Impact Of The Enhanced Regulatory Framework

The enhancements were implemented in order to comply with the recommendations made by Financial Action Task Force (FATF), an inter-governmental organization established in 1989. FATF sets global standards to prevent and detect money laundering and terrorism financing (MLTF). Singapore’s compliance with FATF recommendations will be assessed in second half of 2015.

Anti-social elements often use companies or other business entities to veil their illicit financial activities such as money laundering, tax evasion, terrorism financing etc. CSPs are at risk of being abused by such perpetrators to set up complex business structures to camouflage their clandestine activities. The aim of the enhanced framework is to ensure that the CSPs have failsafe systems and processes to prevent nefarious financial activities. The aim is also to enhance the professional standards of the industry in order to exalt the position of Singapore as an international financial centre and business hub.

The foremost requirement under the enhanced regulatory framework is the registration of Filing Agents (FA) and Qualified Individuals (QI). Entities and individuals providing filing services for businesses and corporations will have to undergo a new registration exercise with ACRA. Such registered entities and individuals will have to comply with the legal obligations contained in the new Part VI A of the Act and comply with the applicable terms and conditions imposed by the First and Second Schedule of the Regulations. The companies that are registered in Singapore and those that are going to be registered in Singapore, will have to furnish details to their CSPs in order to comply with the obligations under the new framework.

Registering as Filing Agents (FA)

Under the enhanced framework, entities are required to be first registered as FAs in order to provide statutory filing services to their clients using ACRA’s electronic filing service. Accordingly, entities that provide the following services are required to register as FAs:

• Company incorporation / business registration
• Nominee director/ secretary for a corporate
• Partner for partnership or similar service
• Nominee shareholder service for a client other than a corporation listed on Singapore exchange
• Registered office address, business address or related service
• Any other statutory business services

In order to be registered as an FA, the entity must fulfil the following conditions:

• Must be registered with ACRA as a business, company, Limited Liability Partnership (LLP), or Partnership
• In case of a sole proprietor, the person must also be a Qualified Individual (QI), or in the case of an LLP or Partnership, at least one partner is a QI or employs or engages a QI.

A non-refundable fee of S$200 is payable for new applications and renewal.

Registering as Qualified Individuals (QI)

• A Qualified Individual is a person who performs filing transactions with ACRA on behalf of clients. The following individuals would fall under the following categories:
• Advocate / solicitor
• Members of the Singapore Association of Institute of Chartered Secretaries and Administrators (SAICSA)
• Members of Institute of Singapore Chartered Accountants (ISCA)
• Members of Association of International Accountants
• Registered Public Accountants
• Members of Institute of Company Accountants
• Corporate Secretarial Agents

It is important to note that after successful registration as a QI one cannot start filing transaction using the electronic systems. The registered QI can only do so if he is appointed, employed or engaged by a registered FA to act as its registered QI, or is a registered FA himself. Employees of the FA may carry out transactions under the supervision of the QI, and hence for this purpose, the QI must submit the particulars of such employees to ACRA electronically. A non-refundable fee of S$100 is payable for fresh applications and renewal.

General Qualifications for FA and QI

In the case of individuals, the applicant must be a ‘fit and proper’ person and must not be an un-discharged bankrupt or an ex-convict.

In the case of entities, the directors or partners or individuals, directly or indirectly involved in its management, must be a ‘fit and proper’ person and must not be an un-discharged bankrupt or ex-convict.

Besides the requirements above, the applicants must fulfil other qualification and experience requirements as well. The history of the applicants’ professional conduct and compliance will be reviewed by ACRA before approval.

Upon successful registration, ACRA will issue the registered FA with a professional number, which has to be used by the registered QI, together with the registered QI’s authentication code, SingPass, in order to file transactions. Employees may file transactions under the registered QI’s supervision.

