Mahyuddin Khalid

emkay@salam.uitm.e du.my

ISLAMIC FINANCIAL LEGAL FRAMEWORK

LEGAL FRAMEWORK OF INTERNET Click to edit Master subtitle style BANKING

CONTENT
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INTRODUCTION INTERNET BANKING REGULATORY FRAMEWORK INTERNET BANKING FROM ISLAMIC PERSPECTIVE CONCLUSION

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INTRODUCTION
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Electronic commerce (E-commerce) is simply referred to buying and selling using the Internet. E-commerce involves much more than electronically mediated financial transactions between organizations and customers. E-Banking may include ATMs, wire transfers, telephone banking, electronic funds transfers and debit cards. The Internet offers the potential for 12/14/12

INTERNET BANKING
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Internet banking involves consumers using the Internet to access their bank account and to undertake banking transactions. Internet banking can mean the setting up of a web page by a bank to give information about its product and services. It involves provision of facilities such as accessing accounts, funds transfer, and buying financial products or services 12/14/12 online.

INTERNET BANKING
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The levels of banking services offered through Internet can be categorized in three types:
Basic
Use It

Level Services:

the banks websites which disseminate information on products and services offered may receive and reply to customers queries through e-mail

Simple
Allow

Transactional Websites

customers to submit their instructions, applications for different services, queries on their account balances, etc, 12/14/12

REGULATORY FRAMEWORK
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Laws on EFT and Electronic Banking

Although

principles of tort, restitution, property law, equity, and even criminal law, may be relevant when considering a problem thrown up by the electronic banking and EFT, the primary source of EFT law is the law of contract and agency. contracts regulate the legal problems that result from the use of EFT.
12/14/12 example, the consumer customer will

Law of Contract and Agency

Those For

LAW OF CONTRACT AND AGENCY

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A whole series of contracts exist between banks and their customers, banks and the electronic system provider, and the banks themselves. The contractual relationship between the banks that participate in the electronic banking system is important. Some banks enter into bilateral arrangements, for example, where a bank which is a member of the integrated banking system agrees to 12/14/12 act as an agent for another institution

REGULATORY FRAMEWORK
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The other laws relevant to EFT and Electronic Banking are the various statutes such as:
Banking Digital

and Financial Institutions Act 1989 Crimes Act 1997

Signatures Act 1997

Computer

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BANKING AND FINANCIAL INSTITUTIONS ACT 1989 (BAFIA)

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Not the whole of the Banking and Financial Institutions Act 1989 is relevant here. In fact only one section is devoted to EFT which is section 119 of the BAFIA, 1989. This section merely provides for the necessity of written authorization from and control by BNM before any system of EFT can be operated and afterwards. Section 119 (1) : stated that no person 12/14/12 shall commence to operate any EFT

BANKING AND FINANCIAL INSTITUTIONS ACT 1989 (BAFIA)

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Section 116(2)(e) : BNM may make regulations to provide for the imposition of duties, liabilities, responsibilities, restrictions, limitations, prohibitions or sanctions, or the conferment of rights, privileges, benefits or indemnities on the parties to any EFT system set up, or operating, in Malaysia. Section 116(2)(f): Power for BNM to make regulations to provide for the setting-up, operation, or administration 12/14/12

DIGITAL SIGNATURE ACT 1997

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What is a digital signature?

Digital A

signatures are not handwritten signatures. digital signature is a technique that can include more possibilities than just an electronic substitute for a handwritten signature. digital signature can also be used to establish the origin and integrity of electronic data.

The Digital Signature Act 1997 sets out a regulatory structure12/14/12 in respect

DIGITAL SIGNATURE ACT 1997

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The Act does not preclude the use of a symbol from being valid as a signature under any other applicable law, thus preserving the right of a person to use a symbol instead of a handwritten signature. Effect of a document signed with a digital signature:
the

document shall be legally binding as a document signed with a handwritten signature s.62(2)(a) digital signature shall be 12/14/12 deemed to

the

COMPUTER CRIMES ACT 1997

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The Computer Crimes Act 1997 is aimed to provide for offences relating to the misuse of computers. The Act introduced the concept of a crime for the unauthorized access via a computer or other electronic forms into the computer or database of another person. The Act makes it an offence if there is an unauthorized access to computer systems and the use of computer 12/14/12 systems for fraudulent purposes.

COMPUTER CRIMES ACT 1997

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Section 3 creates an offence where there has been an unauthorized access to a computer. For the offence of unauthorised access to be committed, the computer used to secure the unauthorised access to any program or data need not be a different computer from that containing the data or program. Section 4 creates an offence where there an unauthorized access with 12/14/12 ulterior Intent

COMPUTER CRIMES ACT 1997

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Section 5 creates an offence where there an unauthorized modification of contents of computer Section 5(1) renders it an offence if a person who does any act which he knows will cause unauthorized modification of the contents of any computer. An essential element of this offence is knowledge. Under Section 7(1), abetments and attempts are punishable as offences. 12/14/12 An example of such act would be

BNM GUIDELINES
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Besides these provisions and legislation relating to EFT and electronic banking, Bank Negara Malaysia, pursuant to powers under the Banking and Financial Institutions Act 1989 has also issued two important and extremely relevant guidelines. They are:
BNM/GP11; Minimum

Guidelines on the Provision of Internet Banking

12/14/12 BNM/GP 11, Guidelines On Consumer

INTERNET BANKING FROM ISLAMIC PERSPECTIVES

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Both Quran and Sunnah proved us guidelines for our everyday life that are applicable at any time and any where. Islam had provided some basic law that should govern any transaction, including the one online. Main features of Islamic ethics are: trustworthiness, honesty, equality, mutual consent, respect, sacrifice, caring and sharing, concern on legality. It has to be emphasized that Islam has 12/14/12

CONCLUSION
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Online banking has made its entrance and has gradually gain the customers confidence. Internet has enable services to be made available anytime and anywhere. Hence, Muslims or non-Muslims worldwide can enjoy the Islamic Banking Finance provided or at least able to gain and widen their knowledge in Islamic Banking Finance. However it does not come without total 12/14/12

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END OF CHAPTER

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