Asia’s Innovative Intermediation Centre

IFC Media Interviews Labuan IBFC

IFC: In 2020, Labuan IBFC celebrated the 30th anniversary of its inception as a financial hub. What have been the key achievements of the centre over this period?

Labuan IBFC: 2020 marks 30 years since Labuan’s birth as an international wholesale trade, finance, risk and asset intermediation centre. With our unparalleled range of structures and solutions, Labuan IBFC has welcomed more than 16,000 registered companies and more than 1,000 licensed entities in banking, leasing, capital markets, insurance, reinsurance, risk management, digital financial intermediation and wealth management.

By enhancing banking vibrancy, embracing digital offerings, reinvigorating business offerings and fostering cross-border collaboration, we have made Labuan an ideal location for substance creation for both global businesses looking at penetrating Asia and Asian entities aiming to go global.

IFC: Labuan IBFC saw considerable growth in captive cell formation over the past year. What makes Labuan such an attractive domicile for captive structures and risk management?

Labuan IBFC: Labuan IBFC is one of the fastest growing captive domiciles in the world and its captive insurance business has continued its upward trajectory in 2021. As of 30 September 2021, nine new captives were formed - this represents more incorporations than during the entire year of 2020. The jurisdiction is now home to 64 captives and in terms of premiums, 70.2 per cent originate from international markets, making Labuan IBFC a global domicile of choice.

Our leadership in captives has been entrenched, showing a progressive trend in new captive formations in recent years and this is expected to continue. Our approach to developing the jurisdiction’s self-insurance sector has been hinged on generating awareness with risk management communities and international industry associations. We continue to actively participate in international events and curate captive focused programmes (i.e., hosting the highly successful Asian Captive Conference) that feature internationally renowned industry speakers and subject matter experts.

With its sophisticated captive infrastructure, Labuan IBFC has a number of specialist captive and insurance managers who provide an international high-quality level of company management services including captive support services such as international banking franchises, underwriting services, captive legal, actuary and accountancy services.

Indeed, the jurisdiction is a global captive domicile ready and open for business from across the world and continues to draw interest from international prospects. It remains an attractive financial intermediation hub with more than 800 licensed financial institutions operating currently, of which close to 250 operate within the insurance, reinsurance and self-insurance space. This forms a strong and deep eco-system to ‘house’ a captive.

Labuan IBFC also provides a cost-efficient operating base with a robust regulatory framework and a wide range of innovative captive solutions, such as protected cell companies (PCC), master-rent-a-captive (incorporated cell company), mutual captives and association captives. This broad range of solutions enables businesses that establish their operations in the Centre maximum flexibility as they develop and mature over their individual lifecycles, which has led to an increased global client interest.

The jurisdiction is also home to the world’s only Shariah compliant captive.

IFC: Labuan is increasingly positioning itself as a home for Islamic finance. How does the jurisdiction create an attractive environment for the use of Islamic financial structures and products?

Labuan IBFC: With a complete suite of Islamic financial structures and solutions, effective regulatory standards, a facilitative business environment as well as a Shariah Supervisory Council (SSC), we are well-positioned to cater to the needs of the global Islamic industry.

Underpinning these innovative structures is Labuan IBFC’s comprehensive infrastructure with dedicated legislations, Shariah governance, and fiscal incentives for Shariah-compliant financial transactions providing a facilitative and flexible framework for industry players.

Operating as an Islamic financial entity in Labuan IBFC means that Shariah compliance is endorsed by the Labuan Financial Services Authority’s SSC (Shariah Supervisory Council) comprising leading global Shariah scholars and practitioners. Unlike other similar bodies in other jurisdictions, Labuan IBFC’s SSC takes on a supervisory role, not merely advisory, and hence SSC rulings are able to be used as reference in the court of law.

With this infrastructure, Labuan IBFC has become an innovative bed for Islamic financial products. It is home to the world’s first USD denominated exchangeable sukuk and has reinforced Malaysia’s position as the global leader in sukuk issuance.

Labuan IBFC recognises the huge potential of the Islamic FinTech landscape, with Islamic green financing being an important service that helps financial institutions adjust their balance sheets and optimise their economic capital to meet Basel III Accord requirements. Armed with Shariah principles, values and goals, Islamic FinTech is by nature financially inclusive and aims to promote economic well-being and create socio-economic equitable distribution which is in line with the spirit of the United Nation’s Sustainable Development Goals.

IFC: Financial regulators are constantly adapting to safeguard their financial systems against emerging AML/CFT threats. What mechanisms are in place in Labuan to ensure compliance with global standards?

