2.

Discuss the legal issues surrounding breach of privacy and security in

respect of electronic banking in Malaysia and whether the existing law is
sufficient to provide protection for customers against these problems.
Support your answer with the relevant legal provisions.

The Banking and Financial Institutions Act 1989 (BAFIA) on October 1989 was
introduce by Central Bank Malaysia. This is an act to provide new laws for the
licensing and regulation of institution carrying on banking, finance company,
merchant banking, discount house, and money-broking business, for the regulation
of institutions that carrying on certain other financial business, and for matters
incidental thereto or connected therewith. The BAFIA Act 1989 repealed the Finance
Companies Act 1969 and the Banking Act 1973. But the provision is not applied to
Islamic banks. It is provide under the s 124(6), BAFIA. For the example are Bank
Islam Malaysia Bhd and Bank Muamalat Malaysia Bhd. This will noted that any
licensee institution carrying on Islamic banking or Islamic business shall not to be
deemed an Islamic bank, and hence be subjected to the provision of the BAFIA.
Most commercial banks in Malaysia carry on such Islamic Banking activities but are
not recognized as Islamic banks. Then, for the improvement in the banking system
and also upgrading business between the commercial bank, merchant bank and
financial company are assembly confusing in banking structure. For that reason,
there is appropriates to replace the Banking Act 1973 and Finance Companies Act
1969 with Banking and Financial Institutions Act 1989 to ensure the banking and
finance system goes more efficient. S.126 BAFIA, Central Bank of Malaysia is
empowered to issue Guidelines for loyalty by banking and financial institutions. The
Guidelines no legislative effect and they not attract hard penalties, knowledge of
and agreement with these guidelines is significant as they serve as an exceptional
guide and instruction from Central Bank for banking and financial institution
employees. Compliance with Central Bank Guidelines enhances compliance with
BAFIA.

The internet banking services or e-banking has been operational in Malaysia

since 2001. Internet banking is the one of the most popular services utilized
Malaysia now days. These Internet Banking Services have licensed under the BAFIA
ACT 1989 and Islamic Banking Act 1983 is allowed to offer Internet Banking
services. There are 12 commercial banks out of a total of 25 in Malaysia currently
offering Internet Banking Services. But the internet banking begins in June 2000
when Central Bank Malaysia permitted the local banks to offer internet banking
services. The electronic banking included telephonic instrument, auto payment,
auto debit, Automatic teller Machine (ATM), cyber banking, home banking and
online banking. On the section 119 BAFIA ACT 1989 mention about transfer money
with electronic, no one can transfers the money without permission from the
banker, the banker can accepted or rejected the skim in subsequent (1), anyone
who the permission was already rejected subsequent (6) must stop immediately
from transferred the money from electronic banking and etc. More, the electronic
banking innovation was traced 1970 when the computerization of financial
institutions gained momentum. Since 1981, this visible presence was evident to the
customer, with the introduction of ATM (Automatic Teller Machine). The increasing
and improving in this technology, bank can offered the electronic facilities for
financial service by providing the automated voice response (AVR). With this
advance also, banks can offers this services through personal computer owned,
through the use of Intranet propriety software. So, the customers can manage their
own business with these facilities.

Central Bank Malaysia also provided “Minimum Guidelines on the provision of

internet banking services by licensed Banking Institution (MGIB) 2000”. The aim of
MGIB is to protect both consumers and banks from the risk such in banking. The
commitment by the banks towards E-banking is evident by the fact that most of
these banks have made substantial investments for moving towards e-banking and
to afford customers with online banking transactions. The issue that customers
mostly face is where perpetrators stole their usernames and password and phishing
is an attempt to commit fraud via social engineering. Others is the nature of attacks
is more active, with technique attacking which is Trojan attack, the careless when
downloading website. The attacker used this Trojan to piggyback information from
user computer to his backyard. Thus, the central Bank Malaysia guideline structure
dealing with the type of internet banking sites, oversight, risk management,
security, consumer protection, compliance and others general requirement.
Moreover, prior to the offering internet banking services educate the customers on
the various issues including the term and condition for the use of internet banking
services. In addition, a fake e-mail with link which is wanted the user credit card
data or password. Customers also must aware for their right in action because bank
will absolved from liability of disputed transaction arising from the customer’s
failure. In this related with the case Joachimson Vs Swiss Bank Corporation must
review, if bank pay different amount compare the amount that needed or pay the
amount for others customer comparing compensation for a particular purpose, the
customers can get the compensation from the banks. Then, gives advised to reads
the policy statement information that related to the third party, especially the
background. We can see the case Ogniben Vs Citibank; the customers give their
card to the third party but the third party knowing the customer PIN number and act
to expel $400 from the customer account. The court held that the bank must liable
to inform the customers about the risk giving the PIN number to the third party.

As the conclusion, the improvement of information in technology and

communication introduced the relations about the internet banking services were
offering by the Malaysian banks. The provider of electronic banking services must
provide more protecting securities to the customers to give them benefit. Besides
that, The Banking and Financial Institutions Act 1989 (BAFIA), is not clearing on
mention the term of specific and details about the protecting customer that being
victim in using the electronic banking. Maybe the institution of electronic banking
Malaysia is in the beginning process and most of the customers of the banks not
really confidence and surely to use the services that provider by the banks
especially for their safety account.
References

1. M. Sadiq Sohail, Balachandran Shanmugham (2002) E-banking and customer

preferencesin Malaysia: An empirical investigation

2. Ahmad Nasir Mohd Zin ABCP and Zahri Yunos ABCP National ICT Security and
Emergency Response Centre (NISER), (2005) HOW TO MAKE ONLINE
BANKING SECURE