LAW540

BANK
ACCOUNTS
OPENING AN ACCOUNT

Bank’s duty to
ensure the
Customer is:-

the person who he

a proper person to
claims to be
open an account (legal
(identity, integrity
capacity & authority)
& reliability)
HOW TO VERIFY

Making preliminary enquiry (due NRIC/passport @ business/company registration record

Individual – identity verification by biometric means
diligence) Business/Company – search conducted at CCM

Need Introducer – for opening Introducer = existing good customer of the bank
current account

S.16 & 18 of AMLAATFA 2001 requires bank to conduct due diligence

on its prospective customer.
WHY ?

• If bank collect cheque from customer but the customer is not the true owner
of the cheque, the bank will be liable to the true owner for conversion .
Ladbroke & Co v Todd (1914) 111 LT 43
• A thief opened an account with a stolen cheques pretending to be payee. No
introducer. Cheque was cleared at the request of the thief and the next day he
drew out the proceeds. Later, fraud was discovered. Action was taken
against the bank to recover the amount.
• Held : banker’s failure to get satisfactory intro/reference = breach of duty to
the true owner of the cheque. So, the bank had not acted “without
negligence”
WHY ?

• The Rubber Industry (Replanting) Bhd v Hongkong and Shanghai Banking Corporation
(1957) MLJ 103
• In this case the plaintiffs issued a cheque in favour of one Toh Whye Teck in the sum of
$6,762.33 and the cheque was marked "account payee only". In some way unknown to the
plaintiffs the cheque came into the possession of some unauthorised person. Subsequently
one Lee Man Choi opened an account with the defendant bank in the name of Chop Toh
Waye Teck and the cheque in favour of Toh Whye Teck was paid into this account. The
plaintiffs claimed damages.
• Held:
• the defendant bank had not discharged the onus of proving that they have acted without
negligence and are not entitled to the protection of section 82 of the Bills Of Exchange
Ordinance, 1949, and were liable to the plaintiffs for damages for conversion of the
cheque.
STOPPING AN ACCOUNT

• When Banker opens an account for the customer, banker takes “mandate” from the customer
• “Mandate” = instruction
• When mandate given by customer is revoked ie- banker does not permit money to be paid
into or out of account until further notice.
• Mandate is impliedly revoked when :-
 Death or mental incapacity
 Bankruptcy
 Resolution for voluntary liquidation of winding up order
 A garnishee order or other court order affecting customer’s a/c
 An assignment of the credit balance in the account by the customer to a third party.
 TYPES OF CUSTOMER
Natural Person
Partnership
Companies

Minors

Societies, Clubs & Unincorporated Body

Sole
Executors/Adminisrators
Proprietorship
 NATURAL PERSON
• Attain the age of majority (current a/c).
• Age of Majority Act 1971 - 18 yo and above.
• Minor = savings a/c (12yo & IC)
 sound mind, not disqualified from contracting
(S.11 of the Contracts Act 1950)

specimen signature

NATURAL Personal detail (address, tel. no, occupation &

employers detail)
PERSON
for current account - need an introducer

have not issued a cheques which were

dishonoured due to insufficient fund
NATURAL PERSON

• Existing customer of the bank

Qualification of introducer • Maintain a satisfactorily conducted
(for opening current account) account for certain period of time
(at least 6 months or 1 year)

To comply with the

requirements under para
14A1 of the Standard
Guidelines on Anti-Money
Laundering, Countering
Financing of Terrorism and
Targeted Financial Sanctions
for Financial Institutions
PARTNERSHIP
Eg- Legal Firms, Accounting
Firms And Medical Practices
Section 3(1) of the
Partnership Act 1961 – “A
relationship which subsists Anyone having legal capacity
between persons carrying on can be a partner.
business in common with a
view of profit”.

