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).
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:
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.
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.
General considerations for entities that may be affected by the bills include the following:
Regarding nominee director services, affected entities should consider the following:
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:
*A solicitor of Morgan Lewis Stamford LLC, a Singapore law corporation affiliated with Morgan, Lewis & Bockius LLP
[1] Corporate service includes any of the following services: (1) forming of business entities, (2) acting/arranging for persons to act as directors/nominee shareholders, (3) transacting with ACRA on behalf of other persons or as a secretary of a company by way of business, (4) providing registered office/business address for business entities, and (5) carrying out transactions for customers concerning any of the designated activities relating to the provision of accounting services.
[2] Not all accounting service providers have to register as a registered CSP. Only business entities that carry out the designated activities in relation to the provision of accounting services must be registered with ACRA under the CSP regulations. Designated activities include the buying or selling of real estate; management of client funds and bank accounts; the organization of contributions for the creation, operation, or management of corporations; and the buying and selling of business entities. Accounting services refer to financial accounting services, internal audit services, management accounting services, or taxation services. ACRA has indicated that it will provide further guidelines and illustrative examples of designated activities and accounting services.