Regulated FinTech Activities

A General
1 Governing law Labuan Companies Act 1990 Labuan Financial Services and Securities Act 2010 (“LFSSA”) or Labuan Islamic Financial Services and Securities Act 2010 (“LIFSSA”).
2. Fintech from Labuan IBFC’s perspective Financial technology (FinTech) refers to technology-enabled innovation in financial services [hereby referred to as Innovative Financial Services (IFS)]. In many parts of the global financial markets, IFS has been observed to spur new business models, processes, mobile application etc. IFS is seen to have a transformative effect on financial markets and institutions on the provision of financial services as a whole.
3. Regulated activities Only IFS activities that fall within the ambit of the Labuan Financial Services & Securities Act 2010 (LFSSA) or the Labuan Islamic Financial Services & Securities Act 2010 (LIFSSA) are regulated by Labuan FSA.
4. Non regulated activities (a) Provision of consultancy & management services such as project management, administrative, real estate, etc.

(b) Advisory experts as project specialist, trainer coaching or even industry specific coaching.

(c) International trading business whether as a general trader, importer/exporter, industrial and customised equipment, non-petroleum commodities or deal maker.

(d) Internet marketing which include e-commerce, web design and Search Engine Optimisation (SEO) specialist.

(e) Provision of backroom processing.

The above list of activities are not exhaustive but it provides indication of the types of activities that are not under LFSSA and LIFSSA. Labuan entities undertaking them must ensure compliance to the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Requirements issued by Bank Negara Malaysia (BNM) and Labuan FSA, and market conduct requirements to promote good market conduct practices via product transparency and disclosure as well as high standard of professionalism in their dealings with clients.
5 Regulator’s treatment or approach to IFS start-ups compared to other Asian markets Labuan IBFC opt for a more market liberal approach for proposed IFS businesses. Labuan entities are allowed to undertake these businesses subject to them complying with the AML/CFT regulations and market conduct requirements, especially for those whose businesses are governed by LFSSA and LIFFSA.
1 Anti-money Laundering and Counter Financing Terrorism (AML/CFT) As mentioned in Labuan FSA’s circular on undertaking IFS in Labuan IBFC dated 26 June 2018, Labuan entities which intend to undertake IFS activities, particularly on the exchange of digital currencies either from or to fiat money, or from or to another digital currency, would also need to comply with the AML/CFT requirements under the Guidelines on the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Digital Currencies (Sector 6) issued by BNM. The said Labuan entities are subjected to obligations as a reporting institution under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
2 Cybersecurity Labuan entities undertaking IFS are expected to have the necessary cyber resilience. This include strengthening their cyber security such as installation of firewalls, regular security scans or the selection and maintenance of password. The extent of such measures would be dependent on the vulnerability of their system setup and the risks posed by the IFS activities.
Unlike other markets which choose to insulate or contain the IFS business in different regulatory platforms (e.g. sandboxes or incubators) for observation and experimental purposes, Labuan IBFC believes that IFS start-ups need to operate in the actual, open international market. This is to inject business pragmatism in IFS undertakings so that they can better adapt and gain traction in the market.
3 Other requirements The requirements on the specific regulated activities governed by LFSSa and LIFSSA shall be applicable.

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