By: Sonny Zulhuda *
Like other ICT inventions that promise both unprecedented benefits and scaring risks, Internet banking has been received by both excitement and worries. While it offers high level of effectiveness such as online fund transfer as easy as from customers’ home desktop, it also haunts many as reflected in incidents involving theft of personal access code, tracing of online footprints and intrusion of online activities of other customers.
In Malaysia, Internet banking is still at its infancy though the number of service providers is increasing. Unfortunately, some crucial areas are left unclear for Internet banking consumers. This includes issues of distribution of liability between Internet banking stakeholders, use of personal data of bank customers, and low level of consumer protection provided by Internet banking operators. Furthermore, serious risks are awaiting consumers since the country’s consumer protection law statute is not applicable to commercial activities effected by information and communications technologies (ICT).
The thrust of this paper is to highlight general condition of Internet banking services in Malaysia from legal perspective, discuss its weaknesses and recommend measures to fill the flaws. Reference will be made to several pieces of legislation that apply to Internet banking services. On top of that it seeks to critically analyze the guidelines of Internet banking services issued by Malaysian central bank.
Besides, the paper pursues discussion on those various legal issues reflected in the laws, guidelines and practices in Malaysia against international regime and practices from other countries. From the various associated risks to issues of prudential regulations and supervision in Internet banking. The message to be forwarded in this paper is that if the Internet banking services can be safely delivered and well risk-managed, the whole process would be able to achieve better corporate governance in Malaysian e-banking institutions, and in turn it would deliver maximum business effectiveness and efficiency.
* This paper abstract was prepared for the 3rd World Congress of International Society of Business, Economics and Ethics (ISBEE), 14-17 July 2004, Melbourne, Australia, jointly with Prof. Abu Bakar Munir.