ACRA – ISCA Seminar: Introduction

to the NEW Legal Requirements for

Corporate Service Providers

Agenda

2

No. Topics

1 Overview of the Enhanced Regime for Corporate Service Providers

2 Introduction to Money Laundering and Terrorism Financing for

Corporate Service Providers

3 Key Legal Obligations for Filing Agents/ Qualified Individuals

4 Break

5 Transition of Current Corporate Service Providers

6 Registration and Renewal for Filing Agents and Qualified Individuals

7 Questions & Answers

Overview of the Enhanced

Regime for Corporate Service

Providers

Cheok Yu Liang/ Desmond Quek

Corporate Service Providers

Enforcement & Regulation Department

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Enhanced CSP regime

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Reasons for enhancing the CSP regime:

Requirement for Singapore as a member to comply with FATF’s

recommendations on anti-money laundering and counter-terrorism

financing.

Increase professional standards for the CSP industry

Applicable legislation:

A new Part VIA in the ACRA Act and a new set of ACRA (Service

Providers) Regulations 2014

ACRA is targeting to implement the enhanced CSP regime in last

quarter of 2014. ACRA will make a public announcement ahead of

implementation.

Sources of Information:

Enhancement to the CSP regime

CSPs can get more information from ACRA’s CSP page

at http://www.acra.gov.sg/home/

Guidelines will be provided by ACRA to assist CSPs to

get ready for the enhanced CSP regime. These

guidelines will also contain:

Internal policies, procedures and controls template

Know Your Customer template form

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Financial Action Task Force (FATF)

FATF is an inter-governmental body established in 1989.

Singapore has been a member of FATF since 1992.

The objectives of FATF is to set global standards to prevent

and detect money laundering and terrorism financing (MLTF)

through its 40 FATF Recommendations.

As a member, Singapore has to comply with these

Recommendations and will be assessed by FATF. Singapore

is due for assessment in the second half of 2015.

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Overview of key legal requirements

contained in the ACRA Act and Regulations

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Sets out Registration/Renewal requirements for FAs/QIs

Provide exemptions for certain persons or categories of person from registration

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

Contains the range of sanctions that can be imposed against CSP for breaches

Key Legal Obligations for

Filing Agents/ Qualified

Individuals

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Definitions Meaning of “Filing Agent” (FA)

A filing agent is a person who or which, in the course of his or its

business, carries out on behalf of any other person (for example, a

customer) any transaction with the Registrar using New Generation

Bizfile (NGB), or via any other means allowed by the Registrar, if

NGB is unavailable.

A FA is a business entity, and is akin to a professional number

holder in the current regime.

It can be an individual if the FA is a sole-proprietor or partnership

firm.

Meaning of “Qualified Individual”

A qualified individual is an individual who satisfies such criteria as

may be prescribed in Regulations.

A qualified individual is akin to a prescribed person in the

current regime.

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Exemption from

registration as FA/ QI

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An officer of a company carrying out a transaction with the Registrar on behalf of the company:

For example: directors, secretaries.

A group secretary from carrying out a transaction with the Registrar on behalf of a group of companies:

Note: A separate arrangement will be made for group secretaries to access NGB

Similar categories of persons for businesses, limited partnerships and limited liability partnerships:

For example: partners, sole proprietors.

Legal Obligations of a registered FA

Certain activities for which FA will have to comply with

FATF Recommendations

Establishing internal policies, procedures and controls

Customer Due Diligence

On-going monitoring

Record-keeping

Audit function

Compliance management

Screening/training of employees

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Activities for which FAs will have to

comply with FATF Recommendations

If a FA, by way of business, prepares for or carries out

transactions with ACRA for a customer concerning the following

activities, it will need to comply with FATF Recommendations

that we have introduced into the Regulations.

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Forming corporations or other legal persons

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

Providing a registered office, business address, correspondence or administrative address or related services

Acting/arranging for another person to act as nominee shareholder for a customer other than a corporation listed on a securities exchange within the meaning of the SFA.

How to meet the

FATF Recommendations

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Customer Due Diligence

On-going Monitoring

Record Keeping Internal policies, procedures and controls (IPPC)

Internal Policies, Procedures and

Controls Document (IPPC Document)

IPPC is a consolidated document each FA is required by law to

have. This document sets out the FA’s internal policies, the

procedures it applies, and the controls it has put in place.

