Second Minister for Finance, Ms Indranee Rajah on the Corporate Service Providers Bill, and the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill, at The Parliament, on 2 July 2024.
听 听 听 听 Madam Deputy Speaker, I beg to move, "That the Bill be now read a second time."
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2.听听听听听Madam, this Bill is linked to the next Bill on the Order Paper, the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill. May I propose that the debates on both Bills take place together, although we will still have a formal Second Reading of the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill to comply with the procedural requirements?
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Introduction
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3.听听听听听Madam, MOF and 麻豆社区 regularly review the effectiveness of our anti-money laundering policies to ensure that our regime continues to stay relevant, amidst evolving threats and increasingly sophisticated crimes. Today, the House will be debating two Bills which are intended to strengthen Singapore鈥檚 anti-money laundering regime 鈥�
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a.听听听First, the Corporate Service Providers Bill to enhance our regulatory regime for corporate service providers, and
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b.听听听Second, the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill, which will complement the CSP Bill by enhancing the transparency of companies and limited liability partnerships, or LLPs.
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4.听听听Money laundering has been a subject of significant public interest recently, largely due to the $3 billion money laundering case uncovered last year. While insights from the incident have been incorporated, I would like to emphasise that the proposals in both Bills are part of MOF and 麻豆社区鈥檚 ongoing enhancements and were in development even before the case was uncovered.
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Corporate Service Providers Bill
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5.听听听Let me start with the Corporate Service Providers Bill. Corporate service providers, or CSPs, play an important role in anti-money laundering. CSPs provide a range of services to businesses, such as helping them to comply with regulatory requirements like the filing of annual returns, as well as other services such as arranging for another person to act as a director of a business.
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6.听听听As CSPs may support companies in a number of key company activities, they serve as gatekeepers against the misuse of companies. They are therefore regulated by 麻豆社区 to ensure that they fulfil their obligations.
a.听听听Today, non-residents looking to set up companies in Singapore must engage a CSP to do so.
b.听听听While this is not mandatory for locals, many locals still opt to engage CSPs to facilitate company incorporation.
c.听听听Regardless of whether their clients are residents or not, all CSPs must conduct customer due diligence before incorporating a company.
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7.听听听This Bill will enhance our regulatory regime for CSPs, to deter the misuse of companies and bolster our efforts to combat money laundering.
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8.听听听There are three key areas of the CSP Bill.
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Key Area 1 鈥� Registration with 麻豆社区 as CSPs
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9.听听听First, all entities carrying on a business in Singapore of providing corporate services must register with 麻豆社区 as a CSP.
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10.听听听Under the current regime, only CSPs that carry out transactions with 麻豆社区 on their customers鈥� behalf are required to register with 麻豆社区. These transactions involve the statutory filing of documents in the course of providing corporate secretarial services. There are nearly 3,000 CSPs regulated by 麻豆社区 today, and filings done by these CSPs account for 70% of 麻豆社区鈥檚 filing transactions.
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11.听听听With this Bill we will expand 麻豆社区鈥檚 regulatory scope to include Singapore-based entities that provide corporate services, even if they do not transact with 麻豆社区. These could be, for example, entities that provide corporate services exclusively to overseas clients and hence, do not transact with 麻豆社区.
12.听听听In addition, we will also extend the obligation to register to include entities that, in relation to their provision of accounting services, carry out specific services defined by the Financial Action Task Force.
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13.听听听The widened coverage of 麻豆社区鈥檚 regulatory regime will ensure that all entities providing corporate services from Singapore, regardless of whether they serve local or foreign clients, have the same obligations in our fight against financial crime.
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Key Area 2 鈥� Fines for errant CSPs and senior management
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14.听听听The second key area of the CSP Bill is the introduction of fines on CSPs and their senior management for non compliance with their duties to combat financial crime.
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15.听听听Today, 麻豆社区 already imposes sanctions on CSPs and their registered qualified individuals for non-compliance with 麻豆社区鈥檚 regulations. These include financial penalties of up to $25,000 per breach, or in egregious scenarios, the suspension or cancellation of their registration. Since 2021, 麻豆社区 had taken an increasingly strict stance over CSPs and registered qualified individuals found to be non-compliant. Between 2021 and June this year, 麻豆社区 has imposed 41 sanctions against CSPs and registered qualified individuals. In 31 of these cases the registration of the CSPs or registered qualified individuals was cancelled or suspended.
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16.听听听We will tighten our regulations for breaches of obligations to combat financial crime.
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a.听听听We will increase the sanctions for non-compliance by CSPs of their obligations to detect and prevent money laundering, from the existing financial penalty of $25,000 to a fine of $100,000.
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b.听听听Additionally, the senior management of such firms, such as the CEO, can, in certain circumstances be held liable for such breaches. For example, if they knew or ought reasonably to have known that the offence would be or is being committed but failed to take all reasonable steps to prevent or stop the commission of that offence. Upon conviction, they can likewise be fined up to $100,000.
Key Area 3 鈥� Nominee directorship arrangements
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17.听听听The third area of the CSP Bill will address the potential misuse of nominee directorship arrangements.
