Criminal Breach of Trust in Malaysia: Laws & Penalties

Key Takeaway

Criminal Breach of Trust (CBT) happens when a person dishonestly misuses property or money entrusted to them.
It is governed under Sections 405–409 of Malaysia’s Penal Code (Act 574), with penalties up to 20 years’ imprisonment, fine, and whipping.
Offenders include employees, company directors, public servants, and agents who hold financial or fiduciary roles.
Conviction requires proof of entrustment, dishonest intention, and breach of legal duty.
Preventing CBT starts with proper documentation, clear authorisation, and internal financial controls in workplaces.

Table of Contents

Criminal Breach of Trust (CBT) in Malaysia refers to the dishonest misuse of property or funds entrusted to someone’s care.

Defined in Sections 405 – 409 of the Penal Code, it carries sentences of up to 20 years’ imprisonment, fines, and caning depending on the offender’s position.

When employees use company funds for personal bills or directors divert client deposits, they risk being charged with Criminal Breach of Trust, one of the most serious white-collar offences under the Penal Code.

It’s a heavy subject, hence we will explain how CBT is defined, how the law applies, what evidence the prosecution must prove, and the penalties that follow conviction.

What Is Criminal Breach of Trust (CBT)?

CBT means dishonestly using property entrusted to you in violation of legal direction or agreement.

The statutory definition appears in Section 405 of the Penal Code (Act 574):

“Whoever, being in any manner entrusted with property… dishonestly misappropriates or converts it to his own use… commits criminal breach of trust.”

To prove CBT, the prosecution must establish three elements:

Entrustment: You had authority or control over property belonging to someone else.
Dishonest intention: You used or disposed of it knowing it was against instructions.
Breach of duty or contract: Your act violated a legal or contractual obligation.

“In 2024, the Royal Malaysia Police’s Commercial Crime Investigation Department (CCID) recorded 1,448 cases of criminal breach of trust (CBT), with losses amounting to RM 546.39 million” – MalayMail

Source: Laws of Malaysia – Penal Code s405)

How Criminal Breach of Trust Is Commonly Committed in Malaysia

Criminal Breach of Trust (CBT) is not always complex, many cases begin with routine financial shortcuts that turn into serious offences.

Misuse of Company Funds: Diverting business revenue or client money into personal accounts.
False Invoicing or Double Payments: Submitting fake supplier invoices or duplicates for reimbursement.
Skimming Sales: Cashiers underreporting daily collections or manipulating POS systems.
Unauthorised Fund Transfers: Using entrusted accounts for personal investments.
Misuse of Client Deposits: Common among lawyers, agents, or treasurers managing trust funds.
Public Fund Diversion: Government officers redirecting allocations for private projects.
Cheque Forgery or Account Tampering: Falsifying approvals or banking records to withdraw company funds.

Who Can Be Charged with CBT?

CBT isn’t limited to public servants. Malaysian courts regularly prosecute:

Category	Example of Entrustment	Relevant Section
Employees / Cashiers	Diverting sales revenue into a personal account	s.406 Penal Code
Company Directors / Partners	Misusing investor or client deposits	s.409 Penal Code
Public Servants / Government Officers	Channelling public funds to private projects	s.409 Penal Code
Agents	Selling or using assets without the owner’s consent while acting as an agent	s.409 Penal Code
Trustees / Other Persons Entrusted	Using entrusted funds contrary to instructions, without falling into a special category	s.406 Penal Code

Employees and Cashiers: Common in private companies and retail settings. Offences often involve daily takings, project funds, or petty-cash abuse.
Company Directors and Business Partners: Charged under Section 409 when corporate funds, investor deposits, or client payments are diverted for personal or unrelated use.
Public Servants and Government Officers: Covered by Section 409, these cases include mismanagement of ministry budgets, community grants, or procurement allocations.
Agents, Trustees, or Representatives: When a property agent, lawyer, or NGO treasurer sells, transfers, or uses assets without approval, it constitutes a breach under Section 405.

Penalties for Criminal Breach of Trust in Malaysia

Offence Type	Section (Penal Code)	Maximum Punishment	Notes
General CBT	Section 406	Imprisonment up to 10 years, whipping, and fine	Applies to anyone generally entrusted with property who misuses it dishonestly.
CBT by Carrier, Wharfinger, or Warehouse-Keeper	Section 407	Imprisonment 1–10 years, whipping, and fine	Covers logistics or custodial professionals responsible for goods in transit or storage.
CBT by Clerk or Servant	Section 408	Imprisonment 1–14 years, whipping, and fine	Typical for employees, accountants, or staff handling company funds.
CBT by Public Servant or Agent	Section 409	Imprisonment 2–20 years, whipping, and fine	The most serious form of CBT, involving individuals in positions of high fiduciary trust.

“Severity increases with responsibility, the higher the fiduciary duty, the heavier the punishment.”

