Your guide to understanding the Money-Broking Business in Labuan, Malaysia:
What Exactly is a Money-Broking Business in Labuan, Malaysia?
In the financial world, money broking plays a crucial role. It involves acting as an intermediary in arranging transactions between buyers and sellers for brokerage fees. However, money brokers do not engage in buying or selling foreign currencies as principals.
Financial Requirements for Starting a Money Broking Business:
To start, a minimum paid-up capital of 500,000 MYR (approximately 115,000 USD) is required. This capital must be unimpaired by losses and deposited in a Malaysian bank account.
Operational Essentials for Money Brokers:
A money broker must maintain a minimum of one shareholder and two directors. An operational office in Labuan with at least two employees is also a necessity.
The Role of a Money Broker:
Money brokers are expected to act solely as mediators, following a Straight Through Processing (STP) model, and should not act as principals in transactions.
Leverage Limits in Labuan:
For money brokers operating in Labuan, the maximum leverage allowed is 100:1, which translates to a 1% margin requirement.
Clientele Scope for Money Brokers:
Money brokers can cater to retail clients, with the exception of those from sanctioned countries. Following the 2018 amendments to LBATA, Malaysian residents are also eligible to be clients.
Taxation for Labuan-Based Money Brokers:
Money broking activities in Labuan attract a tax rate of 3% on audited net profits.
Substance Requirements for Tax Eligibility:
To qualify for the 3% tax rate, a money broker must employ at least two individuals and spend a minimum of approximately 25,000 USD (100,000 MYR) locally.
Setting Up a Marketing Office:
Money brokers can establish a marketing office in Kuala Lumpur, provided no trading activities are conducted there. Expenses for this office cannot be included in the substance requirements.
Exploring the List of Registered Brokers:
Interested parties can view a list of existing brokers registered in Labuan by visiting the Labuan FSA website.
Estimating Operational Costs in Labuan:
The estimated monthly cost for operating a simple office with two staff members, including yearly corporate secretary engagement and licensing costs, is around 3,000 USD.
Crypto Activities for Money Brokers:
With a Digital Crypto Extension, money brokers can expand their services to include digital assets, allowing activities like crypto-to-fiat transactions, managing digital wallets, and more.
Transparency with Regulators:
Finally, the Ultimate Beneficiary Owners (UBOs) of the Money Broker must be disclosed to the regulator, ensuring transparency and regulatory compliance.
Navigating the money broking landscape requires a clear understanding of the regulatory and operational frameworks. With this guide, aspiring brokers can step forward with confidence into the world of global finance.