Singapore Passes New Bills to Enhance Regulations for Corporate Service Providers Sector

The Corporate Service Providers Bill (CSP Bill) and the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill (CLLPMA Bill) were passed by the Parliament of Singapore on July 2, 2024. The CSP Bill seeks to enhance regulations for the corporate service providers sector, while the CLLPMA Bill seeks to enhance the transparency of the beneficial ownership of companies and limited liability partnerships.

Together, the bills seek to combat financial crime and ensure Singapore’s regulations for the corporate service providers (CSPs) sector and beneficial ownership are in line with the standards of the Financial Action Task Force (FATF).

CHANGES INTRODUCED BY THE CSP BILL

The CSP Bill introduces the following key changes:

1. All Business Entities Providing Corporate Services in and from Singapore Are Required to Register with ACRA as CSPs.

Under the current regulations, only CSPs that carry out transactions with the Ministry of Finance of the Government of Singapore’s Accounting and Corporate Regulatory Authority (ACRA) on their customers’ behalf are required to register with ACRA.[1]

Companies and other business entities that operate in Singapore and provide any corporate services will now be required to be registered as CSPs even if they do not file transactions on behalf of their customers with ACRA (e.g., entities that provide corporate services exclusively to overseas clients and do not transact with ACRA). In addition, companies and other business entities that carry on a business in Singapore of providing the corporate service of carrying out any designated activity in relation to the provision of any accounting service[2] will also be required to register as CSPs. 

An entity that breaches the requirement to be registered as a CSP shall be liable upon conviction to a fine of up to $50,000, imprisonment for a term of up to two years, or both. In the case of a continuing offense, entities can be subject to an additional fine of up to $2,500 for every day or partial day during which the offense continues after conviction.

2. All Registered CSPs Are Required to Comply with Obligations, Including ‘AML/CFT/PF Obligations.’

Currently, companies and other business entities that do not file transactions on behalf of their customers with ACRA are not required to be registered as registered filing agents (RFAs) and, consequently, are not subject to Anti-Money Laundering, Countering the Financing of Terrorism, and the Proliferation of Weapons of Mass Destruction (AML/CFT/PF obligations). The changes aim to ensure consistency with the FATF’s recommendations relating to AML/CFT/PF obligations and that registered CSPs comply with the requirements under the United Nations Act 2001. 

Registered CSPs will be required to comply with obligations relating to the financing of the proliferation of weapons of mass destruction, in addition to obligations relating to anti-money laundering and counter-terrorism financing. This serves to plug a regulatory gap where CSPs that are not RFAs could be engaged by customers to facilitate illicit activities.

3. Fines Will Be Introduced for Breaches of AML/CFT/PF Obligations Made by Registered CSPs and Their Senior Management.

Criminal liability will be imposed on registered CSPs and their senior management for breaches of AML/CFT/PF obligations. Fines for such breaches include the following:

• A registered CSP that breaches the AML/CFT/PF obligations will be liable, on conviction, to a fine not exceeding $100,000 per breach
• Senior management of a registered CSP that fails to ensure the registered CSP complies with its AML/CFT/PF obligations will also be liable, on conviction, to a fine not exceeding $100,000 per breach

The changes aim to ensure that the maximum fines for AML/CFT/PF obligation breaches by registered CSPs and their senior management are commensurate with the risks of money laundering, the financing of proliferation of weapons of mass destruction, and terrorism financing in Singapore.

4. Persons Will Be Prohibited from Acting as Nominee Directors by Way of Business Unless the Appointments Are Arranged by and Assessed as Fit and Proper by Registered CSPs.

Following the amendments, a person must not by way of business act as a nominee director of a company unless the appointment of the person as a nominee director of the company is arranged by a registered CSP. A person who breaches this requirement is guilty of an offense and shall be liable on conviction to a fine not exceeding $10,000.