Defences to CBT Charges in Malaysia

Being accused of CBT does not always lead to conviction.

Malaysian courts assess whether dishonesty or misuse was truly proven under Sections 405–409 of the Penal Code.

1. Lack of Dishonest Intention

Not every error is a crime. If misuse happened by mistake or poor record-keeping, it lacks the intent required for CBT.

Example: A finance officer transfers funds to the wrong account and corrects it once discovered. That’s negligence, not dishonesty.

2. Owner’s Consent

When the property owner or superior approved the use of funds, there’s no breach of trust.

Example: A director uses company reserves for salaries with board approval,authorised acts aren’t CBT.

Consent must be documented through letters, emails, or minutes.

3. No Entrustment

You can’t breach trust if you never had control.

Example: A junior clerk following orders without access or signing power cannot be liable.

Courts require proof that the accused had actual authority or custody of the funds.

4. Restitution Before Discovery

Returning money early may not erase guilt but can reduce sentencing.

Example: An employee who realises an overpayment and refunds it immediately shows lack of intent to defraud.

Voluntary repayment carries more weight than repayment after detection.

5. Insufficient Proof of Misappropriation

The prosecution must prove property was truly converted for personal use.

Example: Missing receipts alone aren’t enough, there must be clear evidence of personal benefit.

In other words: Courts look for intent, control, and consent. A CBT charge fails when actions were authorised, accidental, or unproven.

How Courts Decide CBT Cases

Judges examine conduct and context, not just loss amount.

Factors include:

Nature of trust relationship (employee–employer, agent–principal)
Degree of control over funds
Timing of misuse and concealment
Existence of false records or fabricated accounts

What To Do If You Are Accused of CBT

Facing a Criminal Breach of Trust (CBT) charge can be intimidating. Stay calm and act strategically, the wrong move can worsen your case.

Stay Silent Until You Get Legal Advice

Avoid public comments or social media posts. Anything you say may be used as evidence later.

Preserve All Financial Records

Keep bank statements, emails, invoices, and communication logs. They may prove that transactions were authorised or errors were unintentional.

Consult a Criminal-Law Lawyer Immediately

A qualified lawyer can review your charge sheet, investigation papers, and evidence to prepare your defence under the Penal Code.

Do Not Repay Funds Without Guidance

Repaying money prematurely can be seen as an admission of guilt. Always act on your lawyer’s advice before making any restitution.

Cooperate Professionally With Authorities

Attend interviews, provide documentation, and avoid confrontation. Courts look favourably on calm, cooperative behaviour.

Source: Malaysian Judiciary Portal; MahWengKwai & Associates – Criminal Law Guide

What To Do If You Suspect CBT in Your Organisation

Discovering that someone might have misused funds, be it a staff member, business partner, or committee treasurer, requires fast but careful handling.

Secure All Financial Documents Immediately

Freeze account access, back up transaction logs, and secure payment authorisations. This prevents tampering and preserves evidence.

Conduct an Internal Audit

Appoint an independent auditor or your company’s compliance officer to verify records. Identify what amounts are missing and who had access.

Avoid Public Accusations

Do not confront the suspected person publicly or online. Defamation or wrongful dismissal can expose your organisation to counterclaims.

File a Police Report If Loss Is Confirmed

If evidence shows misappropriation, lodge a report under Sections 405–409 of the Penal Code. Include documents showing entrustment and misuse.

Engage Legal Counsel for Recovery and HR Action

A lawyer can advise on disciplinary steps, termination procedures, or filing a civil claim to recover losses.

How to Prevent CBT in Your Organisation

CBT often happens when oversight is weak or roles are unclear. Simple controls can greatly reduce the risk.

Use Clear Financial Procedures: Require dual authorisation for payments and separate duties for approval, recording, and reconciliation. Accounting software works wonders here.
Audit Regularly: Schedule internal and external audits to detect irregularities early. The Companies Act 2016 requires proper financial records.
Limit Access: Give financial access only to authorised staff and remove it immediately when they leave.
Enable Whistleblowing: Set up a confidential reporting system under the Whistleblower Protection Act 2010.
Update Roles and Approval Limits: Revise job descriptions and approval rights whenever responsibilities change.

Source: Companies Act 2016; Whistleblower Protection Act 2010; Malaysian Institute of Accountants

Protecting Trust in Every Organisation

Criminal Breach of Trust isn’t just a legal issue, it’s a test of integrity in everyday business.

When money or property is entrusted, so is confidence and once broken, it takes years to rebuild.

By acting early, setting clear boundaries, and responding calmly to suspicions, companies can protect both their reputation and their people.

This article was brought to you by PRESS, Malaysia’s digital PR agency helping organisations strengthen credibility, manage reputation risks, and communicate with clarity.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Readers should consult a qualified lawyer for guidance on specific cases or legal issues related to Criminal Breach of Trust (CBT) in Malaysia.