Compliance A Strategic Advantage For Labuan IBFC, Not Business Constraint — Labuan FSA

LABUAN, Aug 4 (Bernama) -- Financial institutions in the Labuan International Business and Financial Centre (Labuan IBFC) must regard compliance as a strategic capability that strengthens competitiveness rather than merely a regulatory obligation.

Labuan Financial Services Authority (Labuan FSA) deputy director-general Syahrul Imran Mahadzir said institutions with strong compliance standards would be better positioned to preserve market access, strengthen correspondent banking relationships, attract quality businesses and inspire investor confidence.

“Compliance is no longer the price of doing business or a constraint on competitiveness. It is a source of competitive advantage,” he said in his opening remarks at the Second Labuan International Compliance Conference 2026 (LICC 2026) here today.

The conference, themed “Due Diligence and Compliance: Navigating Global Uncertainty”, was organised with the involvement of the Association of Labuan Banks, Labuan Bank-Compliance Officers’ Networking Group and Universiti Malaysia Sabah.

Syahrul said Labuan IBFC’s competitiveness rested on its ability to combine business agility with regulatory credibility, enabling legitimate businesses to grow while protecting the integrity of financial flows and maintaining market confidence.

“Labuan’s strength rests not only on efficiency and flexibility, but also on credibility,” he said.

Syahrul said compliance should be sufficiently robust to uphold accountability and regulatory confidence without unnecessarily constraining legitimate business activities and responsible innovation.

Institutions, he said, must have the discipline to ask not only, “can we do this?”, but also, “should we, and under what safeguards?”

Syahrul said Labuan FSA recognised that integrating compliance considerations into competitiveness-driven business decisions was not always straightforward.

He said the regulator would continue adopting a proportionate and risk-based approach that recognised the diversity of business models operating within Labuan IBFC.

Labuan FSA would also encourage responsible innovation supported by appropriate safeguards, provide regulatory guidance, facilitate capability-building programmes and reinforce the accountability of boards and senior management.

“Boards and senior management of Labuan financial institutions must remain responsible for their organisations’ risk culture, compliance resources and the effectiveness of their controls,” he said.

Meanwhile, Syahrul said Malaysia’s 2025 Financial Action Task Force Mutual Evaluation marked an important milestone for the country and Labuan IBFC’s anti-money laundering and counter-terrorism financing framework.

He said the assessment recognised Malaysia’s substantial progress since the previous evaluation in 2015 and placed the country under the highest level of “Regular Follow-Up”, compared with its previous “Enhanced Follow-Up” status.

The achievement, he said, reinforced Labuan IBFC’s position within Malaysia’s broader compliance framework and demonstrated its commitment to international regulatory standards.

Syahrul also called for stronger cooperation between Labuan FSA and industry players, as well as closer collaboration among financial institutions, to prevent emerging risks from being managed in isolation.

“In an increasingly digital, interconnected and complex financial world, no institution or jurisdiction can stand alone,” he said.

He said the industry’s three compliance officers’ networking groups should work more closely with one another and collectively serve as a stronger bridge between Labuan FSA and the market.

“Good compliance is not about having the thickest policy manual on the shelf. It is about exercising the best judgement when it matters most,” he added.

-- BERNAMA