Bank Negara Malaysia (BNM) in a statement revealed that it had, on 22 July 2024, imposed an Administrative Monetary Penalty (AMP) of RM88,000 on Bank of China (Malaysia) Bhd (BOCM). The AMP was due to BOCM’s non-compliance with the prudential requirements applicable to the material outsourcing arrangements.
The statement elaborated that BOCM failed to obtain BNM’s prior approval in relocating 2 of its systems to new data centres in December 2022 and February 2023. These were breaches of paragraph 48(1)(a) of the Financial Services Act 2013 (FSA) and paragraph 12.1(b) of the Policy Document of Outsourcing (Outsourcing PD).
BNM asserted that the 2 systems are core banking systems, and their relocation is deemed as a significant modification to the existing approved outsourcing arrangement as it may materially change the level and/or type of risk to which BOCM is exposed. Under the Outsourcing PD, a financial institution is required to obtain BNM’s written approval before significantly modifying any existing approved material outsourcing arrangement so as to ensure BNM’s continued ability to effectively supervise financial institutions.
The non-compliance was a result of gaps in BOCM’s oversight over its outsourcing activities and outsourcing-related internal policies and procedures. Accordingly, BOCM paid RM88,000 for the AMP imposed by BNM on 2 August 2024.
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