceased takaful participant if the nominee
is an executor; or

(b) the estate of the deceased nominee if the nominee is a
beneficiary under conditional hibah.

Nominee who receives
takaful benefits

6.   (1)   A licensed takaful operator shall be discharged from liability
for payments of takaful benefits payable under a takaful certificate if
the licensed takaful operator pays the takaful benefits to the nominee
named in the takaful certificate whether that nominee receives the
takaful benefits as an executor or as a beneficiary under conditional
hibah.

  (2)   For purposes of subparagraph (1) where a nominee of a takaful
participant receives the takaful benefits as an executor, such nominee
shall distribute the takaful benefits in due course of administration of
the estate of the deceased takaful participant in accordance with the
will of that takaful participant or the law relating to the distribution
of the estate of deceased persons as applicable to that takaful
participant.

Assigned or pledged
takaful benefits

7.   (1)   Notwithstanding a nomination under paragraph 2, where the
takaful benefits, wholly or partly, have been pledged as security or
assigned to a person, the claim of the person entitled under the
security or the assignee shall have priority over the claim of the
nominee and subject to the rights under the security or the
assignment being preserved, the licensed takaful operator shall pay
the balance of the takaful benefits to the nominee.

  (2)   Where more than one person is entitled under the security or
the assignment, the respective rights of the persons entitled under the
security or the assignment shall be in the order of priority according
to the priority of the date on which written notification of the
security or the assignment was given to the licensed takaful operator,
both security and assignment being treated as one class for this
purpose.

Payment of takaful
benefits where there is no

nomination

8.   (1)   Where a takaful participant dies without having made a
nomination relating to takaful benefits under a takaful certificate, the
licensed takaful operator shall subject to paragraph 7, pay the takaful

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benefits of the deceased takaful participant to the lawful executor or
administrator of his estate.

  (2)   Where the licensed takaful operator is satisfied that there is no
lawful executor or administrator of the estate of the deceased takaful
participant at the time of payment of takaful benefits, the licensed
takaful operator may pay the takaful benefits to a proper claimant
without requiring the grant of probate or letters of administration or a
distribution order—

(a) where the takaful benefits do not exceed one hundred
thousand ringgit or such greater amount as may be
prescribed by the Bank, all such takaful benefits; or

(b) where the takaful benefits exceed one hundred thousand
ringgit, or such greater amount as may be prescribed by the
Bank, an amount not greater than one hundred thousand
ringgit or such greater amount as may be prescribed by the
Bank.

  (3)   The licensed takaful operator shall pay the balance of the
takaful benefits under subsubparagraph (2)(b) to the lawful executor
or administrator of the estate of the deceased takaful participant.

  (4)   In this paragraph, a reference to takaful benefits is a reference
to the aggregate amount of takaful benefits in respect of all takaful
certificates of the takaful participant with that licensed takaful
operator where the takaful participant has not made any nomination.

Act 97.   (5)   The grant of probate or letters of administration or distribution
order in respect of a personal estate comprising takaful benefits, by a
court in Malaysia or a competent authority outside Malaysia, or its
court certified copy shall be sufficient proof to the licensed takaful
operator to pay the takaful benefits to the person named therein as
the lawful executor or administrator provided that the same has been
duly registered with the court in Malaysia and sealed in accordance
with the Probate and Administration Act 1959 [Act 97].

  (6)   Takaful benefits paid under this paragraph shall be deemed to
have been duly paid and the licensed takaful operator shall be
discharged from liability in respect of the takaful benefits so paid
notwithstanding the absence or invalidity of, or any defect in the
grant of probate or letters of administration or distribution order or
any other document having the same effect.

  (7)   A person to whom a payment is made under this paragraph
shall give a receipt which shall be deemed to be a valid receipt.

Payment to person
incompetent to contract

Act 50.

