New Bill to strengthen measures against misuse of companies

In order to provide stronger oversight to weed out illicit corporate activities, Singapore has adopted a whole-of-government approach to combat money laundering and terrorism financing.

Under the proposed Corporate Service Provider Bill (the “Bill”), targeted to be passed in early 2024, the proposed legislative amendments seek to address the risks presented by the misuse of nominee arrangements in the creation of shell companies to facilitate money laundering and require individuals who act as nominee directors, by way of the provision of services in exchange for a fee or an award, to be qualified persons.

To force corporate service providers (“CSPs”) and their senior management to implement such measures, they will be subject to enhanced penalties for breaches of their anti-money laundering and countering the financing of terrorism (“AML/CFT”) obligations, especially in connection with their appointment of nominee directors.

Proposed Amendments to Companies Act 1967 (“Companies Act”)

In order to align government bodies and their regulations with the proposed provisions of the Bill, there are also proposed legislative amendments to other acts, such as the Companies Act. The proposed legislative amendment to the Companies Act is to require CSPs to register with the Accounting and Corporate Regulatory Authority (“ACRA”) to disclose their nominee status, as well as the identity of their nominators. Upon disclosure to ACRA, the nominee status of the director/shareholder will be made publicly available.

At this stage, neither the Singapore Parliament nor ACRA have definitively stated whether the nominee status of shareholders or directors will be reflected in the ACRA business profile of the company. While it is possible that such information will only be reflected in a separate register disclosed only to ACRA (like the register of controllers), the companies currently utilising nominee shareholder or nominee director arrangements should be prepared for the eventuality that the nominee status (as well as the identities of the nominators) of its shareholders or directors will become much more accessible.

Corporate Service Providers Bill

The Bill proposes, inter alia, to impose an obligation on CSPs to implement a group-wide AML/CFT policy requiring their branches and subsidiaries in Singapore or elsewhere to have a group policy to mitigate their AML/CFT risks. In addition, CSPs will be required to conduct the screening of their customers against prescribed sources of information (i.e. the relevant United Nations lists and Ministry of Home Affairs lists), and to perform risk assessment on their customers.

While the specific measures outlined above may be conducted by the CSP without the involvement of its clients, companies currently engaging CSPs in Singapore should take note that their respective CSPs may impose more stringent KYC requirements in the coming months in anticipation of the passing of the CSP Bill.

Li Ke Cheng | Bérengère Roig

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