BANK Negara Malaysia (BNM) will continue discussions with banks to improve processes and procedures for politically exposed persons (PEPs), Deputy Finance Minister II Steven Sim told the Dewan Negara today.

He said the central bank would also review and improve processes to balance the Malaysian banking system’s credibility and competitiveness.

“This is not a policy that creates negative perceptions towards individuals but a preventive measure for PEPs because they are given authority over public functions of the country or international organisations,” he said during the question-and-answer session in the upper house after senator Mohamad Fatmi Che Salleh asked about the policy and the impact if Malaysia does not implement it.

A PEP is a person entrusted with a prominent public function or important functions in international organisations.

Sim urged banking institutions to conduct safety measures, such as implementing the enhanced customer due diligence (ECDD) procedure for high-risk customers including PEPs.

He said the ECDD aims to obtain comprehensive information and understanding about the customer and further safeguard the country’s financial sector from any risk of financial crime.

The need to implement ECDD was established based on international standards set by the financial action task force (FATF), an international body that sets standards to be complied with by all banks, domestic or abroad, he said.

“Malaysia’s compliance with international standards is subject to joint assessments by FATF members,” he said.

Hence, Sim said, the country would be exposed to the risk of an unsatisfactory rating if financial institutions do not continue to implement PEP policies, and a negative assessment of the country would have serious impacts on our banking system.

“For example, Malaysians and companies established in the country will be subjected to a stricter level of scrutiny and monitoring when dealing with foreign parties, making it difficult to open accounts and conduct cross-border financial transactions,” he added. – Bernama, April 6, 2023.