A minor also can be a partner

Section 4(a) of the
Registration of Business Act
1956 - even a company may
be a partner.
with an adult provided that
the minor is not answerable
for the debts of the firm until
he/she reaches the age of
18.
PARTNERSHIP
• Wong Yoon Yar v Lin Yin Thai & Ors [1987] 2 MLJ 714
A partnership firm or a sole proprietorship has no separate legal entity

• Malayan Banking Bhd v Lim Chee Leng & Anor [1985] 1 MLJ 214
A partner remains liable for debts incurred before his resignation. Therefore,
cannot escape liability just because he has resigned
AMLCFT PD 2019.pdf
BILLS_OF_EXCHANGE_ACT_1949___ACT_204.pdf

PARTNERSHIP
BANK’S DUTY
• To conduct search at CCM to confirm:-
• existence of the firm
• identity of the partners
• other particulars of the firm
• To obtain:-
• specimen of firm's rubber stamp
• account mandate on operation of a/c - signed by all partners
• To comply with the requirements under para 14A1 of the Standard Guidelines
on Anti-Money Laundering, Countering Financing of Terrorism and Targeted
Financial Sanctions for Financial Institutions (AML/CFT and TFS for FIs)
 COMPANIES
• A company is an artificial legal person created by law
• S.20 of Companies Act 2016 – a company incorporated under
the Act is a body corporate and shall
(a) have legal personality separate from that of its members; and
(b) Continue in existence until it is removed from the register
• ie- (a) once incorporated the company exists independently of
the individuals who at any given time are the members of the
corporate body (b) the company has ‘perpetual succession’
 COMPANIES
• (S. 21 of CA 2016) – company has unlimited capacity ie- has the
right to carry on any business or activity including:-
(a) has the right to sue and can be sued in its own name
(b) deal with property
(c) enter into any transaction

• Separate legal personality

Salomon v Salomon & Co Ltd [1897] 22 AC
 Mbf Finance Sdn Bhd v Ting Kah Kwang & Anor
[1993] 3 MLJ 73

Change of company’s name does not affect the

identity of the company, rights and obligations
COMPANI
ES Abdul Aziz Bin Atan & 87 Ors v Ladang Rengo
Malay Estate Sdn Bhd [1985] 2 MLJ 165

Shareholders of a company transferred their entire

shareholdings to a new buyer. Court: the company’s
identity and personality are not effected.
 COMPANIES
• Bank need to conduct due diligence.
Documents required
• Cert of Incorporation
• Constitution (MAA)
• Register of Members
Return of Allotment
(Forms 24, 49)
• Resolution of BOD
Standard Guidelines on
AML/CFT – para 13.4
• Cert of Incorp.
• Constitution (MAA)
• I/D of Dir & S/h
• Authorisation of a person
representing the company
• I/D of the authorised
person
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 Bank to conduct a search on
the company at CCM

To make enquiry to
determine that the company
has not been or is not in the
process of being liquidated

COMPANI
ES To determine the sources of
funds of the company

obtain MAA @ Constitution

& certificate of incorporation

Public Co. – no need to

verify the identity of the s/h

& directors
 Own by one person

No separate legal entity from the person who conduct

the business
SOLE
PROPRIETORSH
IP Sole proprietorships are registered with ROB (registry
of business).

To conduct search at CCM [refer to requirements for

Partnership]
 • Terminated by :-
 Death

 Bankruptcy

SOLE  mental incapacity of the sole proprietorship

PROPRIETORS • Wong Yoon Yar v Lin Yin Thai & Ors [1987] 2 MLJ
HIP 714
Ct: A sole proprietor may not wish to carry on
business in his own name but prefer to choose
something more colourful or meaningful to bring luck
and prosperity to his business. So, he chooses a "chop"
name and trades under that. But he does not by so
doing create an entity separate from himself. He
retains just the same liabilities and obligations in
regard to his business.
 • To comply with the requirements under para
14A1 of the Standard Guidelines on Anti-
SOLE Money Laundering, Countering Financing of
PROPRIETORS Terrorism and Targeted Financial Sanctions
for Financial Institutions (AML/CFT and TFS
HIP for FIs)
 Formed by persons grouping themselves together.

Eg of field – sport, social & culture

SOCIETIES,
No legal status – cannot be sued or sue others

CLUB ETC To recover debt, legal proceedings have to be commenced

against the committee or principal office bearers.

