Labuan, Malaysia (Money Broker)

General Information:
Labuan, a Federal Territory of Malaysia, is a prominent hub for investment and derivative operations due to its flexible regulatory environment. To engage in Investment, CFD, or Derivative business in Labuan, the following are required:

• Incorporation of a local Labuan company with a registered agent.

• Acquisition of a Money Broking License (suitable for forex and derivative businesses).

• Demonstrated prior experience in FX or money broking - director and shareholder must show at least 3 (but suggested -5) years of prior regulated financial experience..

• A minimum of two directors.

• A local office with at least two resident employees and a local phone line (outsourcing is permissible).

  
  

Prior Experience Requirements:

Applicants must provide evidence of:

• Experience: Shareholders (corporate bodies only) and directors must have a background in forex trading, investment management, securities, or financial derivatives.

• Financial Track Record: Demonstrated financial performance for at least three years prior to application.

• Operational Commitment: Clear commitment to establishing functional investment banking operations in Labuan.

  
  

Reporting Obligations:

License holders must submit audited financial statements, conducted by a Labuan-licensed audit firm. The first submission is due at the end of the initial financial year. Costs vary, with Big Four firms charging premium rates.

Application Process:

Applicants will be required to attend an interview with the Labuan Financial Services Authority (LFSA). Support includes:

• Preparation guidelines for LFSA interview questions.

• Local support during the interview and assistance with bank verification procedures.

License Restrictions:

The Money Broking License operates under the Straight-Through Processing (STP) model. Liquidity providers must be licensed but can be based in various jurisdictions, including the EU and offshore regions like Vanuatu, Mauritius, Seychelles.

The Labuan Money Brokers are not allowed to operate with Malaysian Ringgit.

As of 2025 - the Labuan Money Broker cannot offer instruments other than currency pairs and derivatives based on currency pairs. Companies can obtain permission for virtual currencies (Bitcoin, Ethereum, others) - both spot exchange and derivatives. 

Key Benefits:

• Direct access to Malaysian banks (e.g., Maybank) for multi-currency transactions (USD, AED, etc.).

• Availability of Islamic banking options for Muslim clients.

Application for Money Broking License:

• Timeframe: 3 - 7 months (excluding bank account setup).

• Minimum Paid-Up Capital: RM 1,000,000 (~USD 230,000) or equivalent for conventional currencies, and RM 1,500,000 for those dealing in virtual currencies as well (~USD 330,000). 

• Company Structure:

  • At least one shareholder with financial sector experience.

  • Minimum of two directors (natural persons); LFSA may request a third if necessary.

  • A local office post-license issuance (no specific size requirements).

• Confidentiality: Details of beneficial owners, shareholders, and directors are not part of the public record.

Additional Requirements:

• Appointed Secretary/Resident Agent.

• Registered Office in Labuan.

• Minimum of two local employees (preferably an office manager and an accounting staff).

Bank Account Opening:

• Processing time: 3-7 weeks, subject to due diligence. If an account is being opened with MayBank - verification at a bank branch will be required. 

Taxation:

• 3% of net audited profits annually.

• Minimum annual expenditure in Labuan: USD 35,000.

• 0% on capital gains, withholding tax, and stamp duty on offshore instruments.

License and Company Setup Procedure:

1. Completion of application forms (assistance provided).

2. Submission of KYC documents:

   • Attested passport copies and address proof for directors.

   • Bank reference letter confirming good standing.

   • Professional reference letter (lawyer/auditor/notary).

   • Bank balance confirmation meeting capital requirements.

   • Detailed CV and educational certificates (preferred) for directors.

3. Initial document verification via scans, followed by couriering originals to Labuan.

4. LFSA may request additional information during processing.

5. In-person interview in Labuan and bank verification.

6. Receipt of conditional approval from LFSA, allowing for capital fulfillment and local bank account setup.

7. Payment of an annual fee (~USD 1,500) upon pre-approval and annually thereafter.