12-6-2024 (SINGAPORE) Singapore is intensifying its oversight of investment firms, including family offices and hedge funds, in the wake of high-profile financial scandals that have exposed vulnerabilities in the city-state’s regulatory framework. The authorities are demanding more detailed information and stepping up the closure of dormant companies, signaling a renewed commitment to bolstering the integrity of the financial hub.
The government’s push to tighten various investment regimes has accelerated since March, with agencies setting out additional requirements that must be met in the coming months and ramping up the removal of inactive corporate entities, according to sources familiar with the matter.
In a notable move, family offices that have been granted tax exemptions were issued new forms in May, requiring them to provide greater details about their operations. These forms, which carry a submission deadline of June 30, seek to delve deeper into the backgrounds of beneficial owners, directors, representatives, and shareholders, including their potential involvement in money laundering or terrorist financing activities.
Furthermore, the Monetary Authority of Singapore (MAS) confirmed in March that it would repeal a licensing regime commonly used by smaller hedge funds with assets up to $250 million by August 1. These firms will be migrated to a stricter regime with heightened reporting requirements, underscoring the authorities’ determination to strengthen oversight.
Singapore’s intensified scrutiny comes in the aftermath of a series of criminal cases that have highlighted the challenges of policing the influx of foreign wealth into the city-state. At least one of the accused in a recent $3 billion money laundering case was linked to family offices that had been granted tax exemptions, raising concerns about the potential exploitation of regulatory loopholes.
“Having more (and ideally more varied) data helps with potentially detecting undesirable activity earlier, which can help to minimise any loss of economic impact or reputation that illegal activity may cause,” said Richard Crowley, an assistant professor of accounting at Singapore Management University.
In addition to the increased information demands, the Accounting and Corporate Regulatory Authority (Acra) has been proactively reaching out to the directors of some inactive companies, with the goal of striking them off the register. This move is part of broader efforts to reduce the risk of dormant entities being misused for illicit purposes.
While these measures are expected to add to the compliance costs for smaller firms operating in Singapore, industry experts acknowledge the potential benefits of improved data quality and the closure of loopholes that have allowed low-quality firms to operate in the city-state.