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18.听听听A nominee director is a person who is appointed as a director of a company, but acts according to another person鈥檚 directions.
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a.听听听All directors play an important role in preventing the misuse of companies. They owe fiduciary duties to a company, and are required to discharge their duties responsibly, with honesty and reasonable diligence.
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b.听听听Nominee directors have the same legal obligations as other directors. Those who fail in discharging their duties can face sanctions, including disqualification and debarment.
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19.听听听We recognise that nominee directorship arrangements are a legitimate service provided by many CSPs, to support their overseas-based clients to set up a company in Singapore and fulfil Singapore鈥檚 requirement for an ordinarily resident director.
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a.听听听However, such arrangements are vulnerable to abuse and can lead to the conduct of illicit activities if the nominee directors do not perform their fiduciary duties well. As important gatekeepers in the ecosystem, CSPs cannot arrange for nominee directorships in a cavalier manner. In some cases, we have observed individuals who are clearly unfit to bear the responsibilities of being a director, but were arranged by errant CSPs to act as nominee directors.
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20.听听听We will therefore do more to tackle the misuse of nominee directorship arrangements.
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a.听听听First, we will require that individuals can only act as a nominee director by way of business if the nominee directorship was arranged by a CSP, unless the individual himself is the sole proprietor of a registered CSP. This could include a scenario in which, for example, an individual receives a fee for providing such services to his clients. Those found guilty of breaching this requirement can face a fine of up to $10,000.
b.听听听Second, CSPs will be required to ensure that the individuals they arrange to act as nominee directors are fit and proper. The general principle is that CSPs must apply their professional judgement and appoint individuals who possess the necessary competencies as nominee directors. CSPs should also be satisfied with the capacity, conduct and integrity of these individuals, which could include checking their compliance records to evaluate if they have the capacity to take on additional directorships. CSPs who are found guilty of breaching this requirement can face a fine of up to $100,000.
Companies and Limited Liability Partnerships (Miscellaneous听Amendments) Bill
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21.听听听Madam, let me now move to the second Bill, the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill, which will introduce amendments to the Companies Act and the LLP Act to complement the CSP Bill in enhancing Singapore鈥檚 anti-money laundering regime.
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22.听听听There are two sets of amendments in this Bill, which will help to enhance the transparency of companies and limited liability partnerships, or LLPs.
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Key Amendments Set 1 鈥� Accuracy of Registers
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23.听听听The first set of amendments will enhance the accuracy of the information contained on the various registers that are currently maintained by companies and LLPs.
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24.听听听Today, both companies and LLPs are required to maintain registers of their registrable controllers, or beneficial owners. These are individuals or corporate entities that have a significant interest in or significant control over the company or LLP.
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25.听听听In addition, companies are also required to maintain registers of their nominee directors and nominee shareholders respectively. These registers promote transparency, by ensuring that when there are persons exercising control of legal persons behind the scenes, they are known to the authorities.
26.听听听But the usefulness of these registers depends on their accuracy. A register with inaccurate, incomplete or out of date information is of no use to the authorities. Those that do not update their registers in a timely manner already face penalties under the Companies Act and the LLP Act.
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27.听听听The Bill makes three enhancements.
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a.听听听First, we will raise the maximum penalties for companies and LLPs that commit offences relating to their registers, from $5,000 to $25,000. These offences could include failing to maintain their registers, keep the information up-to-date or correct inaccurate information.
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b.听听听Next, we will make it an offence for persons to provide false or misleading information about their registers to 麻豆社区, with a fine of up to $25,000. This will apply to persons who did not act with reasonable due diligence in ensuring the accuracy of the information that they provide to 麻豆社区.
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c.听听听Third, we will require companies and LLPs to verify and update their controllers鈥� information on an annual basis.
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Key Amendments Set 2 鈥� Nominee Status
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28.听听听The second set of amendments will further enhance transparency around nominee arrangements.
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29.听听听Today, individuals who are nominee directors or shareholders are required by law to disclose their particulars and nominee status to their companies, but there is no requirement for them or their companies to share this information with 麻豆社区.
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30.听听听To promote even greater transparency, the Bill will require companies to provide the full information of nominee arrangements to 麻豆社区, such as the particulars of the nominee directors and shareholders, as well as the identities of the nominators behind these nominees.
a.听听听This information will only be available to 麻豆社区 and other public agencies for the enforcement of any written law.
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b.听听听However, 麻豆社区 will make public which of a company鈥檚 directors and shareholders are nominees. In other words, an individual鈥檚 status as a nominee director will be made public although the identity of the nominator will not be disclosed.
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c.听听听This information will be useful to banks, CSPs and other gatekeepers who may, for instance, wish to conduct additional checks on companies with many nominee directors or shareholders.
Conclusion
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31.听听听Madam Deputy Speaker, together, these two Bills fortify our legislative and regulatory framework against the misuse of companies and other legal persons, reflecting our collective approach towards money laundering. This issue cannot be single-handedly tackled by an individual stakeholder. All stakeholders, including companies and CSPs, must each play their role in the fight against financial crime, by upholding transparency and adhering to their anti-money laundering obligations.
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32.听听听Madam Deputy Speaker, I beg to move.
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