The IPPC helps the FA to discharge its responsibility for the

prevention of money laundering terrorism financing, and provide a

framework of direction to the FA’s business, his QIs and employees.

ACRA will provide CSPs with a IPPC document template setting out

the minimum expectations in an IPPC.

FAs are free to customise their own IPPC document based on their

own business needs and risk assessment, but should not set lower

expectations than what ACRA has set out in the template.

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IPPC Document IPPC has to address the following:

Customer due diligence and on-going monitoring

Suspicious transaction reports

Record-keeping

Internal controls

Risk assessment and management

Audit of IPPC

Monitoring and management of compliance with, and

internal communication of IPPC

Hiring and training of employees.

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When to conduct

Customer Due Diligence (CDD)

Establishing new business relationship with customer

Suspicion of money laundering/ terrorist financing activities in the course of business relationship

Doubts regarding veracity/adequacy of documents obtained for identification purposes in the course of business relationship

1. Identify and verify his customers and agents through

reliable and independent documents, data or information;

2. Identify and verify the identity of the beneficial owner if

the customer represents a beneficial owner; and

3. Obtain information on the purpose and intended nature of

the business relationship.

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How to conduct CDD

Identification and Verification

of Customers and Agents

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Recording of identifying info:

• Full name;

• Identity card number;

• Incorporation/registration

number etc

Verifying of information

obtained through use of

reliable, independent sources

• Photo ID (e.g. passport,

driving license);

• Publicly available

information searches etc

Note: More details required based on the different types of customers will

be contained in the Regulations.

Identification and Verification

of Beneficial Owners

“Beneficial owner” is the real owner of the customer. He is:

A person on whose behalf the customer has employed or

engaged the services of the FA; or

An individual who ultimately owns all of the assets or

undertakings of the customer; or

An individual who exercises ultimate effective control over, or

has a controlling interest in, the customer.

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Beneficial Ownership Examples of what is required to establish beneficial ownership

of different types of customers will be given by ACRA in the

guidelines.

For example: for Singapore incorporated companies,

beneficial owners are the individuals who:

Ultimately own or control (whether through direct or indirect

ownership or control) more than a specified threshold of the

shares or voting rights of the companies; or

Otherwise exercise control over the management of the

companies.

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Information on purpose and

intended nature of business relationship

Examples may include:

Details of the customer’s business or employment;

Expected source and origin of funds used in the business

relationship;

Copies of recent and current financial statements; and

Anticipated level and nature of the activities to be undertaken

throughout the business relationship.

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Level of Risks Types of CDD Identification

and verification

of beneficial

owners

On-going

Monitoring

Lower risks Simplified Fewer measures

required

Lower frequency

Normal risks Normal Normal measures

required

Normal

frequency

Higher risks Enhanced Additional

measures

required

Higher

frequency

Types of CDD

Simplified CDD

Examples of lower risks faced by FA

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Type of risks Customer-related Country related Transaction

related

Lower risks Customers

willing to

provide

information and

evidence of

identity of

beneficial

owners;

Face to face

dealings with

the customer

Countries with

good anti-

MLTF

measures

Countries with

low level of

crime/

corruption

Transactions

that are in

line with

customer’s

profile

Simplified CDD

ML/TF risks are assessed to be low;

Written approval has been obtained from the

Chief Executive of ACRA; and

All conditions and restrictions imposed by the

Chief Executive have been complied with.

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Enhanced CDD

Examples of higher risks faced by FA

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Type of risks Customer-

related

Country related Transaction related

Higher risks Customer is

unwilling to

produce

evidence of

identification,

or unwilling to

provide identity

of beneficial

owners.

Politically

Exposed

Persons

Customers from

countries with lax

MLTF measures

Customers from

countries with

significant levels

of criminal/

corruption

activities

Transactions that

use

complex/opaque

legal entities and

arrangement,

such as the

setting up of shell

companies;

Transactions that

do not make any

commercial sense

Enhanced CDD

Establishing business relationship with any persons from or

in countries that are known to have inadequate anti MLTF

measures;

Dealing with other categories of customers/transaction

which the FA considers may present a high risk of MLTF; or

Establishing business relationship with a Politically Exposed

Person (“PEP”)

In addition, enhanced ongoing-monitoring is required

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Politically Exposed Persons (PEP)

PEP is a person who is entrusted with a prominent public

function in Singapore or foreign country or by an international

organisation, and includes immediate family members and close

associates. This term excludes middle ranking or more junior

officials.