9.   Where a person has not attained the age of eighteen years, or
who is certified by a medical practitioner fully registered under the
Medical Act 1971 [Act 50] to be of unsound mind and no committee
of his estate has been appointed, or to be incapable, by reason of
infirmity of mind or body, of managing himself and his property and
affairs, the licensed takaful operator—

(a) in the case of a nominee who receives the takaful benefits
beneficially under a conditional hibah, shall pay the takaful
benefits to the parent of the incompetent nominee, and where
there is no surviving parent of the incompetent nominee—

(i) if the takaful benefits do not exceed fifty thousand
ringgit, may pay the takaful benefits to a proper claimant
who satisfies the licensed takaful operator that the proper
claimant will apply the takaful benefits for the
maintenance and benefit of the nominee, subject to the

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execution of an undertaking by that proper claimant that
the takaful benefits will be applied solely for the
maintenance and benefit of the nominee; and

(ii) if the takaful benefits exceed fifty thousand ringgit, shall
pay the takaful benefits to the Public Trustee or a trust
company nominated by the takaful participant; or

(b) in the case of a person to whom takaful benefits are payable
under subparagraph 8(2), pay to the Public Trustee or a trust
company nominated by the takaful participant.

Distribution of takaful
benefits in due course of

administration

10.   A person to whom takaful benefits may be paid under paragraph
8 shall receive the takaful benefits as an executor and not solely as a
beneficiary and shall distribute the takaful benefits in due course of
administration of the estate of the deceased takaful participant in
accordance with the terms of a will of the deceased person, and if
there is no such will, in accordance with the law applicable to the
administration, distribution and disposition of his estate upon his
intestacy.

Licensed takaful operator
not bound to see

application of takaful
benefits

11.   A licensed takaful operator shall not in any circumstances be
bound or concerned to ensure the application of any takaful benefits
which it has paid in respect of any person under this Schedule.

Compensation on claim
amount

12.   (1)   Where a claim or a part of a claim made under a family
takaful certificate, or under a personal accident takaful certificate
upon the death of a takaful participant is not paid by a licensed
takaful operator within sixty days of notification of the claim, the
licensed takaful operator shall pay a minimum compensation at the
rate of investment yield of the participant’s risk fund plus one
percent or such other rate as may be specified by the Bank, on the
amount of takaful benefits upon expiry of the sixty days until the
date of payment, whereby the one percent is to be paid from
shareholders’ funds.

  (2)   Where the balance of takaful benefits are to be paid by a
licensed takaful operator to the lawful executor or administrator of
the estate of the deceased takaful participant under subparagraph 8
(3), compensation payable under subparagraph (1) shall only apply
to such balance of takaful benefits upon expiry of sixty days from the
time that the lawful executor or administrator produces the grant of
probate or letters of administration or distribution order until the date
of payment.

Schedule to prevail over
takaful certificate and any

other written law

13.   (1)   This Schedule shall have effect in relation to a takaful
certificate which is in force on or after the appointed date, and in
relation to a nomination made before, on or after the appointed date,
notwithstanding anything contained in the takaful certificate, and
nothing contained in a takaful certificate shall derogate from, or be
construed as derogating in any manner or to any extent from, this
Schedule.

  (2)   This Schedule shall have full force and effect notwithstanding
anything inconsistent with or contrary to any other written law
relating to probate, administration, distribution, or disposition, of the
estates of deceased persons, or in any practice or custom in relation
to these matters.

SCHEDULE 11

[Section 146]

Page 179 of 187

PERMITTED DISCLOSURES

First column

Purposes for or circumstances in
which customer documents or
information may be disclosed

Second column

Persons to whom documents or
information may be disclosed

1.   Documents or information
which is permitted in writing by
the customer, the executor or
administrator of the customer, or
in the case of a customer who is
incapacitated, any other legal
personal representative.

Any person permitted by the
customer or, as the case may be,
the executor, administrator or
legal personal representative.

Act 98. 2.   In connection with an
application for a Faraid
certificate, grant of probate,
letters of administration or a
distribution order under the Small
Estates (Distribution) Act 1955
[Act 98] in respect of a deceased
customer’s estate.

Any person whom an Islamic
financial institution in good faith
believes is entitled to obtain a
Faraid certificate, the grant of
probate, letters of administration
or a distribution order.

3.   In a case where the customer
is declared bankrupt, is being or
has been wound up or dissolved
in Malaysia or in any country,
territory or place outside
Malaysia.

All persons to whom the
disclosure is necessary in
connection with the bankruptcy
or winding up or dissolution.

4.   Any criminal proceedings or
civil proceedings between an
Islamic financial institution and—

All persons to whom the
disclosure is necessary for the
purpose of the criminal
proceedings or civil proceedings.

