E-Money And AMLA
Table of Contents
What is E-Money and AMLA?
Over the past decade, e-money has evolved and grown significantly due to the proliferation of mobile technology such as Quick Response (QR) codes and mobile applications (apps), digitalization of financial services, and shift in consumer behavior. For example, the use of e-money for payments has steadily recorded double-digit growth for the past five years and the form of e-money has progressed from the traditional stored value cards to network-based solutions such as online accounts or e-wallets.
So what is E-money? What are some of the laws (specifically, AMLA) governing E-money? We will briefly discuss this with you guys below.
What is E-Money?
Here are some basic terminology and its definition that you will encounter along the way when you are dealing with the topic of e-money:
| Term | Definition |
|---|---|
| E-money | Defined in the Payment Systems (Designated Payment Instruments) Order 2003 as a payment instrument, whether tangible or intangible, that: stores funds electronically in exchange for funds paid to the issuer; and is able to be used as a means of making payment to any person other than the issuer. |
| Issuer | Refers to any person that is responsible for the payment obligation and assumes the liabilities for the e-money being issued. |
| Merchant | Refers to any person that accepts e-money as payment for their goods and services. |
| Reload agent | Refers to any person that accepts payment on behalf of the issuer for the purpose of adding monetary value to the e-money. |
| Licensed institution | Refers to any person licensed under the Banking and Financial Institutions Act 1989 (BAFIA), Islamic Banking Act 1983 (IBA), and Development Financial Institutions Act 2002 (DFIA). |
The Laws Regulating E-Money
| What are some of the laws governing this topic? | Payment Systems Act 2003; Financial Services Act 2013; Guideline on Electronic Money (E-Money) |
| What needs to be done prior to issuing e-money? | Issuers of e-money are required to obtain approval from Bank Negara Malaysia (BNM) pursuant to section 25(1) of the Act before they can issue e-money. In this regard, they have to: submit to the Bank the documents and information as may be prescribed by the Bank; pay the fee prescribed by the Bank; and obtain a written approval from the Bank to issue a designated payment instrument. This does not mean that the bank will automatically grant approval — the bank can ask the issuer to modify and alter any documents as it deems necessary, and it can also impose restrictions, limitations, and conditions in relation to the usage of e-money as it deems fit. |
| Must the issuer be an entity? | Yes — an issuer of e-money must be a company incorporated under the Companies Act 2016 (previously Companies Act 1965). |
| What are the documents needed? | Pursuant to section 9 of the Financial Services Act, issuers of e-money are required to submit an application in writing to BNM together with a covering letter and documents listed in “Submission Requirements for Application for Approval to Operate a Payment System or to Issue a Designated Payment Instrument or to be Registered to Provide Merchant Acquiring Services”. |
The Laws in Relation to AMLA and E-Money
The laws regulating AMLA and E-money are the Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act and the Anti-Money Laundering, Countering Financing of Terrorism and Targeted Financial Sanctions for Financial Institutions policy document.
As to what needs to be adhered to, we have already covered most of it (such as reporting a suspicious transaction) in our previous articles. Therefore, we will not repeat it here.
What is the Current Status in Relation to E-Money and AMLA?
At this juncture, E-money issuers will have to stick to and continue to adhere to the legislation mentioned above.
Recently (in June 2021), BNM issued another document (pursuant to section 11 of the Financial Services Act and Islamic Financial Services Act), titled the “Exposure Draft on Electronic Money (E-money)” with the aim to:
- Ensure the safety and reliability of e-money issued by e-money issuers; and
- Preserve customers’ and merchants’ confidence in using or accepting e-money for the payment of goods and services.
However, it must be noted that the Exposure Draft is not in effect as of today. Therefore, E-money issuers will still have to continue to abide by the laws and regulations mentioned above until further notice is given.
Frequently Asked Questions (FAQ)
1. What legally counts as “e-money” in Malaysia?
E-money is defined in the Payment Systems (Designated Payment Instruments) Order 2003 as a payment instrument, tangible or intangible, that stores funds electronically in exchange for funds paid to the issuer, and can be used to make payments to any person other than the issuer.
2. Does an e-money issuer need approval before it can operate?
Yes. Issuers of e-money are required to obtain approval from Bank Negara Malaysia (BNM) pursuant to section 25(1) of the Act, which involves submitting prescribed documents and information, paying the prescribed fee, and obtaining written approval to issue a designated payment instrument.
3. Can an individual issue e-money, or must it be a company?
An issuer of e-money must be a company incorporated under the Companies Act 2016 (previously the Companies Act 1965) — an individual cannot be an issuer.
4. What laws govern AMLA compliance for e-money issuers?
AMLA and e-money are regulated by the Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act, together with the Anti-Money Laundering, Countering Financing of Terrorism and Targeted Financial Sanctions for Financial Institutions policy document.
5. Is the 2021 Exposure Draft on Electronic Money currently in effect?
No. The Exposure Draft on Electronic Money (E-money), issued by BNM in June 2021, is not in effect as of today, so e-money issuers must continue to abide by the existing laws and regulations until further notice is given.
Planning to Launch an E-Money or Payment Business?
Fareez Shah & Partners assists fintech and payment businesses across Malaysia in navigating BNM approvals and AMLA compliance. We can help you with:
- Preparing your application for BNM approval to issue e-money
- Structuring your company to meet incorporation requirements
- Advising on AMLA and suspicious transaction reporting obligations
- Monitoring regulatory changes such as BNM’s Exposure Draft
- Full-suite Company Secretarial (Cosec) services and compliance monitoring
Stay compliant from day one. Get professional legal guidance today.