Mr. Nor Rashidi Mohammad
Associate Professor Dr. Geoffrey Harvey Tanakinjal
Dean of the Labuan Faculty of International Finance, Universiti Malaysia Sabah (UMS),
Ms. Annie Undikai
Mr. Elvin Mingel
Esteemed Members of the Audience.
1. Assalamualaikum & a very good Labuan morning to everyone. It is a real pleasure for me to be here at the Second Labuan International Compliance Conference (LICC 2026). Let me put on record my sincere appreciation to ALB, the LB-CONG, UMS and to everyone who have worked tirelessly behind the scene to bring today’s conference together. A platform like this reflects more than a mere act of event coordination - it reflects our shared recognition that Compliance now sits at the heart of Labuan IBFC’s financial credibility. In fact, this second Conference edition certainly represents a firm step in strengthening collaboration to embed stronger compliance culture within our market.
2. We meet at a time when the financial sector is being reshaped by powerful dynamics — global uncertainty, rapid techno advancements and increasingly, complex cross-border financial activities. With recent events since 2025, economic volatility and geopolitical tensions are affecting the capital flows, sanctions exposure, correspondent banking relationships and the way financial institutions (FIs) assess jurisdictional risk.
3. At the same time, technology is transforming financial intermediation. Digital assets, tokenisation, stablecoins, AI-enabled financial services and automated eKYC are no longer matters at the peripheral - It is now part of mainstream risk conversations. Together with rising expectations on sustainability, cybersecurity and data governance; these innovations are redefining how FIs address complexities brought about by digital financial crime exposures — and how regulators then judge Fis’ resilience.
In simple terms,
financial crime has also gone digital:
It is faster.
It is more networked.
It is more sophisticated.
And it does not respect borders.
From FIs’ lenses, this matters because illegal proceeds of fraud, cybercrimes and investment scams may eventually seek entry into the formal financial system through their business dealings.
4. Against this backdrop, the issue is not “innovation versus regulation”. But rather it is “innovation with responsibility”. New technologies and innovative businesses must be allowed to grow — but with safeguards strong enough to preserve confidence, credibility and the integrity of the financial system. FIs must be agile enough to remain relevant, but careful enough to remain trusted. They must embrace innovation with clear governance and sound risk controls. More importantly, they must have the discipline to ask not only “Can we do this?”, but also “Should we — and under what safeguards?”
This is why compliance must become more intelligent, more data-driven and more alert to real-world risk patterns.
Ladies and Gentlemen,
5. Amidst the digital wave and risk exposures, the global direction is clear: compliance is moving from paperwork to proof. Policies, files and checklists still matter, but they are no longer the full test. FIs must show that risks are understood, controls are working, and red flags are acted upon adequately. A well-completed file is important, but a well-understood customer is far more valuable. This is why compliance officers today are not merely rule interpreters - In fact they are risk translators, control advisers and guardians of organisational trust. Technology can generate alerts, dashboards can show trends, and AI can detect patterns — but sound judgement remains essential. The most important question in compliance is still a human one:
Does this make sense?
6. For Malaysia and Labuan IBFC, this discussion is especially important. Malaysia’s latest FATF Mutual Evaluation which was completed in 2025 is an important credibility marker for the country’s and Labuan IBFC’s AML-CFT regime. The assessment recognises that Malaysia has significantly strengthened its defences against illicit finance since the previous evaluation in 2015. Malaysia was recognised for its strong technical compliance ratings, with 24 FATF Recommendations rated ‘Compliant’ and 16 rated ‘Largely Compliant’.
7. This reflects Malaysia’s and Labuan’s continued commitment to international AML/CFT standards and to maintaining a credible, transparent and well-regulated financial system. FATF has identified fraud and investment scams, cross-border crime and misuse of corporate structures as key elements of Malaysia's evolving risk profile. As digital finance continues to expand, the growing use of virtual assets, including stablecoins and unhosted wallets, will create additional avenues for money laundering and terrorism financing, enabling illicit fund flows and criminal proceeds to be concealed across peer-to-peer transfers, cross-chain transactions and virtual asset networks.
8. Likewise, the United Nations Office on Drugs and Crime (UNODC) has warned that scam centres, underground banking networks and illicit online marketplaces in Southeast Asia are becoming more organised and globally connected. As these criminal networks grow more sophisticated and digitally enabled, illicit proceeds from fraud, cybercrime, illegal online gaming and investment scams are increasingly finding pathways into the legitimate financial system. This presents a significant challenge for FIs in combating money laundering, while sharpening expectations for them to stay ahead of the curve in compliance.
9. With the heightened regulatory scrutiny on digital financial crimes, global regulatory enforcements continue to intensify. To put this into perspective, allow me to share publicly prominent statistics with you:
- FATF 2026 targeted report noted that stablecoins had exceeded USD300 billion in market capitalisation by mid-2025; and that illicit virtual asset activity has increasingly involved virtual assets;
- UNODC estimates that industrial-scale scam centres generate just under USD40 billion in annual profits, with proceeds laundered through cryptocurrencies, underground banking and global financial channels; and
- Global financial institution penalties in the first half of 2025 totalled about USD1.23 billion, a 417% increase from the prior year, with digital asset firms increasingly in focus.