(a) its customer, his surety or
guarantor relating to the
customer’s transaction;

(b) two or more parties
making adverse claims to
money in a customer’s
account where the Islamic
financial institution seeks
relief by way of
interpleader; or

(c) one or more parties in
respect of property in or
over which some right or
interest has been
conferred on the Islamic
financial institution.

5.   Compliance by a licensed
Islamic bank which has been
served a garnishee order attaching
moneys in the account of a
customer.

All persons to whom the
disclosure is required to be made
under the garnishee order.

6.   Compliance with a court order
made by a court not lower than a

All persons to whom the
disclosure is required to be made

Page 180 of 187

Sessions Court. under the court order.

7.   Compliance with an order or
request made by an enforcement
agency in Malaysia under any
written law for the purposes of an
investigation or prosecution of an
offence under any written law.

An investigating officer
authorized under the written law
to investigate or any officer
authorized to carry out
prosecution or any court.

8.   Performance of functions of
the Malaysia Deposit Insurance
Corporation.

Any director or officer of the
Malaysia Deposit Insurance
Corporation or any other person,
authorized by the Malaysia
Deposit Insurance Corporation
to receive the documents or
information.

9.   Disclosure by a licensed
Islamic bank for the purpose of
performance of functions of an
approved trade repository under
the Capital Markets and Services
Act 2007.

Any officer of the approved
trade repository authorized to
receive the documents or
information.

10.   Documents or information is
required by the Inland Revenue
Board of Malaysia under section
81 of the Income Tax Act 1967
for purposes of facilitating
exchange of information pursuant
to taxation arrangements or
agreements having effect under
section 132 or 132A of the Income
Tax Act 1967.

Any officer of Inland Revenue
Board of Malaysia authorized to
receive the documents or
information.

Act 710. 11.   Disclosure of credit
information of a customer to a
credit reporting agency registered
under the Credit Reporting
Agencies Act 2010 [Act 710] for
purposes of carrying on credit
reporting business as defined in
the Credit Reporting Agencies
Act 2010.

Any officer of credit reporting
agency authorized to receive the
documents or information.

12.   Performance of any
supervisory functions, exercise
any of supervisory powers or
discharge any of supervisory
duties by a relevant authority
outside Malaysia which exercises
functions corresponding to those
of the Bank under this Act.

Any officer of the relevant
authority authorized to receive
the documents or information.

13.   Conduct of centralized
functions, which include audit,
risk management, finance or
information technology or any
other centralized function within
the financial group.

The head office or holding
company of an Islamic financial
institution whether in or outside
Malaysia or any other person
designated by the head office or
holding company to perform
such functions.

14.   Due diligence exercise Any person participating or

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approved by the board of directors
of the Islamic financial institution
in connection with—

otherwise involved in the due
diligence exercise approved by
the board of the Islamic financial
institution.

(a) merger and acquisition;

(b) capital raising exercise; or

(c) sale of assets or whole or
part of business.

15.   Performance of functions of
the Islamic financial institution
which are outsourced.

Any person engaged by the
Islamic financial institution to
perform the outsourced function.

16.   Disclosure to a consultant or
adjuster engaged by the Islamic
financial institution.

Consultant or adjuster engaged
by the Islamic financial
institution.

17.   An Islamic financial
institution has reason to suspect
that an offence under any written
law has been, is being or may be
committed.

Any officer of another Islamic
financial institution or the
relevant associations of Islamic
financial institutions authorized
to receive the documents or
information.

SCHEDULE 12

[Subsection 151(2)]

RESTRICTION ON USE OF CERTAIN WORDS

PART 1

Islamic bank

1.   An association of licensed Islamic banks or association of
employees of any such licensed Islamic banks.

PART 2

Takaful, Islamic insurance or Islamic assurance

2.   A person who appends to his name a takaful qualification
conferred on him by a prescribed body, where the qualification so
appended is followed with the initials of the name of that body.

3.   An association of licensed takaful operators, approved takaful
brokers, approved Islamic financial advisers or association of
employees of any such persons.

4.   A takaful agent registered with any association of licensed
takaful operators.

PART 3

Islamic financial adviser

5.   A licensed takaful operator.

6.   An approved takaful broker.

7.   A licensed Islamic bank.

8.   A licensed bank which has obtained approval to carry on Islamic

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banking business under the Financial Services Act 2012.

9.   An approved insurance broker which has obtained approval to
carry on takaful broking business under the Financial Services Act
2012.

