A New Offshore Destination for the FX Exodus: Labuan, Malaysia

The Malaysian territory is welcoming retail FX brokers with 1:100 leverage

The offshore migration trend which started in the aftermath of the new EU regulations is one of the major changes to the industry over the past year. Brokers have been creative in finding new destinations. The latest jurisdiction to officially offer a broker license is Malaysia’s offshore island of Labuan.

The news comes amid tightening conditions in some other remote jurisdictions. Most recently the island of Vanuatu became a much more strict regulatory destination, requiring company directors to reside on the island for six months every year.

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Labuan License Details

The island is located in East Malaysia and is home to the country’s International Business and Financial Centre (IBFC), where the Labuan Financial Services Authority (Labuan FSA) is located.

With a Money Broking License on offer, the regulator is delivering a permit specifically suited to the FX industry.

david woliner
David Woliner, Head of Financial Regulation at Nir Porat & Co. Law Firm

Elaborating to Finance Magnates, David Woliner who is Head of Financial Regulation at Nir Porat & Co. shared that a company needs one shareholder and two directors to get started. The minimum experience required from directors stands at three years, and at least a diploma level education.

“In comparison to many jurisdictions requiring a minimum of 5 years, this is a more lenient requirement. The capital requirement, to be deposited in a local bank in Labuan, stands at 500,000 MYR, which are roughly $130,000 USD. The capital is freely usable, not blocked like in Belize or Vanuatu, as long as you do not fall below the threshold,” Woliner explained.

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According to the industry expert, the licensing process is rather straightforward and short. Companies can expect the process to take as little as three months after a conditional license is issued within one month.

Operational Requirements

A local office in Labuan alongside two employees will need to be established, which is something that has become a traditional requirement for offshore jurisdictions lately. None of the directors or the CEO of the company are required to be based on the island, however.

The costs for the company to maintain its presence on the island is also required to reach a minimum of 100,000 MYR ($25,000 approx.) per year. As to taxation, the company will be required to pay three percent of its profits.

A notable prerequisite in many offshore jurisdictions is insurance. Labuan’s financial regulator does not require professional indemnity insurance as many other jurisdictions.

Brokers will have a 1:100 leverage limitation on all instruments that are traded via the subsidiary. Access to banking is also considered to be one of the strong points of this license, Woliner elaborated.

“Altogether, Labuan offers a welcoming and business-oriented jurisdiction with a fairly good reputation and should be highly considered by all market players,” the Head of Financial Regulation at Nir Porat said.

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