Guide to Set Up Labuan Investment Bank

Due to Labuan International Bank Financial Centre’s strong regulatory framework, flexible and favorable tax regimes and low cost of set-up and operation, it has successfully attracted many international investment bankers to set up in Labuan Jurisdiction such as Credit Suisse, Sumitomo, DBS, OCBC, etc. Labuan Commercial Bank and Labuan Investment Bank are conferred slightly different in business activities, hence require different license to operate. [Read: Labuan Commercial Bank]

Labuan Investment Banks primarily serve corporations and government bodies and high net worth individuals as part of their Wealth Management business. Labuan Investment Banks are permitted to conduct all business activities of commercial banks, except receiving individual/corporate account deposits.

Permitted Business Activities of Labuan Investment Bank include:

1. the business of providing credit facilities (Transaction Banking)

• Principal investing
• Trade financing (letter of credit, performance, and financial bank guarantees)
• Project/asset financing (project evaluation/ feasibility studies)
• Syndication/ loan arrangement
• Revolving credit

2. the business of providing consultancy and advisory services relating to corporate matters (Corporate Finance)

• Mergers and acquisitions
• Initial public offerings (IPO)
• Capital restructuring
• Dealing in securities (e.g. debt issuance)

3. the business of undertaking foreign exchange transactions, interest rate swaps, dealings in derivative instruments or derivative financial instruments or any other similar risk management activities (Securities Trading)

• Derivatives (interest rate swaps, cross-currency swaps)
• Hedging (interest rates, LIBOR, etc)
• FOREX (foreign exchange)
• Treasury/government bonds
• Unit trusts
• Funds
• Listings of financial instruments on Labuan International Financial Exchange (LFX)
• Proprietary trading
• Issuance of financial products for sale

4. the business of providing consultancy and advisory services relating to investment matters (Asset & Wealth Management)

• Private banking
• Wealth management of High Net Worth Individuals (HNWI)
• Portfolio fund management of sovereign wealth funds, pensions and corporations
  [Check out the Labuan Private Foundation – a perfect wealth management tool for HNWIs)

5. Labuan Islamic investment banking business, if Shariah compliant.

Other Guidelines for Labuan Investment Bank include:

• Cannot accept deposits for individuals and corporate 
• Permissible in dealing in Malaysian Ringgit and foreign currencies
• Minimum working fund/capital of RM 10 million or equivalent in any other currency must be maintained throughout the business operation
• Every director or principal officer (PO) of a Labuan investment bank must be a fit and proper person and shall not be subject of any adverse report from any reliable sources. Appointment of a director or PO of a Labuan investment bank must obtain prior approval from Labuan FSA
• FATCA Compliance – Reporting on US citizens/residents is required for dealings exceeding USD 50,000
• Must maintain a physical presence in Labuan with minimum 3 staffs with annual spending of minimum RM 180,000. Permissible to establish a Marketing Office in Kuala Lumpur or Iskandar.

Main Governing Legislation/Acts for Labuan Investment Bank include:

• Exchange Control Act 1953
• Guidelines on Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT)
• Labuan Financial Services and Securities Act 2010
• Financial Services Act 2013

Note: Information is correct at time of publication but may be subject to change depending on LFSA guidelines.

In evaluating the best place to domicile your Investment Banking business, consider your business objectives and intended activities. Labuan may be able to help you meet your business objectives. At CP TRUST, we help clients in all their Labuan business incorporation undertakings including the application of licenses for operation.

Criteria for Labuan Investment Bank License:

The application may be accepted from any one of the following:

* An investment bank or group engaging in investment banking activities licensed by the regulatory authority in the country of origin; or
* A licensed bank or an established financial institution or financial service provider supervised by a competent regulatory authority; or
* Any institutions licensed under the Financial Services Act 2013 with prior approval from Bank Negara Malaysia;  or
* Corporations with the necessary expertise and experience in the financial industry with at least three (3) years of good track record and regulated by an authority in their home country.

CP TRUST one-stop license application service level for Labuan Investment Banking License include:

* Consultation of your eligibility and procedures based on your profile
* Profiling, due diligence, and guidance documentation preparation
* Preparation of Business Plan, Financial Forecast, AMLAH and KYC Policies
* Submission and supervision of applicant process approval
* Act as your liaison and contact point with Labuan FSA for all correspondence and arrange an interview (if any)

Labuan Investment Banking License Application Time Frame:

1. Two to three months depending on the completeness documents
2. Key personnel may be required by the Labuan FSA to attend interviews.

CP TRUST as Your Trust Company

We provide consultation on company structure for Labuan Company set up for your Labuan Investment Banking license, documents profiling and due diligence on company incorporation, assist in providing the registered office and back-end support to ease your operations in Labuan as well as the application of marketing office/co-location office in Kuala Lumpur/Iskandar. We provide assistance from start to finish in helping you set up your Labuan investment. Consult us today!

Feel free to contact us on how to best structure your banking business and license qualifications! We are here to “simplify the complexities” .