Labuan Money Broking / FX
Print ready version

Money broking business is defined as the business of arranging transactions between buyers and sellers in the money or foreign exchange markets with brokers acting as an intermediary for consideration of brokerage fees paid. It however does not include the buying or selling of foreign currencies by the broker as principal in such markets. Section 86 of the Labuan Financial Services and Securities Act 2010, governs money broking activities in Labuan IBFC.

As most of the jurisdictions have tightened up their requirements and regulations on money broking business, which among others include compliance oversight, capital requirements and rules of segregation of client funds as well as change of leverage limit in foreign exchange trading, Labuan Financial Services Authority (“Labuan FSA”) has decided to enhance its processing and assessing on new application for money broker licence in Labuan.

A. Minimum Eligibility Criteria of Applicant
  • A licensed domestic (Malaysian onshore) money broker
  • A Labuan company incorporated under the Labuan Companies Act 1990 (with money broking expertise)
  • Any licensed institutions under the Banking and Financial Institutions Act 1989 with prior approval from Bank Negara Malaysia
  • All applicants from the categories above should have a good track record of financial performance, at least in the three (3) years preceding its application and is committed to setting up functional operations in Labuan

B. Regulatory Requirements
  • The company must have a minimum paid-up capital of RM300,000 (unimpaired by losses) or its equivalent in any foreign currency
  • The company must inform Labuan FSA of any changes in its shareholding structure and/or any erosion of paid up capital

C. Operational Requirements
  • The company must maintain a registered office in Labuan, and all dealings must be done through this registered office in Labuan
  • All transactions must be in foreign currencies other than the Malaysian Ringgit, except for the purpose of defraying administrative and statutory expenses
  • The company is prohibited from dealing with Malaysian residents other than authorised dealers as specified under section 4 of the Malaysian Exchange Control Act 1953
  • The company must appoint an auditor
  • The company must notify Labuan FSA of any amendments or alteration to any information in its constituent documents
D. Application Requirements
  • A business plan detailing the operations and strategies of the applicant
  • Description of nature of business of the applicant
  • Certified true copy of certificate of licence granted by relevant authority(s) in its home country, if applicable
  • Letter of awareness or approvals of authorities from the home country, if applicable,
  • Information on the jurisdiction of its potential clients
  • Letter of support / approval from the jurisdiction that imposed restriction and regulations on foreign exchange business, where applicable
  • An undertaking letter from the head office/parent company to undertake any liability arising from the operations of its branch or subsidiary in Labuan
  • Three (3) years financial projection
  • The controller or director or chief executive officer and the directors of the board of the applicant company must be fit and proper persons. Prior written approval of Labuan FSA must be obtained for the appointment of such said persons
  • Audited financial statements of the applicant for the last three (3) years or annual report, if applicable
  • Framework on Know-Your-Customers’ policy and compliance to the Anti-Money Laundering and Anti-Terrorism Financing Act 2001, and
  • Any other information that is relevant to the application
E. Licensing Fees

License processing fee (one-off) RM1,000 / USD300
Annual license fee RM5,000 / USD1,500

The annual license fee is payable when the license is approved by Labuan FSA and remains valid until 31 December of the year of approval. Subsequent annual license fee is payable on or before 15 January of each calendar year

F. Features of Labuan Company carrying on money broking business
Share Capital
Permitted Currencies Any foreign currency except Ringgit Malaysia
Standard currency US$
Minimum issued capital Equivalent of RM300,000 in any foreign currency
Authorised capital N/A
Par / Nominal value N/A

Directors
Minimum Two (2)
Corporate directors Not Allowed, only individual
Local directors requirements Optional
Location of meeting Anywhere but for commercial substance purpose, it is highly recommended to hold meetings in Labuan, physically and/or originated from Labuan, if via tele-conference meeting
Minimum numbers of meeting Per Articles of Association
Publicly accessible records No

Shareholders
Minimum One (1)
Bearer shares No
Corporate shareholders Allowed
Local shareholders requirements No
Location of meeting Anywhere
Minimum numbers of meeting One (1) annually
Publicly accessible records No

Company Secretary
Minimum One (1)
Requirements A resident secretary who must be a Trust Officer of a trust company OR a Labuan / Malaysian domestic company wholly-owned by the Labuan trust company

Registered Office
Requirements Principal office of a trust company in Labuan

Accounts
Records Kept in Labuan
Preparation of accounts Yes
Audit requirements and filing Required for licensed companies
Publicly accessible records No

Annual Requirements
Annual Return Not later than 30 days from the anniversary date of incorporation of the Labuan company
Annual Government Fee On or before the anniversary date of incorporation of the Labuan company
Tax Filing Annual tax return needs to be filed with the Malaysian Director General of Inland Revenue by 31 March of that year of assessment. Normally, an extension of time for filing is allowed by the Inland Revenue.

Taxation
Money broking activities RM20,000/- OR 3% of net audited profits, upon election annually
Others No withholding tax, no capital gain tax, no stamp duty on offshore instruments


Click Here To Contact Us For Further Discussion

The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.