Singapore proposes new regulatory regime for corporate service providers

Background

ACRA constantly reviews existing legislation to ensure that the corporate regulatory environment in Singapore remains competitive and robust. In 2015, the ACRA Act was amended to require filing agents and qualified individuals to be registered and comply with the recommendations of the Financial Action Task Force (“FATF”) relating to the combating of money laundering, terrorism financing and the financing of proliferation of weapons of mass destruction.

The proposals being contemplated, aim to enhance the sector's regulatory regime for the purpose of:

1. improving Singapore’s compliance with the FATF recommendations and maintaining Singapore’s reputation as a trusted financial hub; and
2. addressing the risks presented by the misuse of nominee arrangements in the creation of shell companies to facilitate money laundering; and to require individuals who act as nominee directors, by way of business, to be qualified persons.

Proposed enhancements to the regulatory regime

The legislative proposals are:

• to enact a new CSP Bill requiring all entities or persons providing corporate secretarial services in and from Singapore to register with ACRA as Corporate Service Providers ("CSPs") under the new CSP Bill, regardless of whether they need to transact with ACRA;
• to increase the maximum financial penalty for breaches of terms and conditions of registration by Registered Filing Agents ("RFAs") and CSPs from $25,000 per breach to at least $50,000 per breach;
• to increase the maximum financial penalty for breaches of terms and conditions of registration by Registered Qualified Individuals ("RQIs") from $10,000 per breach to $20,000 per breach;
• to introduce a fine not exceeding $100,000 for breaches of anti-money laundering/ countering the financing of terrorism obligations (“AML/ CFT obligations”) by, inter alia, directors, owners, partners of CSPs, committed with the connivance of, or attributable to any neglect by these individuals;
• to introduce a requirement for CSPs to conduct screening of their customers against prescribed sources of information, and to perform risk assessment on their customers;
• to introduce a requirement for CSPs to introduce group-wide AML/ CFT obligations covering their branches or subsidiaries in Singapore or elsewhere to mitigate the risks of money laundering/ terrorism financing;
• to remove the requirement for RFAs to display their notices of registration conspicuously at every place of business at which they carry out the function of a filing agent;
• to introduce a requirement for CSPs to provide ACRA with copies of Suspicious Transaction Reports that they file with the Suspicious Transaction Reporting Office;
• to remove the existing exemptions which provide that RFAs do not have to inquire on the existence of beneficial owners in relation to a customer which is a Singapore government entity or a foreign government entity;
• to introduce a provision that the AML/CFT obligations for CSPs will also cover financing of the proliferation of weapons of mass destruction;
• to introduce a requirement for CSPs to ensure that individuals they appoint to act as nominee directors are fit and proper; and satisfy prescribed training requirements, if they hold more than a legally prescribed number of nominee directorships by way of business (unless they are qualified persons); and
• to introduce a new requirement for nominee directors and shareholders to disclose their nominee status and the identity of their nominator to ACRA and for ACRA to maintain such information. The nominee status of the director/shareholder will be made publicly available.