Enhanced Regulatory Regime for Corporate Service Providers in Singapore

Andy Sim

Assistant Chief Executive

Accounting & Corporate Regulatory Authority (ACRA), Singapore

Agenda 1 Overview of the corporate service providers (CSP)

sector in Singapore

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3 The need to enhance the regulatory framework for the CSP sector

4 The new statutory obligations that CSPs face

5 The new CSP Enforcement & Regulation Department in ACRA

6 Monitoring and supervision

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Money laundering (ML)/ terrorism financing (TF) risks facing the CSP sector

Pending initiatives 7

3

The CSP sector in Singapore

Corporate Secretarial Firms Accounting Firms Law Firms

Provide range of corporate secretarial services, including filing of corporate

and financial information with ACRA and the following:

Forming corporations or

other legal persons

Providing a registered

office, business address,

correspondence or

administrative address or

related services

Acting/Arranging for person to act as:

1. Director/secretary of a corporation 2. Partner of partnership 3. Similar position with regard to another legal person

Acting/arranging for another person to act as shareholder for a customer

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Enhancing the CSP regulatory framework

FATF identified CSP sector as requiring regulation

Introduction of

enhanced CSP regime

We have identified some ML/FT risks in our NRA that

CSPs can help us mitigate

FATF

To meet FATF’s

Recommendations Internal Policies,

Procedures and

Controls (IPPC)

i

Customer Due

Diligence

(CDD)

On-going

Monitoring Record

Keeping

Compliance Management | Training

Raising Professional

Standards

ADD VALUE COMPLIANT QUALITY

NRA

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New legislation implemented on 15 May 2015

Amended ACRA Act with supporting Regulation

To require CSPs to register as Filing

Agents (FA) and Qualified Individuals

(QI)

Subject to AML/CFT obligations

Sanctions for non-compliance

Note: 18 outreach sessions to 5,000

attendees with Guidelines issued on

application of the new law

Filing Agent

Qualified Individual

Individuals employed,

engaged or appointed

by RFA (e.g. lawyers,

public accountants,

corporate secretarial

agents)

Business entities

registered with ACRA

to file business

transactions for their

customers using

ACRA’s electronic filing

system (BizFile+)

2,700 registered Filing Agents (RFA) and 3,000

registered Qualified Individuals (RQI)*

* Figures as at Jan 2017

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New legislation regulating FA & QI

Sets out registration/renewal requirements for FA/QI

Provide exemptions for certain persons or categories of person

from registration

Contains the range of sanctions that can be imposed against

FA/QI for breaches

FA must abide by statutory obligations including FATF

Recommendations and T&Cs of registration

QI must abide by statutory obligations including T&Cs of

registration

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Fit and Proper Criteria for FA & QI

• No conviction for any offence involving fraud or dishonesty punishable

with imprisonment of 3 months or more

• Not bankrupt

• Previous conduct and compliance history satisfactory. (i.e. no adverse

complaint)

• Applicant has not acted in a manner that adversely reflects on the

commercial integrity of the applicant

• Applicant has the capacity and capability to properly fulfill the

obligations of a registered FA or QI

• Not contrary to the national or general public interest

Note: If factors not met, ACRA may refuse application, or cancel

registration

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Statutory Obligations of FA

Establish Internal

Policies,

Procedures and

Controls (IPPCs)

Risk Assessment &

Documentation

Applying risk-

based approach

Informed Decision

Identify and verify

customers, agents

and beneficial

owners

Screen customers,

agents and

beneficial owners*

Establish business

relationship if no

adverse results

Decline business if

adverse results and

file Suspicious

Transaction Report if

necessary

On-going monitoring

and record keeping

* Using UN sanction lists /

Ministry of Home Affairs

website etc.

Audit Function

Compliance Management (Compliance Officer)

Screening and Training of Employees

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Indicators of Suspicious Transactions

Indicators relating to incorporation of shell companies

• Companies registered in Singapore with no apparent business and low paid up capital

• Addresses of the registered FA or PO Box addresses are used by companies as their

registered/mailing addresses

• Multiple bank accounts opened with various banks for no apparent economic or business

reasons

• Authorised bank signatories are usually foreign directors and shareholders located overseas