Before dealing with PEP, the FA must:

Inquire into the background and purpose of the proposed

business relationship;

Obtain approval from senior management for establishing the

proposed business relationship; and

Take reasonable measures to establish the source of wealth

and source of funds involved in the proposed business

relationship.

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If CDD cannot be conducted If FA is unable to apply CDD in relation to a customer, he shall:

Not commence a business relationship with the customer;

Terminate any existing business relationship with the

customer; and

Consider whether to make a suspicious transaction report

under the Corruption, Drug Trafficking and Other Serious Crimes

(Confiscation of Benefits) Act, and Terrorism (Suppression of

Financing) Act.

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Examples of suspicious

indicators for filing of STRs

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Specific Indicators for incorporation of shell companies

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

Addresses of the CSP or PO Box is used by Shell 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 based

overseas.

Bank accounts were opened around the same period these foreign directors were in

Singapore to set up their companies.

Frequent large incoming remittances from different individuals and companies, located

mainly overseas.

After receipt of funds in the Singapore 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 companies’ principal

business.

Examples of suspicious

indicators for filing of STRs

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Other Indicators (applicable to other crimes)

Clients gave false/misleading explanation for CDD purposes

Clients unwilling/unable to provide information for CDD purposes

Clients used forged/fraudulent/ Clients uncontactable for CDD purposes

false identity documents for CDD purposes

Clients featured in adverse news

Suspicious transactions involving entities involved in sensitive

employment/responsibility

Suspicious transactions involving Political Exposed Persons (PEPs)

Unrealistic turnover in client business’s accounts

Unusual/ Uneconomical movement of funds

On-going Monitoring

This needs to be done throughout the course of business

relationship:

Scrutinise transactions including where necessary, the source of

funds, to ensure that the transactions are consistent with the FA’s

knowledge of the customer and his business and risk profile; and

Keep documents, data or information obtained for the purpose of

applying CDD measures up to date.

The FA should be required to perform enhanced on-going

monitoring on the customer if the risks are assessed to be higher.

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Record-Keeping

A copy each of the information and evidence of the

customer’s and agent’s identity;

A copy each of the information and evidence of the

beneficial owners (if any);

Records showing the business relationship.

The records have to be maintained for ongoing business

relationships. If the business relationship has ended, the

records still have to be kept for 5 years from the end of the

business relationship.

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Audit Function

Implement and maintain an audit function that is

adequately resourced and independent, and able to

regularly assess the effectiveness of the IPPC of the FA.

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Compliance Management

Develop compliance management arrangements to

continually review and update IPPC; and

Appoint an employee or officer in management role as

the compliance officer.

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Hiring and Training

of Employees

Implement screening procedures for the hiring of fit and

proper persons as employees;

Ensure that employees are briefed on the laws for

prevention of money laundering and terrorism financing;

Ensure that employees are briefed on prevailing methods of

and trends in money laundering and terrorism financing; and

Ensure that employees are briefed on the FA’s IPPC.

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Legal obligations of a registered QI

To comply with terms and conditions of registration in

Regulations:

To ensure that a document used by him for any transaction is

complete and in proper form;

Not to use any document for a transaction if he believes or has

reasonable grounds to believe that the information in it is

inaccurate;

Not to carry out any transaction unless it relates to a customer

of the registered FA, and is authorized by the customer;

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Legal obligations of a registered QI

Not to use the professional number assigned to his FA for any

illegal or prohibited purpose;

To appoint fit and proper employees to carry out transactions

via NGB under his supervision;

To withdraw the employee’s access to NGB if he is not fit or

proper; and

To ensure that the employees under his supervision comply

with the obligations relating to the carrying out of transactions

and use of professional number.

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Transition of Current

Corporate Service Providers

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Recap of current framework

Currently, individuals who file transactions for third

parties are registered with ACRA as “prescribed

persons” if they meet the qualifications in law.

Upon registration, the business entities that they

work for are issued with professional numbers by

ACRA, to enable them to file transactions. These

are termed “professional number holders”.

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Transition Process

ACRA will be sending notices to the professional number

holders to decide if they want to opt into the enhanced CSP

regime as FAs, together with at least one and up to two QIs.

The professional number holders will be given a deadline to

respond to ACRA’s notices.

Through this process, the professional number holders and

two prescribed persons may opt in.

