29-4-2024 (SINGAPORE) In the wake of last year’s multibillion-dollar money-laundering scandal that rocked Singapore, the rapid expansion of Chinese family offices in the city-state has been reined in amid tighter scrutiny on new applicants.
The sprawling case first erupted into public view in August when 10 China-born suspects were arrested, some with links to Singapore’s approximately 1,400 single family offices – private wealth management firms that oversee the financial affairs of affluent families or individuals.
Prime Minister-in-waiting Lawrence Wong, who also chairs the Monetary Authority of Singapore (MAS), confirmed the number of such offices in a recent parliamentary response. About 10% handle assets of Chinese origin, according to Loh Kia Meng, Chief Operating Officer at law firm Dentons Rodyk.
While that proportion is expected to hold steady, Loh told This Week in Asia that the growth rate of Chinese family offices has decelerated markedly due to heightened asset requirements in the city-state. “I anticipate the growth rate to continue to be stable in the next two to three years, assuming no major changes to tax incentive schemes’ qualifying criteria,” he said.
The increased vigilance coincides with Singapore’s presidency of the Financial Action Task Force (FATF), the global anti-money laundering watchdog. In November, FATF unveiled new measures to intensify monitoring of residency and citizenship-by-investment programs, warning they are “attractive to criminals laundering illicit proceeds.” Many of the arrested suspects held foreign passports.
However, the city-state is hardly abandoning family offices. In February, the government extended certain tax incentives for them until end-2029 – a move Loh said “signals Singapore’s commitment to attract and support fund management and private wealth management.”
Beyond regulatory tightening, other factors like elevated property prices and higher stamp duties for foreign buyers, introduced last year, have cooled Chinese investor appetite, suggest industry insiders. A consultant revealed some wealthy Chinese are exploring Singapore and regional company investments but valuation gaps stymie deal-making.
Still, the government persists in enhancing Singapore’s allure. Loh expects forthcoming changes in Q3 this year to broaden tax breaks for Singapore-registered limited partnerships, affording fund managers “more flexibility” in structuring investment vehicles.
He added that family office investments may increasingly pivot towards philanthropy and sustainable projects locally – “a sign of a maturing private wealth management landscape” as the initial boom cohort also matures.
Complementing these efforts, Singapore’s Wealth Management Institute rolled out twin initiatives last September to deepen family office engagement. One guides new arrivals through the investment landscape, while the other bolsters sector capabilities and compliance safeguards against financial crimes like money laundering.
In a statement, MAS said it “actively collaborates with international counterparts to effectively combat money laundering and syndicated crime networks” which often operate across borders, though it declined to comment on specifics.
Despite the headwinds, the lucrative family office sector remains pivotal for Singapore’s ambitions to cement its wealth management hub status. With over $3 billion in assets seized thus far, the aftermath of last year’s scandal will likely only spur the city-state to double down on regulatory rigour and reassure ultra-wealthy clients that their fortunes are in responsible hands.
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