10. As digital-related crimes become faster and harder to trace, compliance can no longer rest on policies and checklists alone. Regulators are looking for outcomes — whether risks are understood, controls are effective, and red flags are escalated early. This is especially critical in sanctions compliance and beneficial ownership, where FIs must screen exposures continuously, look beyond legal structures, and assess whether arrangements make real commercial sense. Technology - from AI and RegTech to blockchain analytics can strengthen detection, but it must support, not replace, sound judgement of compliance officers.
11. This is where Labuan IBFC’s message is clear. As an international business and financial centre, Labuan’s strength rests not only on efficiency and flexibility, but on credibility. Trust is what sustains an IFC — trust in its laws, regulation, institutions and financial flows. Labuan IBFC is therefore not about LIGHT-touch regulation, but RIGHT-touch regulation. In short, we focus on promoting proportionate, risk-based and internationally aligned conformity — enabling legitimate businesses to grow while keeping the system trusted.
Ladies and Gentlemen,
12. In a landscape marked by diverse forms of financial threats and multi-dimensional risks, FIs must move beyond a checklist approach to compliance and adopt a more risk-based mindset. In this regard, let me share four priorities that I believe are critical for FIs of today:
- Effective compliance begins with understanding the customer, not merely maintaining customer records. This requires enhanced due diligence for cross-border activities, complex ownership structures and higher-risk counterparties, while keeping customer risk profiles current as ownership, source of funds, business transaction patterns and digital asset exposure evolve.
- FIs must also strengthen their ability to detect and respond to emerging risks through timely, intelligence-led transaction monitoring. This includes screening processes, monitoring practices and identifying anomalies more efficiently. Sanction controls likewise need to be timely, comprehensive and supported by effective governance and escalation procedures.
- A one-size-fits-all approach may not be appropriate considering many Labuan institutions are branches or subsidiaries of larger international financial groups, with business mandates, governance and control functions aligned to group-wide strategies. Controls should be sufficiently proportionate that fit for each Labuan institution’s business model, risk profile and customer base.
- Compliance is critical, it should not operate in isolation or unnecessarily constrains legitimate business. Rather, it should strike the right balance - robust enough to uphold accountability and regulatory confidence, while supporting responsible business growth.
13. Ultimately, compliance is not a cost of doing business—it is a strategic capability that sustains market access, and preserves trust in the financial system.
Ladies and Gentlemen,
14. The LICC 26 is especially timely, following the conclusion of Malaysia’s Mutual Evaluation 2025 as I had mentioned earlier. Indeed, this is a significant milestone in the country's and Labuan IBFC’s AML-CFT regime. The assessment recognised Malaysia’s substantial progress since 2015 and had upgraded the country’s rating to the highest level of “Regular Follow Up” from the earlier “Enhanced Follow Up” rating.
15. For Labuan IBFC, this achievement reinforces its position as part of Malaysia's broader compliance framework. As an IBFC, Labuan's competitiveness rests on credibility. Labuan’s value proposition is its ability to combine business agility with regulatory credibility — supporting legitimate growth while protecting clean financial flows and market confidence.
Ladies and Gentlemen,
16. We are navigating a volatile and uncertain times. While compliance is critical, it should not operate in isolation and unnecessarily constrains business. This points to a fundamental shift in how compliance is viewed: compliance is no longer the price of doing business nor a constraint on competitiveness—it is a source of competitive advantage. FIs that can achieve the balance to strengthen compliance and innovate to remain competitive, are better positioned to maintain market access, strengthen correspondent banking relationship, attract quality business, and inspire investor confidence. Compliance, therefore, is not a trade-off against competitiveness,
it is what enables institutions to pursue new opportunities responsibly, while maintaining regulatory confidence and long-term business edge.
17. This brings me to the role of Labuan FSA. We recognise that balancing compliance into competitiveness-driven decision-making is not always straightforward. Labuan FSA remains committed to creating an enabling business environment that supports both resilience and credible growth. We as the Labuan IBFC’s regulator, would continue to:
- adopt a proportionate and risk-based approach that recognises the diversity of business models within Labuan IBFC;
- encourage responsible innovation supported by appropriate safeguards;
- provide regulatory guidance through supporting effective implementation of evolving requirements;
- facilitate capability building through continuous industry engagement, training, knowledge sharing; and
- promote governance and accountability by reinforcing that Boards and senior management of Labuan FIs to remain responsible for their entity’s risk culture, compliance resources and control effectiveness.
Closing
Ladies and gentlemen,
18. Before I close, allow me to return to the theme of this conference “Due Diligence and Compliance: Navigating Global Uncertainty”. In a financial world that is increasingly digital, more interconnected and complex; no institution or jurisdiction can stand alone. Stronger cooperation — between Labuan FSA and the industry, and inter-FIs themselves, is essential to ensure that risks are not managed in silos; but addressed collectively and cohesively. In this regard, we envisage that the three industry CONGs to work closely between one another and collectively bridge Labuan FSA to the market more intricately.
19. On that note, May today’s Conference offer you fresh insights and practical takeaways. Do remember that: Good compliance is not having the thickest policy manual on the shelf—it is about exercising the best judgement when it matters most.” Because compliance is simply doing the right thing—with Integrity, Clarity and perhaps the most effective control of all: plain Common Sense....
Thank you and have a great conference ahead!