Additionally, a registered CSP must not arrange for a person to act as a nominee director of a company unless it is satisfied that the person is fit and proper. In determining whether the person is a fit and proper person, the registered CSP must take reasonable steps to satisfy itself that the person is not disqualified from acting as a director of a company under any written law, and consider other factors prescribed in subsidiary legislation. The obligation to determine that the person a registered CSP arranges to act as a nominee director satisfies fit and proper requirements is required to be fulfilled at the time of arrangement and is not continuous. A registered CSP that breaches this requirement shall be liable on conviction to a fine not exceeding $100,000.

Employees appointed as directors for their company, or a related company, will not be required to be appointed through CSPs.

The changes aim to prevent the misuse of nominee directorship arrangements by way of business in creating shell companies to facilitate money laundering, such as where CSPs arrange for unqualified individuals to act as nominee directors for their customers.

CHANGES INTRODUCED BY THE CLLPMA BILL

The CLLPMA Bill introduces the following key changes:

1. The Nominee Status of Nominee Directors and Nominee Shareholders and Their Nominators’ Identities Are Required to Be Disclosed to ACRA.

Companies and foreign companies will be required to file all information kept in their registers of nominee directors and nominee shareholders with ACRA, and for ACRA to maintain such information.

Upon disclosure to ACRA, the nominee status of the director and shareholder will be made publicly available and be added to business profile extractions. However, only public agencies may access the full information maintained by ACRA for the administration or enforcement of any written law.

The changes seek to mitigate money-laundering risks by enhancing the transparency of nominee arrangements, as it can trigger additional scrutiny and customer due diligence by AML-obligated entities if a company or foreign company has nominee directors or shareholders. It will also ensure Singapore’s continued compliance with the FATF’s update of its standards on beneficial ownership, in which nominee directors and nominee shareholders are required to disclose the identity of their nominators to the Singapore Company Registrar, and to publicly disclose their nominee status.

2. Fines Pertaining to the Registration of Registrable Controllers, Nominee Directors, and Nominee Shareholders will Increase.

The maximum fines for offenses pertaining to (1) the registration of registrable controllers, nominee directors, and nominee shareholders for companies and (2) the registration of registrable controllers for limited liability partnerships fines will increase from $5,000 to $25,000.

These changes aim to ensure the accuracy of information maintained in entities’ registration of registrable controllers, nominee directors, and nominee shareholders and that the accompanying fines are appropriately dissuasive and in line with the FATF’s recommendations.

KEY TAKEAWAYS

General considerations for entities that may be affected by the bills include the following:

• The proposed amendments have yet to take effect. ACRA has indicated it intends to communicate the effective date of commencement in advance and provide the necessary lead time for CSPs to implement changes in accordance with the legislative requirements and that amendments may potentially commence in stages
• Companies that carry on a business in Singapore of providing any corporate service— including carrying out any designated activity in relation to the provision of any accounting service—and that are not currently registered as a CSP will need to consider if they fall under the new CSP regulations

  Regarding nominee director services, affected entities should consider the following:

• CSPs that currently offer nominee director services should consider updating their internal policies in due course to incorporate procedures for determining if an individual is fit and proper to act as a nominee director
  • ACRA has indicated that further details will be provided in the subsidiary legislation and guidelines will be provided to help CSPs determine how to apply fit and proper requirements
  • Factors to be considered will include satisfactory conduct and compliance history; sufficient competency, capacity, and capability to properly discharge his/her duties as a director; and whether the nominee director displays commercial integrity
  • There may be increased compliance costs associated with these enhanced requirements
• While the new requirement for fitness-and-propriety assessments will not apply retrospectively to existing nominee director appointments, CSPs offering nominee director services may still wish to carry out fit-and-proper assessments for the nominee directors that it works with or refresh the fit-and-proper assessment that it had previously conducted on nominee directors, where such individuals are arranged to act as a nominee director for many of the CSP's clients on an ongoing basis
• Companies that use nominee directors and shareholders should be aware that, following the amendments, the nominee status of such directors and shareholders will be made publicly available and will be reflected on public business profile searches conducted on the company; however, only public agencies may access the full information maintained by ACRA in relation to such nominee directors and shareholders