18 April 2016

Labuan IBFC emphasises focus on compliance and transparency for business activities

In the wake of the Panama Papers expose, the Labuan International Business and Financial Centre (Labuan IBFC) has emphasised that it continues to play a facilitative role for cross-border trades and investments, particularly in the ASEAN region, but also ensures rigorous transparency and high regulatory requirements for the business activities undertaken by players.

The centre has continuously enhanced its regulatory framework and supervisory regime in conformity with international standards and practices on transparency and regulatory compliance, said the organisation in a statement.

“The current issue relating to the information leakage has heightened the demands for greater transparency and effective exchange of information across all international financial centres,” said Danial Mah, CEO, Labuan IBFC, the marketing arm for Labuan Financial Services Authority (Labuan FSA).

Considering that Labuan has attractive value propositions and is strategically located to investors to establish their businesses in this region, there is a need to ensure that the laws and regulations are robust to govern the centre and ensure that it operates in a sound, prudent and transparent manner.

He added that “the business activities in Labuan IBFC are conducted under a strong set of rules and regulations that ensure the orderly establishment and operations of Labuan business entities including the licensing of financial institutions”. 

Labuan FSA, as the regulatory authority, supervises and regulates the various financial institutions including trust companies which are responsible for the registration of Labuan entities. They are required by regulations to have proper due diligence process in place when dealing with potential customers and maintain records and accounts of their clients in Labuan.

Labuan IBFC as part of Malaysia is committed to the global standards and requirements on transparency and exchange of information. In the area of taxation, Labuan IBFC’s tax laws are in compliance with the internationally agreed tax standards under the OECD Global Forum on Tax Transparency and Effective Exchange of Information.

Malaysia including Labuan have been cooperating with other countries in exchange of information under the various multilateral and bilateral agreements including the Double Tax Agreements signed by Malaysia with more than 75 countries. The Labuan Business Activity Tax Act 1990 was amended in 2010 to provide for accessing and sharing of information with other regulatory and competent authorities. Labuan IBFC is also committed to the reporting requirements under the Foreign Account Tax Compliance Tax Act and Common Reporting Standards for Automatic Exchange of Information (CRS-AEOI).

Mah reiterates “in fact, Malaysia (including Labuan) is among the countries that made early commitment to adopt the OECD standards on exchange of information”. Furthermore, Labuan is a full signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (MOU) that enhances regulatory cooperation with other Securities Commissions on capital market activities. It has also signed bilateral MOUs with other regulatory authorities to further reinforce cross-border cooperation on regulatory and supervisory activities.

In addition, the jurisdiction requires its players and service providers to be in compliance with the laws and guidelines pertaining to Anti Money Laundering and Combating Financing of Terrorism (AML/CFT). Malaysia (including Labuan) was one of the early jurisdictions to undergo the international mutual evaluation exercise under the new methodology in 2014 and the admission of Malaysia as a member of the FATF in February 2016 is a testament of the commitment to standards and practices in AML/CFT.

Mah concluded that Labuan IBFC will continue to play a positive role in providing the synergy and connectivity for financial linkages and businesses in the region, particularly among the ASEAN countries. “We welcome legitimate and genuine businesses and players that want to operate in Labuan IBFC’s cost-efficient and well-regulated environment.” he said.