Consistent transparency by banks critical to tackling fraud and money laundering, says lawyer

Malay Mail

5 days ago

KUALA LUMPUR, May 29 —Consistent and transparent disclosure of internal compliance information by banks—particularly in cases involving suspicious cross-border remittances—is key to boosting corporate confidence in Malaysia's financial system, said legal expert Datuk J. Shamesh.
He said pre-action discovery mechanisms, increasingly recognised by Malaysian courts, are playing a pivotal role in compelling financial institutions to disclose crucial documents that could help uncover fraudulent transactions.
'Legal tools such as the Norwich Pharmacal relief and Order 24 Rule 7A of the Rules of Court 2012 allow aggrieved parties to seek access to a bank's internal documents—even before initiating formal legal proceedings—especially in cases involving potential fraud, money laundering or questionable transfers,' said Shamesh.
Speaking to Bernama, the lawyer also highlighted that while these tools are not intended to implicate the bank, they enable access to records that may assist in identifying wrongdoers or enforcing legal rights.
The corporate lawyer cited the case of First Malaysia Finance Bhd v Dato' Mohd Fathi Haji Ahmad [1993] 3 CLJ 329, in which the court endorsed the Norwich Pharmacal principle, ruling that a third party, such as a bank, can be ordered to disclose information if it is innocently mixed up in potential wrongdoing.
Shamesh explained that this decision confirms that compliance records, anti-money laundering (AML) frameworks, internal alerts, and audit trails can be disclosed when legitimate legal interests are at stake.
He further noted that courts may issue disclosure orders when there is evidence of fraud, financial misconduct, the use of third-party accounts for illicit fund transfers, suspected breaches of internal compliance policies, or money laundering activities involving cross-border transactions.
'These disclosures are especially important when doubts arise about a bank's internal controls or when red flags are raised during due diligence,' he added.
Shamesh stressed that consistent and transparent cooperation by banks in such proceedings could significantly strengthen trust among corporate clients.
'Corporates want assurance that financial institutions will support legitimate investigations and are not safe havens for questionable remittances,' he said.
However, he cautioned that resistance or selective disclosure by banks could backfire, potentially undermining public and corporate confidence in the sector's commitment to transparency.
'If applied consistently, these disclosure practices not only reinforce governance and compliance standards but also send a strong message that banks are active partners in the fight against financial crime,' he said. — Bernama