Bank Negara mandated the sms sending so that cardholders can detect unauthorized transactions and report to the bank. Doesn't make sense if the bank say they cannot block that transaction.

It took a while for me to understand the situation.
The moment you were to receive an SMS, it means that a merchant has charged a transaction to your card but the transaction have yet to be posted to your account. A transaction will be complete once it has been posted to your account. Do note that not necessarily a transaction will be posted to your account as sometimes certain transactions occur due to other reasons such as "Pre-Authorization - Hotels charging your card as deposit". The actual (final) transactions that has been firmed and claimed by the merchant will appear in your statement and this is called posted transactions.

The purpose of the SMS is to act as an early warning system in the event the cardholder notice a transaction which is not made by the cardholder. The cardholder can then call the bank to proceed with a block. And later you may proceed with a transaction dispute if necessarily.

The SMS system is not a confirmation that a transaction has been posted and confirmed to your card. Please take your time to understand the difference between transaction date and posted date.

I think you do not understand how the whole system works thus your question above. Don't confuse yourself unnecessarily.