Malaysia Guidelines on Agent Banking – Overview and Summary of Requirements

• By: Staff Editor
• Date: April 11, 2013

The guidelines is applicable to the following FIs:

• Agent banking should be conducted in unserved areas in Malaysia only.
• Agents can provide following banking services:

1. Accepting deposits
2. Facilitating withdrawal of funds by customers
3. Facilitating fund transfers
4. Receiving loan/financing payments
5. Facilitating bill payments by customers

• The agents must at a minimum provide the services of accepting deposits and conducting withdrawals.
• Agents are not allowed to undertake the following services on behalf of FIs:

1. Opening of bank accounts and issuance of bankcards
2. Conducting money changing activities
3. Conducting loan/financing appraisal

• FIs must ensure that all transactions by agents are conducted on a real-time basis and within the business premise of the agent only.
• FIs are required to establish an appropriate daily cash withdrawal limit for customers.
• FIs are encouraged to use infrastructure that allows open access by other FIs, as one agent may represent multiple FIs.
• FIs may pass fees and charges to customers.

• FIs will be held responsible and accountable for the effective and continuous management of risks arising from the agent banking arrangements.
• The Board of Directors (BOD) is responsible to approve an FI’s agent banking strategy, internal controls and risk management policies.
• The senior management must establish clear guidance regarding agent banking and risk strategy.
• The senior management must establish adequate management oversight mechanism to continuously assess, monitor and manage risks and issues.
• The internal audit function must conduct independent reviews on agent banking arrangements to ensure compliance with the agent banking risk policies and procedures, and to ensure the integrity of management information reports and system on agent banking activities.

• FIs must select capable and reliable agents by establishing internal selection criteria.
• The minimum selection process and criteria to be considered are:

1. Selecting agents that have a business license, permanent business premise and established core business
2. FIs are prohibited from appointing businesses whose sole activity is agent banking
3. Conducting assessment and due diligence (Know-Your-Agent) on the business owner and business operations

• FIs must conduct training to enhance the competency of agents before any agent banking activity is conducted.
• FIs must establish a contractual agreement for effective oversight over the affairs and conduct of appointed agents.
• The contract must clearly specify the rights, responsibilities and expectations of all parties and signed by the relevant parties prior to the commencement of services.
• The Bank may direct an FI to modify or terminate an agent banking arrangement in the interest of the FI or its customers and creditors based on its supervisory review of the risks related to agent banking.

• FIs must ensure that the services delivered are in the manner as expected and in accordance with the terms of the contract, and that associated risks are being effectively managed.
• FIs must establish an efficient and effective system and ensure the availability of adequate expertise, resources and tools to support the monitoring function of performance and operation of the agent banking arrangements.

• FIs should be fully responsible and accountable to the customers for activities and conduct of appointed agents, including any complaints against the agents.
• FIs are therefore required to implement appropriate measures to ensure that adequate safeguards for customer protection and preservation of customer confidentiality are in place such as:
  • display of the national agent banking logo and the logo of FIs at the agent’s business premise,
  • measures to ensure customers' information is protected and
  • establishment of a dispute resolution/redressal mechanism etc.

• FIs need to establish internal policies, procedures, systems and controls to support agent consistent with the Guidelines on Management of IT Environment.
• FIs have to ensure the systems comply with the following minimum requirements:

1. IT infrastructure should support real-time processing; provide a secured network including end-to-end encryption; and be robust in managing infrastructure capacity to support agent banking services.
2. Payment Acceptance Devices (PAD) should be able to support minimum 2-factor authentication for agent and customer registration; support the requirement of end-to-end encryption based on industry standards algorithm and no storage of the sensitive customer info at the end-point devices (PAD) e.g. PIN/Password.
3. Agent Banking Application

1. For domestic commercial banks: Jabatan Penyeliaan Konglomerat Kewangan Tingkat 9, Blok A Bank Negara Malaysia Jalan Dato’ Onn 50480 Kuala Lumpur
2. For Islamic banks and locally incorporated foreign banks: Jabatan Penyeliaan Perbankan Tingkat 5, Blok A Bank Negara Malaysia Jalan Dato’ Onn 50480 Kuala Lumpur
3. For development financial institutions: Jabatan Kewangan Pembangunan dan Enterpris Tingkat 9, Blok C Bank Negara Malaysia Jalan Dato’ Onn 50480 Kuala Lumpur

1. Monthly reports on the number and amount of transaction for each of the services provided through agent banking arrangements
2. Details of the agents, name, type of agent, postal address and Global Positioning System (GPS) co-ordinates of the agent, telephone number
3. Independent reviews of agent banking arrangements by the internal audit function as and when needed by the BNM.

• FIs are required to comply with other current requirements imposed by the BNM such as guidelines on – risk governance, management of IT environment, business continuity management, credit card, basic banking services and fraud reporting requirements etc.
• The BNM may specify or impose additional requirements in addition to the Guidelines depending on future circumstances and needs.
• The BNM will closely monitor the implementation of agent banking by FIs.

Additional Resources

Read the Malaysian Guidelines for Agent Banking in full here.