Registered under Societies Act 1996

Bank to conduct search at Registry of Societies to determine

the existence of the societies and identities of office bearers.
 SOCIETIES, CLUB ETC

Banker should obtain

• certificate of Registrar of Societies certifying its registration
• constitution of association
• member’s resolution
• committee’s resolution
• account mandate

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 Karting Club of Singapore v David Mak & Ors
[1985] 2 MLJ 280

Unincorporated member club not being a

partnership or legal entity cannot sue or be sued
SOCIETIES, in the name of the club

CLUB ETC Malaysia Shipyard and Engineering Sdn Bhd v

Bank Kerjasama Rakyat Malaysia Berhad [1985]
2 MLJ 359

There is no express provision in the Act or rules

enabling the society to issue guarantee, therefore
respondent have no power to issue guarantee.

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 • To comply with the
requirements under para 14A1
of the Standard Guidelines on
SOCIETIES, Anti-Money Laundering,
Countering Financing of
CLUB ETC Terrorism and Targeted
Financial Sanctions for
Financial Institutions
(AML/CFT and TFS for FIs)

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 Full age – 18 years (section 2 of Age of
Majority Act 1971)

Minor is not bound by certain agreements –

has no legal capacity to contract

Bank cannot allow minors to operate current

MINORS accounts or to overdraw their accounts

Halijah v Morad & Ors [1972] 2 MLJ 166

HC : the agreement was absolutely void as

the respondents were infants
Halijah v Morad & Ors [1972] 2 MLJ 166
EXECUTORS/
ADMINISTRATORS
• A person may die testate (with a will) or intestate
(without a will)
• Executor/administrator will be appointed to
manage the property of deceased
• Dies intestate – the court or public trustee will
appoint administrator
• Upon death of customers – bank freeze the account
until production of grant of probate @ letter of
administration @ trust deed
EXECUTORS/
ADMINISTRATORS

• Executors – grant of probate

• Administrator – letter of administration
• Trustee – trust deed
• Bank to conduct search to determine the
genuineness of the documents
 Saving And Current Accounts

Joint Accounts
TYPES OF Fixed Deposit Accounts
ACCOUNT
Trust Accounts

Nominee Accounts
 Deposit Accounts
ie- accounts which
The most common
allows money to
accounts open by
be deposited and
customers
withdrawn by the
account holder
SAVINGS AND
CURRENT
Funds deposited
Current account :
are payable when
the use of
demanded ( Foley
cheques to
v Hill [1848] 2 HL.
withdraw fund
Cas 28)
JOINT ACCOUNT
1 2
Account open by more than Additional duty on the part
one person of the Bank ie - need to
know the ‘mandate’ and
liability of each account
holder
3 4
Should obtain a written Mandate - to specify which
mandate signed by all and how many of the
parties to accounts parties have authority to
sign the cheques or carry
out other transactions
connected with the account.
 • Without the mandate – bank cannot pay
a cheque safely unless the cheques have
been signed by all parties to the account .
• The mandate will be revoked by:-
 Customer’s instruction (at any time
& by any one of them). If unilateral

JOINT instructions – bank need to inform

the other parties to the account. eg-
instruction by one party to stop
ACCOUNT cheque issued by another party
 Death any
of the parties – bank should stop
 Bankruptcy the
account as soon as he has notice
 Mental incapacity
 • Investment and savings
• Money deposited for certain
period of time & fixed rate of
interest is paid at the end of the
term.
• Bank impose condition – term
and amount. Customer cannot
FIXED DEPOSIT withdraw until end of the term.
Term of investment could be
ACCOUNT 1m, 3m, 6m or 1y.
• To produce deposit receipt
before the money deposited may
be withdrawn.
 The relationship between Bank
and Customer only come to an end
at the time the deposited money
are repaid to the Customer.
FIXED
DEPOSIT
FD can be used as a security (eg-
security for a loan).
TRUST
ACCOUNT
• Person who hold funds in
trust for others.
• Trustee – deposit trust funds
• Administrator – estate
account
• Duty of the Bank : not in
breach of trust
NOMINEE
ACCOUNT
• An account open up by a
nominee for an on behalf of the
beneficiaries
• Purpose – to administer the
assets of his client
• Eg – stockbroker(nominee) -
buying and selling of his clients
shares.

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