New Regulatory Framework for Corporate Service Providers: Strengthening Anti-Money Laundering in Singapore

The Parliament of Singapore passed two key legislative measures in July 2024 to draw a line of defense against financial crime. These are the Corporate Service Providers Bill (CSP Bill) and the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill (CLLPMA Bill). These two bills are part of a broader effort to tighten the anti-money laundering (AML) laws in the country and improve transparency in corporate ownership.

These changes mark a significant overhaul to the regulatory regime in the country. Particularly, they are likely to impact corporate service providers (CSPs) and LLPs in Singapore. The bills are yet to come into effect, and businesses must consult established professionals for corporate advisory services in Singapore to stay updated through the official Government Gazette.

Key Changes in the CSP Bill

The purpose of the CSP Bill is to regulate corporate service providers more stringently. This way, the bill tries to ensure compliance with AML obligations. Check out some of the key reforms that this legislation introduces.

Mandatory Registration with ACRA

One of the most important changes under the CSP Bill is that all businesses offering corporate services in Singapore need to register with the ACRA (Accounting and Corporate Regulatory Authority). This includes companies that provide services like filing transactions, even if they do not do so directly with ACRA. Besides, the new mandate applies to businesses providing accounting-related services.

Failure to register as a CSP can result in severe penalties. The fines can range up to S$50,000 (US$37,905), while the span of imprisonment is up to two years. This regulatory move ensures that CSPs operate within a controlled framework. The process significantly mitigates the risk of unregulated service providers committing financial crimes.

Compliance with Anti-Money Laundering Obligations

With the new norms in place, registered CSPs will now be held to stricter standards when it comes to anti-money laundering. It’s essential for these firms to comply with AML regulations. Any breach can result in hefty fines and potential criminal liability for both the CSP and its senior management. For each offence, the provision for a maximum fine is S$100,000 (US$75,818).

The effort from the Singaporean government demonstrates its commitment to prevent misconduct, particularly cases like money laundering. Over the years, such crimes have exploited loopholes in the corporate services industry.

Fit and Proper Tests for Nominee Directors

Another significant change is the introduction of fit and proper tests for nominee directors. Only registered CSPs reserve the right to appoint nominee directors, and they need to first assess whether or not the individual is qualified. Nominee directors have a significant role to play in the corporate structure. Appointing unqualified individuals has often been a means to create shell companies for illicit activities like money laundering.

Those failing to meet the fit and proper standard can face fines of up to S$10,000 (US$7,582). This change is likely to prevent the misuse of nominee directorships and enhance corporate governance.

Key Changes in the CLLPMA Bill

The CLLPMA Bill focuses on improving transparency in the ownership structures of companies and LLPs by imposing stricter reporting requirements. The objectives of these amendments are to increase the visibility of nominee directors and enhance the accuracy of records related to company ownership.

Disclosure of Nominee Status

One of the major provisions of the CLLPMA Bill requires companies to disclose the nominee status of their directors to ACRA. While the identities of the nominators will remain confidential, the nominee status of directors and shareholders will be made public.

The purpose of this provision is to ensure that companies cannot hide complex ownership structures or the true identity of individuals controlling the company.

Increased Fines for Inaccurate Registers

The bill also introduces steeper fines for companies and LLPs that fail to maintain accurate and updated registers of registrable controllers, nominee shareholders, and nominee directors. For non-compliance, penalties range from $5,000 (US$3,791) to S$25,000 (US$18,956). Looking forward, companies are likely to take their reporting obligations seriously.

Conclusion

With these two bills in place, Singapore takes a significant leap in its fight against financial crime, particularly money laundering. The country tightened its regulations on CSPs and enhanced the transparency of ownership in companies and LLPs. These laws are likely to make the business environment in the country more accountable and transparent. As these amendments are not yet in force, businesses should consult professional experts at the IMC Group and stay informed on the updates. With professionals on the side, they can remain compliant with the upcoming changes.