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  • Zen Chong

Singapore Tightens Scrutiny on Family Offices: Latest Information Required by End of June

Singapore is intensifying its scrutiny of family offices, requiring them to submit up-to-date information by the end of June and increasing efforts to clean up inactive companies. This action is part of a series of measures taken by Singaporean authorities following the exposure of a $3 billion money laundering case last year, which revealed regulatory loopholes. The case involved family offices and registered filing agents, with at least one defendant linked to a tax-exempt family office. A registered filing agent had its license revoked, and nine companies under a director of this agent were linked to three defendants in the money laundering case.

MAS to Appoint Professional Task Force for Screening

Reports of tightening policies and increasing scrutiny to combat money laundering have been circulating since the end of last year. Bloomberg further reported on Tuesday (June 11) that family offices received new forms from the authorities last month, which must be submitted by the end of this month, along with an intensified effort to clean up inactive companies.

Responding to related reports, a spokesperson for the Monetary Authority of Singapore (MAS) noted on Tuesday that in December last year, MAS had announced plans to enhance the tax incentive administration process for Single Family Offices (SFOs). This involves expanding the due diligence scope to cover a broader group of individuals and entities, and taking swift action to remove tax incentives when misconduct is detected.

The MAS spokesperson stated, "MAS will also appoint a professional task force to screen the money laundering and terrorism financing risks of individuals and entities applying for tax incentives. More details will be announced in the coming months."

The spokesperson added, "These measures aim to cultivate a high-quality wealth management ecosystem and enhance the confidence of SFOs, assuring them that they are operating in a jurisdiction with strict anti-money laundering standards. In this regard, MAS has observed a strong pace of SFO tax incentive applications, faster than the years before the pandemic."

ACRA Intensifies Efforts to Eliminate Inactive Companies

A spokesperson for the Accounting and Corporate Regulatory Authority (ACRA) pointed out that ACRA has been intensifying efforts to eliminate inactive companies that are reasonably believed to have ceased business or operations.

"This is part of ACRA’s ongoing efforts to reduce the risk of inactive companies being misused for illegal purposes."

The ACRA spokesperson revealed that over the five years ending in 2023, 17,000 inactive companies were removed from the register, and the authority has since ramped up its efforts to clear inactive companies.

Inactive companies are defined as those that have not filed annual returns with ACRA for three consecutive years. These companies typically have no business activities, unlike those that have declared a "dormant" status to the authorities. Dormant companies are exempt from filing annual returns, while non-declared inactive companies are still required to submit them.

Stefanie Yuen Thio, Joint Managing Partner at TSMP Law Corporation, noted in an interview with Lianhe Zaobao that cleaning up inactive companies is a good internal management practice but not the most significant measure against money laundering. "Banks are being asked to conduct more aggressive training to ensure more effective Know Your Customer (KYC) processes, and tightening licensing regulations by MAS might have a greater impact."

Regarding the regulation of family offices, Yuen Thio said, "Singapore is taking steps to assure the broader international market that we take money laundering cases seriously. The fact that these bad actors were able to set up accounts and transfer such large sums to Singapore shows that KYC processes are not always effective. I think sending bank officers for more in-depth training is beneficial to identify common ways of evading KYC checks and the tricks used by criminals."

Gerald Singham, Senior Partner and Chief Operating Officer at Dentons Rodyk & Davidson LLP, commented that while inactive companies could indeed be exploited for money laundering, the likelihood is relatively low. Similar to how individuals might allow their Singpass to be used by scammers to open bank accounts, money laundering activities require some form of cooperation from company personnel or authorized individuals.

Regarding the requirement for family offices to submit updated information, he said, "I believe this is part of MAS's ongoing efforts as a regulatory body to strengthen scrutiny over family offices. It is a positive step to prevent the misuse of family offices for illegal activities."

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