Recent Policy Document On Money Services Business - Agent Oversight Framework For Money Services Bus

On 1 July 2022, Bank Negara Malaysia released the Policy Document on Agent Oversight Framework for Money Services Business (Agent Oversight Document) in reference to the money services businesses under the Money Services Business Act 2011.

The Agent Oversight Document came into effect on 30 June 2022.

In this alert, our associate, Nur Shohidah Ramlee will briefly discuss the Agent Oversight Framework.

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On 1 July 2022, Bank Negara Malaysia (BNM) released the new policy document entitled Policy Document on Agent Oversight Framework for Money Services Business (Agent Oversight Document) in reference to the money services businesses which are authorised under the Money Services Business Act 2011 (MBSA). The Agent Oversight Document came into effect on 30 June 2022. This alert discusses the Agent Oversight Framework. Introduction Money Services Business (MSB) agents primarily assist their clients to access safe, economical and dependable money services businesses especially in facilitating the increased usage of the formal money business in Malaysia. In ensuring effective agent oversight for principal-agent arrangements, the Agent Oversight Document outlines the minimum prerequisites that a money service business agent must observe. These requirements are set forth in Section 43 of the MBSA. The Agent Oversight Document replaces the Money Services Business Industry Guidelines on Agent Oversight Framework published on 15 April 2013. The minimal parameters that a MSB agent is required to follow are contained in the Agent Oversight Document, which among other things include: A. Requirements Relating To Agent Oversight A principal licensee is solely liable for the conduct and operations of the designated agent acting on its behalf in connection with money services business activities, such as remittance or money changing. A principal licensee is required to set up effective agent management and monitoring procedures and to designate management staff who will oversee supervising and checking up on the actions and business dealings of the agents assigned. B. Policies And Procedures On Appointment Of Agent A principal licensee must conduct due diligence in selecting an agent and thoroughly conduct background checks, engagement sessions and on-site visits to ensure its agent meets the standards of professionalism in business conduct, adequate financial and human resources, and good compliance track records. Additionally, the agent must possess adequate technological capabilities to support smooth operation of the business. The term of appointment must be clearly documented in the form of a contractual agreements which cover scope of business activities to be provided by the agent, obligations of the agent to comply with all legal requirements and expectation of professional ethics and conduct. The principal licensee must set up ample training programs to ensure the designated agent understands his duties. The programs may cover the regulatory requirements stipulated under the MSBA as well as internal policies and procedures of the principal licensee. C. Policy, Processes And Controls To Monitor Agent’s Operations And Compliance A principal licensee must form a policy to efficiently inspect the operations, conduct and compliance of its agent and this must regularly be reviewed by the board of directors of the principal licensee and management to ensure that they remain effective. The standard operating procedure (SOP) must be implemented for the conduct of money services business. This must include a mechanism that enable clients to certify that a principal licensee has in fact authorised the money services business activity to be performed by its agent. For agents operating at physical premises, such agent must prominently display signage and certificate of appointment illustrating that it is an agent of the principal licensee. For agents operating through online channels, such agents must display prominently at minimum the business information in a manner that is easily identifiable by the customer such as name of agent, business registration number and official association’s membership number. The SOP on requirements for clarity in dealings and the issuing of receipts for transactions utilising the agent's services, including proper disclosure to clients on the items and services offered by the agent, must also be laid forth by the principal licensee. A record by an agent to support audit reviews and consolidation of records must be properly maintained by the principal licensee. A principal licensee must conduct regular reviews at least on quarterly to ensure the agent complies with the SOP and “fit and proper” requirements namely the compliance level and efficacy of the agent’s internal control. A principal licensee must require its agent to submit the financial information, evolution report on rectification measures to resolve deficiencies identified in the agent’s operations, including where appropriate, termination of agents in compliance with proper processes, new money services affairs, reports on suspicious transactions and any incident of fraud, theft and robbery at the agent’s premises. D. Specific Requirements For Principal-Agent Arrangement A principal licensee must obtain prior written consent of BNM in opening or repositioning of sites commenced by its agents, any manner of money services business through virtual channels, any change to the substantial shareholders, directors, and CEO of an agent other than an agent that is a licensee. A principal licensee must notify BNM within fourteen days from the date of commencement and new address of the agent’s premises, any modification to the non-substantial shareholders of the agent, and termination of the agent's employment with a statement of the grounds and the termination date. If the agent is involved in illegal activities, breach of professional ethics and noncompliance with statutory framework, the principal licensee is obliged to notify BNM and the redress mechanism to be taken to address the gaps identified. To guarantee a fair and competitive money services industry, a principal licensee holding a Class C & Class D or Class A & Class D licensee must not use discriminatory pricing for its wholesale foreign currency operation. A principal licensee must consider the market demand and accessibility of the customer in determining the working hours of its agents. Authored by Nur Shohidah Ramlee, an associate from the firm’s Energy, Infrastructure & Project practice.

29 September 2022