AFP/ Kuala Lumpur

Thousands of Malaysian demonstrators turned central Kuala Lumpur yellow for a second straight day Sunday with a rally demanding the prime minister's resignation over a corruption scandal, as the government threatened action against organisers.

The two-day rally, one of Malaysia's largest in years, has been mostly incident-free even though police declared it illegal, blocked the organisers' website and banned their official bright yellow T-shirt and logo.

Thousands awoke from a night camping out near the capital's Independence Square and were soon joined by tens of thousands more as a carnival-like mix of speeches, sing-a-longs, prayer and ubiquitous selfies resumed.

The numbers did not quite appear to match Saturday's, when organisers -- electoral-reform activist group Bersih (the Malay word for Clean)-- said 200,000 turned out, while police put the number at 29,000.

"We are hoping to have as many people as yesterday to send the message to this government: they have been lying and stealing and bullying for far too long and the public won't take it anymore," said Simon Tam, a lawyer.

Deputy Prime Minister Zahid Hamidi, who also is home minister in charge of domestic security, warned organisers face possible charges under assembly, sedition and other laws.

"We also follow every word they say, we know the actions taken by them," he was quoted saying by state media.

Prime Minister Najib Razak is under fierce political pressure after the Wall Street Journal last month published Malaysian documents showing nearly $700 million had been deposited into his personal bank accounts since 2013.

His cabinet ministers have called the transfers "political donations" from unidentified Middle Eastern sources. But the accounts have been closed and the fate of the money is undisclosed.

Najib denies all wrongdoing, alleging a "political conspiracy" to topple him.

With smaller anti-Najib rallies held in several other locations around the country, state news agency Bernama reported 12 people were arrested in the city of Malacca for wearing Bersih shirts.

All were later released, it said. It was not clear what charges they would face.

The Kuala Lumpur rally got a boost late Saturday when 90-year-old former premier Mahathir Mohamad made a brief appearance.

Still a ruling-party heavyweight, Mahathir's attendance was a surprise because he took a tough line against dissent during his uncompromising 1981-2003 rule.

But he has led calls for Najib's ousting, accusing him of corruption and misgovernance and saying the claim that Najib's money came from foreign political donors was "absurd".

Mahathir prompted wild cheers, but did not address the crowd. But organisers said his appearance showed the rally was not supported only by the opposition.

- 'Black coal on Malaysia's face' -

The protest itself is not however considered a serious threat to Najib.

The reform movement lacks much traction in rural areas where Najib enjoys solid support, Malaysia's opposition is currently fractured, and Najib firmly controls key institutions such as the police, judiciary and parliament.

"Those who wear this yellow attire, who are they? They want to discredit our good name (and) scribble black coal on Malaysia's face to the outside world," official media quoted him as saying Saturday.

Besides the financial scandal, demonstrators demanded he be ousted over alleged economic mismanagement, an unpopular new consumption tax, and Malaysia's electoral system, which Bersih say is biased in favour of the 58-year-old ruling coalition.

Najib recently purged critics in his cabinet and sacked or reassigned officials and parliamentarians who were probing the scandals. The future of those investigations is uncertain.

Najib had already faced months of allegations that hundreds of millions of dollars in state funds had disappeared from deals involving a heavily indebted government-owned investment company he launched in 2009.

Bersih had originally planned to occupy Independence Square, but it was cordoned off by hundreds of police behind barricades.

Previous Bersih-organised rallies have ended in clashes with police, but security forces and protesters have exercised restraint this weekend.

Bersih said a number of people suffered vomiting and stomach pains after consuming contaminated boxes of juice handed out to demonstrators, calling it an "act of sabotage" by rally opponents.