Malaysia Update – The Laws Behind Your Touch ‘n Go: E-Money Regulations in Malaysia

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E-money is an instrument that contains monetary value paid in advance by any user like ourselves to the e-money issuer (for example, Touch ‘n Go Sdn Bhd) to be able to make payments to purchase goods or services from third party merchants (such as retail outlets). E-money falls under what is known as a payment instrument under the Financial Services Act 2010 (“FSA”). The FSA empowers Bank Negara Malaysia (“BNM”) to designate such payment instruments as a designated payment instrument (DPI).

Prior to 2005, only banks were allowed to issue e-money. However, now, BNM has liberalised its guidelines by allowing non-banks to also issue e-money. Further, to become an e-money issuer, issuers must follow the standards published by BNM in addition to the operational requirements of the FSA. Although regulations and guidelines are readily available to assist interested parties in the application for an e-money license, there is still little information available about BNM’s decision-making process. There are also no pointers as to foreign equity restrictions, making it difficult for foreign applicants to assess the likelihood of approval.

The increasing use of e-money raises the risk of money laundering as it provides transacting parties with an easy way to transfer financial value. These risks have of course been identified and an issuer of e-money must therefore comply with the Anti Money Laundering and Anti-Terrorism Financing Act 2001. Regulators should therefore be monitoring the threats posed to this twenty first century innovation and implement adequate policies to facilitate this economic change.

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