Labuan IBFC: Labuan Financial Services Authority (Labuan FSA), being the regulator and administrator of the jurisdiction, ensures that business conducted in Labuan IBFC is in an orderly and prudent manner and that regulations adhere to global standards and are recognised by international regulatory bodies such as IMF/World Bank, APG, FATF and OECD.

Furthermore, with increasing globalisation and rapid technological advancement in the financial services where money laundering and terrorism financing risk have become more prominent in the financial market, the guidelines on AML/CFT are regularly refined by Labuan FSA, with the most recent being The Beneficial Ownership Guidelines for Legal Person and Legal Arrangement issued on 17 November 2021 and the Guidelines on AML/CFT for Reporting Institutions on 15 October 2021. It is worth noting that Labuan IBFC adheres to Malaysia’s national rules, standards and regulations with regards to AML/CFT, cementing our adherence to this integral element towards ensuring a well-regulated marketplace.

IFC: Labuan approved a record number of FinTech licences in 2020. What are the key ingredients to Labuan’s success as a digital jurisdiction?

Labuan IBFC: Labuan IBFC’s debut as a digital-friendly jurisdiction began in 2017 with just one licence and has since expanded with a wide range of digital businesses and players, from digital banking and insurtech to intermediaries such as robo-advisory, digital asset exchanges, crypto trading platforms, tokenisation licences and e-payment systems. As of 2020, the jurisdiction has approved a total of 30 Digital Financial Services (DFS) operators, bringing the total number to 62. Out of the total DFS providers, the majority were licensed to provide digital currency trading platforms, credit token businesses, and e-payment systems.

The key elements that are essential for digital service providers to thrive are currency and tax neutrality, as well as proportionality in regulation. As Labuan IBFC offers all these elements, Labuan IBFC’s “digital family” has grown significantly in the last five years.  This is in addition to the progressive approach the centre has taken in embracing the digital revolution by recognising that the nature of all Labuan legacy licences may be structured to be a digital variant for as long as all entry criteria, regulatory requirements, and supervisory needs can be met.

The COVID-19 pandemic has also profoundly impacted the international market and businesses. It has forced businesses to pivot as the old ways of doing things will not work anymore. Many organisations have had to digitally transform their operations to meet customer expectations and needs.

Labuan FSA has always encouraged digital innovation for business solutions that are tailored to current market needs while at the same time ensuring a conducive and safe operating environment for businesses. The launching of the new Labuan Digital Banking Framework in 2020 has attracted new players into the digital banking space well ahead of other key international financial centres.

This framework is in line with Labuan IBFC’s progressive and facilitative approach to financial innovations that have made Labuan IBFC the “go to” centre for digital intermediation. By creating a digitally conducive environment, Labuan IBFC’s “tool box” of digital licensed and approvals provides and attracts a wide range of operating structures for both upcoming start-ups and legacy financial services providers who are looking to venture into the digital realm.

IFC: Labuan is the only jurisdiction in Asia that offers private foundations as a wealth management solution. How important is it for Labuan to be innovative and meet the demands of HNWIs through vehicles such as foundations?

Labuan IBFC: Labuan IBFC is at the forefront of international wealth planning and intermediation, providing high-net-worth investors and families the flexibility to choose a bespoke wealth preservation solution for their unique circumstances such as private foundations, protected cell companies, and purpose trusts, all of which can be offered in a conventional or Islamic structure.

Labuan IBFC is also the only jurisdiction in Asia that offers private foundation as a wealth management vehicle and protected cell company structure for investment funds. Clearly as an innovative centre, it’s in the forefront of the wealth management industry and provides an ideal base for wealth management needs.

Labuan IBFC’s comprehensive legal provisions include a strong set of legislations that provide added comfort and protection for wealth management activities. The Centre also offers private clients an avenue for structuring and administering their wealth management, asset protection, business succession, and estate planning needs. Our established wide range of legal solutions and structures are available to suit investors seeking common and civil law wealth management solutions. These vehicles can provide for a wide array of private wealth management needs and are especially suitable for family offices and wealth managers, facilitating dynamic wealth transfer, dynastic planning, and inheritance management. The structures can be undertaken either via conventional or Islamic means to meet individual preference and, more importantly, the bespoke needs of families.

IFC: This year, the Qatar Financial Centre Authority signed a Memorandum of Understanding (MoU) with Labuan IBFC to deepen economic and financial ties between the two centres. How do you see this partnership developing and do you have similar agreements planned with other financial centres?

