UN refugee agency (UNHCR) is no longer allowed to issue identity cards for refugees applying on a 'walk-in' basis at its office in Kuala Lumpur, the government said.

Minister in the Prime Minister's Department Shahidan Kassim said this was decided by the cabinet after it was found that the UNHCR-issued cards were abused by recipients.

"I have met with them (UNHCR) many times and told them to stop issuing this cards because it only brings problems to Malaysia.

"There is a lot of illegal clearing in Cameron Highlands and Rompin by UNHCR-card holders.

"Last week the cabinet instructed a committee to be formed to resolve this (refugee) issue, and today we decided that UNHCR can no longer issue this cards for 'walk-in' applicants - it must cease immediately," he told reporters at PWTC in Kuala Lumpur today.

Shahidan said the cards can only be issued at immigration detention depots after clearance from police and immigration.

"They must be arrested first before taken to UNHCR," he added.

Shahidan said stern action will be taken if the cards continue to be issued, including by third parties who issue fake cards.

"If it is true that UNHCR cards are sold in Chow Kit then alert us and we will arrest those who issue these fake cards," he said.

Shahidan said the fake cards have been abused by migrants to do work they are not allowed to do, including driving taxis.

Malaysia does not formally acknowledge refugees in the country but allows UNHCR to process the refugees so they can be moved to third countries.

However, a concession was made for some 3,000 Syrian refugees, some of whom arrived in May and are living at temporary housing in Shah Alam.

There are 151,560 refugees registered with UNHCR in Malaysia as at May 2016.