Banks in Malaysia getting sticky about paperwork

Kuala Lumpur

BANKS in Malaysia appear to have stepped up the paperwork in relation to demand drafts and telegraphic transfers (TTs), especially those denominated in foreign currencies, amid increasing surveillance by the regulatory authorities.

The more stringent requirements coincide with the unravelling of the transactions of the government-owned 1MDB, which continues to be the focus of investigations in a number of countries, including Singapore, the US and Switzerland.

Bank customers have been surprised - and in some cases, inconvenienced - by the extra paperwork entailed, even for relatively small sums.

Some banks insist that the supporting documents are needed even though a customer can declare the purpose for the draft in the remittance application form.

The remittance application form of a local Chinese bank, for instance, has about seven categories - goods, services, capital, current transfers, special transfers, remittance for foreign workers only, and non-resident to non-resident.

Bank officers said they ask for supporting documents in order to satisfy the central bank. "Now they are very strict," an officer at a government-linked bank said with a shrug.

Going by postings on a popular online forum, banks that previously had not asked for supporting documents are now asking for them, even for ringgit-denominated drafts.

A corporate executive who banks with an international bank said he tried to make a TT to pay for some Singapore shares a few months ago, but was denied the service unless he could produce a contract note.

"I explained to the bank officer that I would receive the contract note only about a week after I buy the shares, but have to pay by T+3."

The executive who is in his 60s and a long-time customer of the bank added: "I told the officer I have banked with the bank even before she was born!"

He said he obtained his TT only after he said he would make the bank liable for any potential losses if his shares were force-sold. The TT was not even all that large, he said - at less than the equivalent of RM20,000 (S$6,415).

In another instance, a pensioner going by the name Madam Hui was asked to provide supporting documents when she went to purchase a demand draft at a Singapore bank.

She found some share certificates of a company that is dual-listed on the Hong Kong and Singapore stock exchanges that she had forgotten all about. As trading is now scripless, she had to register the shares before they could be deposited.

The demand draft was for about HK$110, or about RM60.

Only after she produced her e-mail correspondence with the registrar would the bank officer process her application.

An officer at another Singapore bank concurred. "Regardless of the amount, we need supporting documents - especially if it's in foreign currencies."

Netizens said they have been asked for supporting documents when buying demand drafts to pay third parties in the country.

In March, a netizen said he informed his bank that the required draft was for legal fees and a down-payment on a house. He was told that a receipt or invoice was required as the bank had to answer to Bank Negara.

"So I asked my lawyer to print the details," he said.

Another observed that when he bought a car two years ago, the same bank did not ask for documents and that his draft was processed in no time.

"Maybe new rules," he observed.

The Association of Banks Malaysia did not respond to a request for comment.

The stepped-up scrutiny appears to coincide with the fallout from state-owned 1MDB's financial scandals. Although Singapore has charged and convicted a number of people and thrown the book at a few banks in connection with 1MDB, the Malaysian authorities have said they have found no evidence of wrongdoing.

Over in the US, the Department of Justice has filed civil-forfeiture suits to seize assets amounting to US$1.7 billion that it claims were purchased under an international scheme to launder money using funds misappropriated from 1MDB. Last week, it asked a Los Angeles court to put the suits on hold pending its criminal investigations.