(Adds background on central bank measures)
KUALA LUMPUR, Dec 27 (Reuters) - Bank Negara Malaysia said it was taking action against an unnamed financial institution for failing to promptly notify the central bank of its dealers' misconduct involving the fixing of the dollar-ringgit exchange rate.
The action comes amid efforts by the central bank to curb offshore trade of the ringgit and stem the fall of the currency, which is one of Asia's worst performing currencies in 2016.
In a statement on Tuesday, the central bank said the financial institution facing action failed notify it of a "significant audit finding."
"The finding indicates that there were communications with traders from other foreign financial institutions which included inappropriate references to the fixing rate submission process," Bank Negara said.
The central bank said it viewed such reporting breaches seriously, "especially on financial institutions' involvement with offshore ringgit NDF (non-deliverable forward) market or any activities that relates towards market manipulation."
The action could include monetary penalties, issuance of a written order to comply, a public reprimand and a written order to mitigate or remedy such breaches, it said in a statement, without naming the financial institution.
Last month, two Australian banks - Macquarie Group Ltd and Australia and New Zealand Banking Group Ltd - offered to pay fines for "cartel conduct" when trading ringgit foreign exchange contracts out of Singapore in 2011.
The two banks said they offered to pay the fines after the antitrust agency started court proceedings.
Last month, the Malaysian central bank began trying to force currency traders overseas to stop driving the ringgit lower.
Bank Negara demanded that banks sign a commitment to cease trading the ringgit on the offshore non-deliverable forward market.
Trading became thin after the central bank's action, though earlier this month Bank Negara announced measures to boost liquidity and encourage more onshore trade.
The ringgit is down 4 percent so far this year. Like some other emerging market currencies, it took a hit after Donald Trump won the U.S. presidential race.
Reporting by A. Ananthalakshmi; Editing by Simon Cameron-Moore