10.   A person who appends to his name a takaful qualification
conferred on him by a prescribed body, where the qualification so
appended is followed with the initials of the name of that body.

11.   An association of approved financial advisers or association of
employees of any such approved persons.

SCHEDULE 13

[Subsection 189(1)]

ADDITIONAL PROVISIONS RELATING TO COMPULSORY
TRANSFER

The Third Schedule of the Central Bank of Malaysia Act 2009 shall
apply in relation to an order of the Bank under Subdivision 4,
Division 2, Part XIV with the following modifications:

1.   A reference to subsection 36(18) in paragraph 1 of the Third
Schedule is a reference to section 187 of this Act.

2.   A reference to subparagraph 32(1)(c)(iii) in the Third Schedule is
a reference to section 188 of this Act.

3.   A reference to subsection 32(1A) in subparagraph 2(5) of the
Third Schedule is a reference to section 220 of this Act.

4.   A reference to section 94 in subparagraph 4(7)(j) of the Third
Schedule is a reference to section 271 of this Act.

5.   A reference to “shares or other capital instruments” in the Third
Schedule is not applicable for the purposes of this subdivision.

6.   Paragraph 5 of the Third Schedule is not applicable for the
purposes of this subdivision.

SCHEDULE 14

[Subsection 225(2)]

LIST OF TRANSACTIONS

1.   The act of—

(a) buying, selling, exchanging, borrowing or lending;

(b) issuing, publishing or disseminating information in any form
or advertisements which may lead, directly or indirectly, to
the buying, selling, exchanging, borrowing or lending; or

(c) retaining or using,

of foreign currency, gold or other precious metals;

2.   The act of—

(a) borrowing or lending; or

(b) issuing, publishing or disseminating information in any form
or advertisements which may lead, directly or indirectly, to

Page 183 of 187

the borrowing or lending,

of ringgit between non-residents or between a resident and a
non–resident; or

(c) retaining or using of ringgit by a non-resident;

3.   The making of any payment by a person to another person
including a payment—

(a) to or for the credit of a non-resident;

(b) by a resident or a non-resident;

(c) as consideration for or in association with—

(i) the receipt of a payment or the acquisition of a property,
outside Malaysia, by any person; or

(ii) the creation in favour of, or the transfer to, any person, of
a right to receive a payment or to acquire a property,
outside Malaysia;

(d) under a judgment or order of any court or an award of any
arbitrator or under any written law in favour of a non-
resident, or a resident outside Malaysia; or

(e) for settlement of property in favour of a non-resident, or a
resident outside Malaysia,

other than—

(A) payment in ringgit between residents in Malaysia; and

(B) payment in foreign currency between non-residents outside
Malaysia;

4.   The receiving of any payment in paragraph 3;

5.   The giving or obtaining of any guarantee, indemnity or
undertaking in respect of any debt, obligation or liability;

6.   The issuance, transfer or substitution or the doing of any act in
relation to an Islamic security or an Islamic financial instrument
other than—

(a) the issuance or transfer of any ringgit-denominated Islamic
security between residents in Malaysia; or

(b) the substitution of any ringgit-denominated Islamic security
for other ringgit-denominated Islamic security between
residents in Malaysia;

7.   The importing into, or exporting from, Malaysia, of any ringgit,
foreign currency, gold, other precious metals, Islamic security,
Islamic financial instrument or any other article as may be specified
by the Bank;

8.   The act of—

(a) receiving export proceeds by any person in Malaysia—

(i) for an amount that is less than the full value of the
subject matter exported; or

(ii) in a manner or within a period other than those as may be
specified by the Bank; or

(b) doing or refraining from doing any act by any person in
Malaysia which would lead to or result in the non-receipt of

Page 184 of 187

export proceeds, in whole or in part; or

9.   The doing or refraining from doing any act by any person in
Malaysia, who has a right to receive an amount of ringgit or foreign
currency, which would to lead or result in the delay or the non-
receipt of the amount, in whole or in part.