• Bank accounts are opened at around the same period foreign directors are in Singapore to

incorporate their companies

• Frequent large incoming remittances into bank accounts from different individuals and

companies, located mainly overseas

• After receipt of funds in the bank accounts, the funds are usually moved out of Singapore

within the next few days. These bank accounts generally have low balances

• Transaction patterns in the bank accounts are often not in line with the company’s principal

business

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Indicators of Suspicious Transactions

Indicators relating to other crimes

• Customers give false/misleading information for CDD purposes

• Customers unwilling/unable to provide information for CDD purposes

• Customers use forged/fraudulent/false identity documents for CDD purposes

• Customers uncontactable for CDD purposes

• Customers featured in adverse news

• Transactions involving politically exposed persons

• Unrealistic turnover in customer’s financial statements

• Unusual/uneconomical movement of funds

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CERD and its key functions

• CSPs Enforcement & Regulation Department

(CERD) was set up in Nov 2013

• Comprises Compliance Managers and

Investigators to:

• conduct outreach and education programmes

• process new and renewal applications

including screening to ensure applicants are

“fit & proper”

• supervise, monitor, inspect and regulate FA

and QI

• investigate into breaches of law and impose

sanctions against errant FA and QI

• conduct regular industry survey

• represent ACRA at international AML/CFT

forums and assessments. e.g. FATF

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Monitoring and Supervision

• ACRA adopts a risk-based approach in supervising and monitoring the RFAs

• Risk factors considered for RFAs include: – Legal, reputational and regulatory risk – Business activity and services risk – Resource constraint and operational limitation risks – Other dynamic factors (e.g. compliance review outcome unsatisfactory,

complaint received against RFA, adverse publicity against RFA)

• Based on ACRA’s assessment of the risk factors, a RFA is then internally risk-tiered

• The risk category assigned to a RFA is dynamic and a RFA can be re-categorised pursuant to inspection outcome or other events

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Compliance Reviews

• ACRA conducts on-site compliance reviews for RFAs to:

– monitor the extent of AML/CFT compliance in the CSP industry

– provide guidance to RFAs to improve their level of AML/CFT compliance

– address the ML/TF risks and weaknesses of the CSP industry

• ACRA engages AML/CFT specialists as Reviewers to perform on-site compliance reviews (½ day per review)

• Reviewers conduct compliance reviews in accordance to compliance review methodology approved by ACRA

• Prior to on-site compliance review, RFAs have to complete a Self-Assessment Form on its level of understanding of ML & TF before the onsite visit takes place

• Reviewer will inform RFA of preliminary findings at the close of the compliance review and subsequently send an assessment report to both the RFA and ACRA

• Reviewer does not impose any sanction

• Depending on the outcome of the compliance review, ACRA may follow up with inspection

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If sanction is intended

• Notice to show cause

• Opportunity to explain

• Review response by RFA

• Sanction may ultimately be

imposed

Inspection Findings

• Consider findings from

inspection

• Notify RFA of outcome of

inspection

3

Pre-inspection

• Letter to notify RFA on:

- upcoming inspection

- documents to be sent to

ACRA prior to inspection

1

On-site Inspection

• ½ day or more

• Interview

• Review customer files

• Closing meeting

2

Inspection Process

4

Inspection Process

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Sanctions that ACRA may impose

against RFA and RQI

• Cancel registration*

• Suspend for a period not exceeding 12 months

• Impose financial penalty of up to S$25,000 (for RFA) or S$10,000 (for

RQI) for each breach

• Restrict access to ACRA’s electronic filing system – BizFile+

• Censure

*Note: If registration cancelled, cannot re-apply within 2 years

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• Completed 476 compliance reviews and inspections

Compliance Review and Inspection Outcome

Compliant 262

Satisfactory but improvements needed 145

Non-compliant 69

Overview of ACRA’s Compliance Reviews and Inspections

* Figures as at Jan 2017

Sanctions Imposed till date

Suspension Financial Penalty Censure Advisory

1 7 1 1

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Pending initiatives

• Development Training for FA, QI and employees

New applicants and incumbents to attend

mandatory AML/CFT training at regular intervals

New applicants and incumbents to pass an online

proficiency test before they can be

registered/renewed

Allow option of 2 years registration period instead

of 1 year

e-learning module to enable employees of RFA to

learn about AML/CFT measures and the statutory

obligations RFA and RQI

Accounting and Corporate Regulatory Authority 10 Anson Road #05-01/15

International Plaza

Singapore 079903

www.acra.gov.sg

www.facebook.com/SG.ACRA

www.twitter.com/ACRA_SG

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