Labuan IBFC: The signing of the MoU with Qatar Financial Centre Authority is a significant milestone as it entails a commitment to collaborate on a number of objectives such as marketing, awareness activities, and identification of mutually beneficial initiatives. With this agreement, both parties commit to exploring a mutually beneficial framework to allow relevant financial institutions in the State of Qatar to operate in Labuan IBFC and vice versa, subject to the approval of all competent authorities.

Both financial centres also agree to collaborate on financial sector domains, such as setting up business operations with respect to Islamic finance, digital finance, capital markets, asset and investment management, and other relevant financial institutions and financial service providers within their ecosystems. The agreement further stipulates facilitating the recognition of banks, insurers, and other financial sector entities in their respective markets, subject to meeting the other jurisdiction's regulatory requirements, and collaborating to explore mutual recognition of regulations for relevant financial institutions via the competent authorities of each jurisdiction.

Following the success of this MoU, we are currently exploring possible MoUs with other key international financial centres to develop strategic collaboration towards greater market development initiatives.

IFC: The COVID-19 pandemic prompted global economic uncertainty and unstable business environments. How did Labuan IBFC remain resilient despite adversity?

Labuan IBFC: As the Centre transitioned into the new decade, it was confronted with a systemic market-wide disruption of global proportions – the COVID-19 outbreak in early 2020. The pandemic resulted in a negative impact to Labuan’s economic activities and businesses in the Centre due to the movement and travel restrictions imposed because of the pandemic. Recognising the heavy strain on Labuan IBFC and the Island’s local economy, Labuan FSA  undertook the proactive role to:

  • facilitate Labuan businesses and cushion the pandemic’s impact on the market; and
  • support the local community by providing assistance to relieve hardships via the pooling of resources.

A set of measures  was undertaken to facilitate the market which were deemed appropriate and timely to ensure licensed entities were able to operate their businesses during the adverse pandemic situation. The response measures rendered were underpinned by specific objectives and accomplished through various initiatives such as:

Policy Objectives

Response Measures

Ensuring Uninterrupted Business Operations

Communicating regulatory expectations via:

• Market reminder to undertake precautionary measures and stay vigilant.

• Adoption of effective internal controls on cyber security and AML/CFT.

Promoting Continued Client Servicing

Providing relaxations for certain regulatory requirements via:

• Temporary reprieves from non-critical requirements.

• Regulatory relaxations for specific administrative and prudential requirements.

Managing Regulatory Burden

Assessing market adversity for pre-emptive policy initiatives via:

• Market simulations on critical sectors.

• Business climate assessment through industry surveys.


IFC: You have recently partnered with Z/Yen Group on research into the role that IFCs can play in the delivery of Sustainable Development Goals. Can you share some details on the research findings and recommendations?

Labuan IBFC: The joint white paper explores the 'recalibrated' role that IFCs play in the delivery of Sustainable Development Goals (SDGs), particularly how they can facilitate financial inclusion using new and emerging digital technologies, how they can act as a crucible for positive innovation, and how they can foster debate with policy makers on sustainable and equitable development.

The paper further highlights financial inclusion being the fulcrum of equality and key to the delivery of the SDGs, and how IFCs can facilitate financial inclusion by using new and emerging technologies in the digitalisation of financial services.

Labuan IBFC, being a wholesale innovative intermediation centre, provides various technology enabled structures via the concept of a ‘digital wrapper’ with a dedicated focus on encouraging financial inclusion through its DLT (Distributed Ledger Technology) or digital structures and licences. A ‘digital wrapper’ or a digital business plan fundamentally acknowledges that the element of technology to be utilised is embedded into the business plan of each proposed licensed entity, and the regulator will then assess each applicant based on merit.

With the effects of COVID-19, it is imperative that international key stakeholders band together and work towards achieving the global aspirations of the SDGs to ensure its success.

IFC: What opportunities are ahead for Labuan IBFC in 2022?

Labuan IBFC: Labuan IBFC plans to reinforce its position as Asia’s innovative intermediation centre in a well-regulated, transparent and substance-enabling environment with diversified products and solutions. 

Our key areas for 2022:

  • Facilitate the growth of our digital financial services and digital propositions;
  • Enhance the growth of the Labuan insurance market to ensure the jurisdiction’s position as Asia’s fastest growing insurance and risk intermediation centre as well as focus on deepening the ecosystem with professional insurance intermediaries such as insurance managers and brokers;
  • Promote Islamic finance focusing on sukuk, Islamic funds and waqf foundations, encourage digital adoption within Islamic finance as well as takaful captives and umbrella funds via the PCC structure.

Our focus on Asia Pacific will continue unabated and we plan to further propagate the principles of financial inclusion and ESG.