Guide to Start Labuan Forex Money Broking Business
It is easy to start your own Forex or Money Broking business in the Labuan jurisdiction with 100% foreign ownership! Labuan Authority has recently issued new guidelines on money broking business in Labuan with effective 1st Jan 2018. To know more, read below:
What is a money broking business?
The 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 is a straight thru processing (STP) model. Labuan Forex Money Broking license, however, does not include the buying or selling of Ringgit and foreign currencies by the broker as principal in such markets.
Who qualifies to apply for the money broking business license?
Eligible applicants include:
- Individual or institution with money broking expertise with a good track record and sufficient years of experience in the field
- Regulated money broker or provider of such services from other jurisdictions with approval from home authority with the letter of awareness or consent available
- Any licensed institutions including approved money broker under the Financial Services Act 2013 with approval from the Central Bank of Malaysia
Qualifying Eligibility for Labuan Money Broker License
* All applicants must show at least three (3) years’ of good track record and relevant experience in the money broking business.
* You will be required to register a Labuan entity in order to operate the Labuan licensed money broking company with a paid-up capital of RM500,000. The company can be set up after the Labuan Money Broker License is obtained.
Three (3) permissible activities of a Labuan Money Broker license is as follows:
- bringing together the counterparties on mutually acceptable terms for the same financial products in money or foreign exchange market to facilitate the conclusion of a transaction
- receive payments for its service in a form of brokerage or commission fees
- act as mediator, strictly not act as principal.
Latest Regulatory and Operational requirements for Labuan Money Broking Forex License, after approval, is as follows:
- Minimum paid up capital of RM500,000 (can be in the equivalent in foreign currencies) unimpaired by losses with a certificate of evidence from the banks in Labuan
- Must maintain an operational office in Labuan and all transactions must be done to, through and from Labuan with minimum 2 staffs with minimum annual spending of RM 100,000
- Transact in foreign currencies of your choice, except with Malaysian Ringgit
- No transactions are permitted to be done with Malaysian residents, other than authorized dealers approved by the Malaysian Exchange Control
- The money broking company shall impose a maximum leverage limit of 100:1 on clients’ trading transactions (i.e. a minimum of 1% margin deposit to enable the opening of trade position). Example: if the transaction is USD100,000, then the margin requirement is USD1,000
- Ensure the counterparties ie principal broker or liquidity provider are regulated by a recognized supervisory or authority
- It is necessary to obtain approvals from the authorities who intend to operate prior commencing the business in those respective markets and such approvals have to be copied to Labuan FSA
- Where technology client interface is deployed, any intrusions or malfunctions of the systems incidents discovered must report to Labuan FSA with root cause and impact analysis report to be submitted within 14 days
- Labuan money broker must disclose to their clients the list of introducing brokers and their roles and responsibility
- The company must appoint an approved external auditor to carry out an audit of business operations annually
- Maintain a separate account for clients’ monies and marked clearly each clients monies in record and client’s withdrawal has to be done within 3 working days
- Have proper written agreements and contracts with clients and any parties
- The money broking company must have a principal broker, liquidity provider, trading platform provider and copies of agreements
- Ensure compliance with the AML/CFT Act and Guidelines issued by Central Bank of Malaysia and Labuan Authority with a compliance officer hired
- Any changes on shareholders, directors, office location, additional office outside Labuan and outsourcing arrangements required to obtain approval from Labuan FSA
- Yearly license fee payable to Labuan FSA is RM5,000 (USD 1,500).
Important Documents to Submit for License Application:
1. Three (3) years’ Business Plan with Financial Forecast, AMLAH and KYC frameworks and Marketing Strategies (optional)
2. Profile of the Directors and Shareholders and Qualifications
3. Audited Account for past two(2) years of the current corporate on-going company (if applicable)
4. KYC, AMLAH and Operation Policies
CP TRUST one-stop license application service for Labuan Money Broker-Forex License includes the following:
* Consultation of your eligibility and procedures based on your profile
* Profiling, due diligence and guidance on the preparation of documents
* Preparation of Business Plan, Financial Forecast, AMLAH and KYC frameworks
* Submission and supervision of the application process with approval
* Act as your liaison and contact point with Labuan FSA for all correspondence and arrange an interview (if any)