Malaysia’s central bank governor, Muhammad Ibrahim, who is also chairman of the Labuan Financial Services Authority, said that the FSA would implement the initiative in 2017.
“Labuan IBFC will […] implement the Inter-Governmental Agreement of Model 1B, which will facilitate compliance by financial institutions in the [finance] centre to the Foreign Account Tax Compliance Act and exchange information with the United States.”
No details were provided at this stage about what form the compliance facilitation will take.
The onerous cost of complying with Fatca has prompted financial institutions around the world to reassess or withdraw the services they offer to US citizens.
Merrill Lynch, one of the ‘big four’ investment banks in the US, will no longer work with US citizens living abroad following the closure of all expat accounts in October.
In September, the UAE arm of Generali announced that they were no longer accepting US clients for its savings and investments business.
Brokers Charles Schwab suspended US clients from new trades in the region the same month. Existing clients in the UAE, however, will not be affected by the changes.
Vince Truong, partner at Dubai-headquartered financial planners Holborn Assets, said that the with the “reporting obligations imposed by the US, it’s simply too expensive (and potentially ruinous, in the event of an accidental breach of procedure) to have US clients”.
In addition to supporting financial institutions with Fatca compliance, Labuan IBFC also reiterated its ambition to become a ‘midshore’ centre rather than an offshore one.
“As a midshore centre, it offers both the ease of doing business found typically in the offshore centres, combined with high international standards of regulation and supervision found onshore,” Ibrahim said.
“We now need to further refine the ‘midshore centre’ concept by moving away from broad-based financial services already widely offered and available onshore, to focus on niche areas with high growth potential.”
Ibrahim identified wealth management, commodity trading, leasing, and captives as areas that have “continued to show an upwards trend in driving the centre’s growth in recent years”.
“Wealth management, in particular, offers a unique value proposition given that it is the only international financial centre in Asia to offer private foundations and special purpose trusts, including Islamic foundations or waqf.”