Why Do Banks Ask For Your Salary When You Update Or Open A New Account?

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Picture this: You head to the bank to update your details, only to be asked about your occupation, employer, and monthly income later

You might find this very intrusive, as information about your income is generally considered personal data.

However, there are very legitimate reasons behind why banks do this:

1. Keeping your customer profile up to date

Let's say you started with an income of RM3,000 a month and, several years later, moved between companies and doubled your income.

Banks have ongoing customer due diligence (CDD) obligations, which include keeping customer information relevant and up to date.

Bank Negara Malaysia (BNM) says CDD can be carried out when there is doubt about the accuracy or adequacy of information previously obtained, while ongoing due diligence requires institutions to keep CDD information up to date and relevant.

That's why a bank may periodically ask you to review your personal or employment details.

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2. Understanding your financial profile

Your salary can provide additional context to your financial situation when a bank chooses to collect it.

For example, knowing that someone is a salaried employee earning a particular amount may help a bank understand their financial circumstances more clearly than knowing only occupation.

However, it is important to note that our salary is not automatically a universal piece of information that every Malaysian bank must collect from every customer.

What a bank asks for can depend on its own requirements and the circumstances of the customer.

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3. Assessing financial risk

Banks have to manage the risk that their services could be misused for money laundering or other financial crime.

Stating your salary helps financial institutions build risk profiles and monitor transactions against what they know about you and your profile.

This doesn't mean the bank assumes that someone earning RM5,000 a month can only have RM5,000 flowing through their account.

People receive money from many legitimate sources. You could sell a car, receive an inheritance, collect rental income, or transfer savings between your own accounts.

And Bank Negara Malaysia specifically says banks do not have to establish a customer's source of funds or source of wealth in every case.

These enhanced checks generally apply when the overall money-laundering or terrorism-financing risk is assessed as higher.

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4. Applying for credit

If you're applying for a credit card, personal financing, or a mortgage, your income can be relevant to the bank's assessment of whether you qualify and how much credit or financing you can reasonably take on.

The bank may ask for information such as your salary and supporting documents because the application involves assessing your financial circumstances.

This is separate from routine customer-information updates.

For credit applications, banks also use information from sources such as CCRIS and CTOS, systems that collect credit information from participating financial institutions and provides it back to them to help establish a view of borrowers' credit histories.

If you're unsure, it's perfectly reasonable to ask the staff member what the information is being used for

You can also check the respective bank's official customer-information or privacy notice.

Make sure to be aware of scammers as well.

A legitimate bank may ask you to update personal or employment information, but that doesn't mean you should provide sensitive banking credentials to someone who contacts you unexpectedly.

Instead, go directly to your bank's official website or app, or contact the bank through their official number.