SCHEDULE 15

[Paragraph 245(3)(b)]

IMPOSITION OF MONETARY PENALTY

A monetary penalty may be imposed in respect of a breach or non-
compliance with the following provisions or standards, requirements,
conditions, specifications, restrictions or otherwise made or imposed
pursuant to such provisions:

1.   subsection 16(2);

2.   subsection 22(1) or (2);

3.   subsection 29(2), paragraph 29(4)(a) or subsection 29(5);

4.   subsection 30(1), (2) or (3);

5.   section 31;

6.   section 32;

7.   paragraph 33(1)(c) or (d), or subsection (2) or (3);

8.   subsection 34(1) or (2);

9.   subsection 35(1) or (2);

10.   subsection 37(1) or (2);

11.   subsection 38(2);

12.   subsection 43(2);

13.   section 44;

14.   subsection 45(1), (2) or (3);

15.   subsection 58(1) or (2);

16.   subsection 59(1);

17.   subsection 60(1);

18.   section 61;

19.   subsection 63(1), (2), (3) or (4);

20.   subsection 64(1), (2) or (3);

21.   subsection 65(1), (2) or (3);

22.   paragraph 66(1)(a), (b) or (d);

23.   subsection 67(1), (2), (3) or (4);

24.   subsection 68(2);

25.   subsection 69(1);

26.   subsection 70(1) or (2);

27.   section 71;

Page 185 of 187

28.   section 73;

29.   subsection 74(1);

30.   subsection 75(1) or (2);

31.   subsection 76(1), (2) or (3);

32.   subsection 78(1) or (3);

33.   section 79;

34.   section 80;

35.   section 81;

36.   subsection 83(1), (2), (3), or (4);

37.   section 85;

38.   paragraph 86(c);

39.   subsection 87(1) or (2);

40.   section 88;

41.   section 90;

42.   section 91;

43.   subsection 92(1) or (3);

44.   subsection 93(1);

45.   section 94;

46.   section 95;

47.   subsection 96(1);

48.   subsection 97(1);

49.   subsection 99(1) or (2);

50.   subsection 100(1);

51.   section 101;

52.   subsection 102(3), (7) or (10);

53.   subsection 103(2);

54.   subsection 104(1);

55.   subsection 105(1);

56.   subsection 106(6);

57.   subsection 109(1), (2), (4), (5) or (6);

58.   section 111;

59.   subsection 112(1), (2), (3) or (6);

60.   subsection 113(1) or (2);

61.   subsection 115(1);

62.   subsection 117(1) or (2);

63.   section 119;

64.   subsection 122(1) or (3);

65.   section 123;

Page 186 of 187

66.   subsection 124(1), (3) or (4);

67.   subsection 126(1) or (2);

68.   subsection 127(4);

69.   subsection 135(1);

70.   subsection 137(1);

71.   subsection 138(4);

72.   subsection 139(1) or (3);

73.   subsection 152(4);

74.   subsection 155(1) or (2), paragraph 155(3)(b), or subsection 155
(4) or (6);

75.   subsection 156(1);

76.   subsection 162(1);

77.   subsection 228(2);

78.   subsection 290(2);

79.   subsection 291(2);

80.   paragraph 10 of Schedule 8; or

81.   any requirement imposed on a licensed takaful operator in
Schedules 8, 9 and 10, except for paragraph 11 of Schedule 9.

SCHEDULE 16

[Section 283]

LIST OF SUBSIDIARY LEGISLATION REVOKED

PU(A) 308/1985. 1. Takaful (Operators Registration) Regulations 1985 [P.U.(A)
308/1985]

PU(A) 310/1985. 2. Takaful (Statutory Deposits) Regulations 1985 [P.U.(A)
310/1985]

PU(A) 314/1985. 3. Takaful (Power to Compound) Regulations 1985 [P.U.(A)
314/1985]

PU(A) 337/1990. 4. Takaful (Prescribed Loan) Regulations 1990 [P.U.(A) 337/1990]

PU(A) 93/1991. 5. Takaful (Prescribed Loan) Regulations 1991 [P.U.(A) 93/1991]

PU(A) 435/1995. 6. Takaful (Prescribed Loan) Regulations 1995 [P.U.(A) 435/1995]

PU(A) 237/1997. 7. Takaful (Prescribed Loan) Regulations 1997 [P.U.(A) 237/1997]

PU(A) 17/2003. 8. Takaful (Prescribed Financial Institution, Loan and Investment)
Regulations 2003 [P.U.(A) 17/2003]

PU(B) 465/2008. 9. Notification under subsection 40C(2) [P.U.(B) 465/2008]

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