What are the consequences for financial institutions failing to adhere to TFS?

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Bank Negara Malaysia can impose enforcement actions, including administrative monetary penalties, on reporting institutions that fail to meet targeted financial sanctions (TFS) requirements
Bank Negara Malaysia (BNM) has fined AEON Credit Service (M) Bhd RM520,000 for breaches of TFS requirements, showing that failures can lead to an administrative monetary penalty (AMP). In that case, an on-site supervisory examination found that a specified entity listed under the Domestic List was onboarded as a customer and that there was also a delay in freezing the customer’s account after confirmation. BNM also said it will take appropriate supervisory and/or enforcement actions if any reporting institution does not meet its legal and regulatory requirements.
BNM’s enforcement outcome can include an administrative monetary penalty
BNM imposed an AMP of RM520,000 on AEON Credit after findings from an on-site supervisory examination. The breach involved onboarding a specified entity as a customer despite a positive match to the Domestic List. This outcome reflects BNM’s use of monetary penalties as an enforcement tool for TFS compliance failures.
BNM assesses factors such as breach severity and care in compliance
BNM stated that, when deciding the AMP, it considered aggravating and mitigating factors. These included the severity of the breaches and AEON Credit’s lack of reasonable care to ensure compliance with TFS requirements. BNM also cited the firm’s past compliance record and post-misconduct behaviour, including whether remedial actions were effective in preventing recurrence.
Delays in freezing a specified entity’s account can be treated as a breach
BNM said there was a delay in freezing the customer’s account after confirmation that the customer was a specified entity. It linked the breaches to lack of staff oversight and a gap in AEON Credit’s standard operating procedure (SOP). This indicates that both decision-making failures (such as not rejecting a positive match) and operational delays after confirmation can contribute to enforcement findings.
Reporting institutions face ongoing supervisory and enforcement pressure for TFS non-compliance
BNM said it requires all reporting institutions (RI) to ensure compliance with TFS requirements. It also stated it will not hesitate to take appropriate supervisory and/or enforcement actions if any RI fails to meet legal and regulatory requirements. While the AEON Credit case specifically resulted in an AMP, BNM’s statement makes clear that enforcement can extend beyond a single administrative outcome.

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What are the consequences for financial institutions failing to adhere to TFS?

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