Transition of the CSPs to new framework

ACRA had earlier implemented a transition exercise from 13 April to 8 May 2015.  The exercise was to facilitate the transition of the Corporate Service Providers (CSP) to the enhanced framework by choosing to register as Filing Agents and Qualified Individuals.

Business entities that have been issued a Professional Number by ACRA to file transactions on behalf of the clients were known as Professional Number Holders. After the onset of the enhanced regulatory framework, such Professional Number Holders who opted to move to the new regime are now known as registered Filing Agents (FA). These FAs enjoy seamless transition to the new regime and continue to file transactions on behalf their clients via Bizfile using their existing professional number.

The employees or appointed agents of the Professional Number Holders were known as Prescribed Persons. When the Professional Number Holders made the transition to FA, a minimum of one and up to two Prescribed Persons were also required to make the transition to the new enhanced regime as Qualified Individual (QI), in order to continue filing transactions on behalf of Filing Agents. The FAs and QIs, who have made the transition, enjoy fee waiver until their respective registration falls for renewal in March 2016.

The Professional Number Holders who had decided to opt out from the transition to the new regime will no longer be able to file transactions with ACRA’s electronic transaction system as their registrations as Professional Number Holders and Prescribed Persons registrations have lapsed. However, if such entities eventually choose to register under the new regime, they may do so by filing a fresh application. An authorized representative must submit the application.  An authorized representative is one who is already registered with ACRA as the Officer, Manager, Business Owner or Partner of the entity that is using the Professional Number.  A non –refundable application fee of S$200 is payable.

Obligations of Filing Agents under the enhanced framework

In general, FAs must take measures to:

• Identify and verify the identity of customers and agents
• Identify and verify beneficial owners
• Conduct on-going monitoring of business relationships
• Take a risk-based approach and perform enhanced due diligence measures for higher risk customers and for Politically Exposed Persons (PEPs)
• Appoint an internal audit function and appoint a compliance manager

Implications for companies registered / to be registered in Singapore

With the new obligations under the enhanced regulatory framework, the CSPs engaged by Singapore registered companies will need to obtain further information such as the following:

• Full Name, NRIC or Passport number, Residential Address and Nationality of individual client
• Proposed company’s information, including its business activities
• Full Name, NRIC or Passport number, Residential Address and Nationality of the Ultimate Beneficial Owner (“UBO”), Directors and Shareholders of the company
• Declaration that client is not a Politically Exposed Person (“PEP”)

CSPs in Singapore would usually have requested for most of the above stated information at the time of company incorporation. If such information were not requested earlier, then the Singapore registered companies will soon be requested to furnish details by their CSPs. In the event of failure to produce such details, your CSP may terminate their service agreements with you. If your CSPs do not approach you for additional information as stated above, they may lose their license, on the grounds of non-compliance, as part of the sanctions imposed by CSP Enforcement and Regulation Department (“CERD”). The CERD was established by ACRA to oversee the administration of the new regime and regulate the CSPs.

It must be noted that the declaration of non-PEP is clearly a latest requirement. A PEP is an individual who is or has been entrusted with a prominent public function by a government. The term also covers family members and close associates of such individuals. Due to the privileges associated with their position and their influence, it is recognized that many PEPs are in positions that can be potentially abused for the purpose of committing money laundering (ML) offences and related offences, including corruption and bribery, as well as conducting activities related to terrorist financing (TF). This new requirement does not mean that CSPs must refrain from having business relationships with PEPs but will have to fulfil the obligation of additional customer due diligence to prevent any financial malpractices.

Closing Note

With the proliferation of financial offences and terrorism financing there is a global drive to clamp down all potential channels that are susceptible to abuse. Therefore CSPs have been identified as vulnerable channels, and are now being subjected to strict regulations like financial institutions regulated by Monetary Authority of Singapore (MAS). The objective of the highly regulated landscape is to flush out financial offence and terrorism financing, while promoting a healthy ecosystem where businesses thrive.