The following is the final in a series of 10 articles on cross border transactions and remittances. These articles will explore the rules and regulations that monitor these transactions, the requirements Malaysian individuals or companies must fulfill when undertaking such payments via banks.
Filling in clients on remittances details, risks, and remedial processes will raise payment services standard
By Shanti Ayadurai
While businesses engaged in international trade are generally prepared for currency exchange fluctuations in their dealings, they also expect some amount of certainty in matters that facillitate their trade. For example, payment or remittances systems and bank accounts that are meant to facilitate their cross-border transactions with as little delay and complications as possible. How do the systems match up in Malaysia?
Bank Negara Malaysia (BNM)’s Product Transparency and Disclosure guidelines already require banks (FSPs) to explain key remittance details to customers in an “easily accessible and understandable manner. “For example, banks must tell customers how much they pay versus what the beneficiary receives, the applicable fees/exchange rate, and the estimated delivery time and pickup location. They must also promptly advise customers of any delays or inability to execute a transfer, and explain dispute and unclaimed‐fund procedures, ” says Raymon Ram, Managing Principal of Graymatter Forensic Advisory Sdn Bhd.
In reality, however, the communication between banks and clients is not that clear cut, according to Raymon.
“Customers often receive standard disclaimers such as “bank not liable for correspondent delays or FX changes” without clear, personalised explanations. This can leave customers unaware of specific risks (foreign exchange moves, compliance holds, etc.) and unsure of available remedies.”
Citing the European Union’s Payment Services Directive 2 (PSD2), as an example with a more balanced client-services provider set up, he said the PSD2 mandates that payment providers disclose execution timeframes and all fees before execution.
“Such transparency helps customers make informed choices. Similarly, SWIFT’s Global Payments Innovation (GPI) – adopted by Malaysian banks – is explicitly designed to speed up and clarify cross-border transfers: Swift notes GPI “dramatically improves the customer experience in cross-border payments by increasing speed, transparency and end-to-end tracking”.
Hence, more recent technologies and standards (like ISO 20022 messaging) can compel banks to provide more real-time status and fee breakdowns, not just broad disclaimers.
“More balanced also means aligning bank disclosures with actual risks and BNM’s own guidelines emphasize fair treatment: a new Policy Document on Fair Treatment of Financial Consumers requires banks to handle customer complaints fairly, effectively and transparently.
Hence, banks can improve pre-transaction communication – for example, giving customers a detailed remittance receipt or tracking link – rather than leaving them uncertain, Raymon said.
“In many cross-border transfers, key data (originator identity, purpose, exact charges) can be lost or obscured as the payment hops between institutions. Malaysian banks and money‐service businesses are legally required to include full originator and beneficiary details in wire transfers: for any cross-border payment, ordering banks must pass on the sender’s name and account (and for large transfers, address or birthdate) and the beneficiary’s name and account. In practice, though, middlemen may truncate or omit fields (especially on older SWIFT MT messages), leading to a lack of information.”
Missing information bring operational risks as well. A missing remitter data can violate Malaysia’s Anti-Money Laundering/Countering the Financing of Terrorism (AMLA/CFT) rules and can trigger enhanced due diligence or even blockages by beneficiary banks. This can cause funds to be held up or investigations launched, exposing the remitter and banks to regulatory fines.
There is also settlement and delay risk. Without standardized data, payments are more likely to stall or require manual intervention.
“For instance, if a beneficiary bank can’t match the transfer to a customer due to missing reference details, it may return or queue the payment. Each manual fix (bank inquiries, re-submissions) slows the process and increases errors. BNM’s transparency rule confirms that banks should promptly notify customers of any delay; if they don’t, customers may be left waiting indefinitely.”
Gaps in information can also see unexpected costs or confusion for senders and recipients.
“Hidden intermediate fees or unfavorable exchange rates may not be visible to the customer upfront, causing disputes on final amounts. Such surprises damage trust in the service. For example, U.S. regulations (Remittance Transfer Rule) were introduced precisely because undisclosed correspondent charges were a recurring problem. In Malaysia, a customer whose family receives less money than promised may complaint to the bank or regulator.”
When identity fields are not checked or passed along, there can also be room for illicit actors to easily launder money or impersonate someone.
Hence, greater standardization and transparency can significantly mitigate remittance problems, Raymon opined.
“At the customer level, uniform disclosure standards can ensure senders always receive clear, comparable information. For example, under EU PSD2, payment providers must pre-disclose all fees, exchange rates and execution times for cross-border payments. Adopting a similar requirement would force Malaysian banks to tell customers up-front exactly how much the recipient will get and how long it will take. BNM’s Product Transparency guidelines (Schedule VII) is already moving in this direction: they explicitly require remittance providers to inform customers of fees, charges and exchange rates and the expected time and location of funds. Enshrining such rules in law or policy (e.g. in the Payment Services Act or a bank directive) would make them uniformly applied.
“Initiatives like SWIFT GPI should be fully leveraged. GPI provides an end-to-end payment tracking mechanism, so that a sender can see each step of the transfer and all fees charged along the way. If Malaysian banks mandate or incentivize GPI participation, customers will gain unprecedented transparency on status and costs. To summarize, standardised disclosure – whether via regulatory requirements (like PSD2), banking standards (like MT202 COV), or new payment rails – can offer a much clearer, more balanced remittance experience.”
.Raymon also suggested that banks and remittance operators revise their client agreements and interbank contracts to allocate responsibility. “For instance, customer agreements can include clear Service Levels for remittances (e.g. “bank commits to credit beneficiary within X days under normal conditions, and to notify customer of any delays”). Clients should also get a contractual promise of full fee disclosure – any extra charges by intermediaries should be explicitly communicated or borne by the bank.”
He pointed out using specified message types and fields between banks such as the SWIFT’s Market Practice Guidelines on Cover Payments, which obliges banks to use MT202 COV so that no underlying payment detail is omitted. “Malaysian FIs could similarly incorporate such standards (or ISO 20022 Payment Status Report messages) into their treasury and correspondent-account contracts.”
On countering remittance transparency lapses, Raymon suggested formalising payment tracking (for example, offering customers links to GPI trackers) as this would create a contractual transparency promise.
“If a transaction fails or is delayed due to missing information, bilateral agreements between banks can stipulate who bears the cost of re-initiating the payment. Hence, combining stricter BNM rules (and enforcement under the Financial Services/Payment Services Acts and AMLA) with explicit contractual clauses (in both customer terms and interbank contracts) will provide remedies against remittance transparency lapses.”
–WE