Cryptocurrency Exchanges

Cryptocurrency Exchanges To Be Designated As Reporting Institutions & New Requirement For Banking And Money Services Business

It has been reported that Bank Negara Malaysia will designate persons converting cryptocurrencies into fiat money currencies as “reporting institutions” under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.

The Governor of Bank Negara Malaysia (“BNM”), Tan Sri Muhammad Ibrahim, has recently announced that BNM has initiated the foundational work for the development of a regulatory structure for digital currencies and that beginning in 2018, BNM will designate persons converting cryptocurrencies into fiat money currencies as “reporting institutions” under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (“AMLA”).

This measure is being taken by BNM considering that the nature of terror and terrorism financing has become much more complex in recent years and that “terrorist financiers will attempt to benefit from anonymous transactions made possible by innovations of new payment products and services such as internet-based payment systems, prepaid cards and virtual currencies.”

The Governor also noted that global internet users have increased from 397 million in the year 2000 to nearly 3.9 billion as of June 2017 – a growth of almost 1000% – and that global investment activities in the FinTech industry have increased from USD9 billion in 2010 to USD25 billion in 2016. He stated that the financial system must always be in a state of readiness to identify and effectively prevent any emerging risk of terrorism financing, and suggested a 3-pronged defence strategy within the financial system –

  •  capitalising on technology;
  • promoting clever partnership between the authorities and industry; and
  • closer international cooperation particularly in the sharing of intelligence and technical know-how.


The Governor commented that while technological misuse poses a danger to society’s wellbeing, technology is also an effective tool to counter terrorism financing. The adoption of artificial intelligence, machine learning and big data technology are imperative tools as suspicious transactions become more complex and harder to detect. It was pointed out by the Governor that “according to many pundits, digital currencies will become the new norm.

The advent of digital currencies as some have forecasted, will mark the beginning of a new era in the financial sector. As authorities, we cannot be oblivious to these developments.” In the light of the foregoing, the latest move by BNM is to prevent the abuse of the system for criminal and unlawful activities and to ensure the stability and integrity of the financial system.

Under AMLA, all reporting institutions are required to undertake preventive measures to prevent their institutions from being used as a conduit for money laundering and terrorism financing activities e.g. conducting risk assessment and customer due diligence, submission of suspicious transaction reports and cash threshold reports, and maintenance and retention of records of transactions.

Tan Sri Muhammad Ibrahim related that a finding from the Global FinTech Report published recently is that legislation is not keeping pace with innovation and that a more adaptable structure in policy-making, which minimises red tape, could be “advantageous under the current dynamic environment to encourage potentially important innovations”. As such, BNM will continue to foster cooperative platforms between the authorities and financial institutions to enable “rapid responses” to terrorism financing threats.

The Governor also announced that BNM is in the midst of finalising the details of a new requirement for the Banking and Money Services Business sector to report remittances in high risk areas whereby these areas will be determined “based on the law enforcement agency’s intelligence on areas that they view may pose higher risks for funding of terrorism activities”.

For more information, please contact :

Chong Mei Mei


Habibah Ahmad Tajuddin

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