No notices will be sent to prescribed persons. They will opt in

through their professional number holders.

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How to opt-in

The professional number holder’s authorised

representative will have to logon to the online

transition module in Bizfile and inform ACRA

whether the professional number holder wishes to

be registered as a FA under the enhanced CSP

regime.

If the professional holder chooses to opt in, it also

has to state the names of two prescribed persons

who it wishes to appoint or employ, and who

consent to opt in, as QIs. 41

How to opt-in

The authorised representative also has to:

update the particulars of the professional number holder,

and

update the appointment of a maximum of two QIs who will

be registered under the ACRA Act for the transition period.

Upon successful registration, ACRA will issue to the FA a new

professional number which will need to be used to access

NGB.

Employees of FA who are not QI are not required to opt in.

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Important notes

By opting in, the registration fees for both FAs and QIs

from the date of implementation of the enhanced CSP

regime to end 2015 will be waived.

The implementation of the enhanced CSP regime will

coincide with launch of ACRA’s NGB (which replaces

current BizFile), scheduled for last quarter of 2014.

By opting in, the registered FA and his QIs will be

subject to the enhanced CSP regime when it is

implemented.

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Important notes

Professional number holders that do not opt in will be

presumed to have opted out. They will cease to be

permitted to access NGB when the enhanced CSP

regime starts.

The current professional number will not be recognised

in NGB.

When the transition period ends in end 2015, FAs/QIs

will have to apply for renewal. Renewal fees of $200 for

FAs and $100 for QIs will be payable.

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Registration and Renewal for

Filing Agents and Qualified

Individuals

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Registration and renewal

of registration as FA A person who wishes to register as a FA (i.e. business entity) or

have his annual registration renewed must satisfy two general

requirements:

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• Business

• Company

• Limited Liability Partnership

• Limited Partnership

• He is also a registered QI or

• At least 1 partner is a registered

QI (for partnership, LLP, LP) or

• He employs/engages a

registered QI.

To register as FA

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Online

application

via NGB &

submission

of

declaration

Appoint at

least 1

registered QI

(can be

himself if he

is a

registered

QI), who will

have to

endorse

online.

If application

approved,

registration

is valid for 1

year.

Payment of

$200

application

fee

To renew registration as FA

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Appoint at

least 1

registered QI

(can be

himself if he

is a

registered

QI), who will

have to

endorse

online.

Online

application not

earlier than 60

days and not

later than 30

days before

expiry of

registration

If renewal

approved it

will be valid

for 1 year.

Payment of

$200

application

fee

Important notes

An applicant must show that he is a “fit and proper” person.

If he is a sole proprietor,

i. he must not have been convicted (whether in Singapore

or elsewhere) of any offence involving fraud or

dishonesty punishable with imprisonment for 3 months

or more; or

ii. he must not be an undischarged bankrupt, whether in

Singapore or elsewhere.

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Important notes

If he is not a sole proprietor

i. any director, partner or individual directly or indirectly

taking part in or concerned in his management has not

been convicted (whether in Singapore or elsewhere) of

any offence involving fraud or dishonesty punishable

with imprisonment for 3 months or more; or

ii. any director, partner or individual directly or indirectly

taking part in or concerned in his management is not an

undischarged bankrupt, whether in Singapore or

elsewhere.

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Important notes

ACRA has the discretion to reject the application if the “fit and

proper” requirements or any other requirement imposed by the

Chief Executive are not met.

ACRA has the discretion to consider whether the previous

conduct, of the applicant or the previous conduct of his directors,

partners or any individuals directly or indirectly taking part in or

concerned in his management has been satisfactory.

For example, ACRA may consider whether his previous

registration as a FA has been suspended; or whether he has had

a financial penalty imposed on him during his previous

registration as a FA and he has not paid the financial penalty in

full.

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If a person’s registration had been cancelled because of:

a breach of a term or condition of registration; or

a failure to pay a financial penalty imposed because of a

breach of such a term or condition;

he cannot make a fresh application until 2 years have

elapsed from the date the previous registration was

cancelled.

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Time – bar

Q&A

Q: What happens after an application for registration or

renewal as FA has been approved by ACRA?

A: ACRA will inform the applicant that his application is

successful. ACRA will also issue to each registered FA a

unique professional number for the purpose of carrying out

any transaction with the Registrar using NGB.

Q: What happens if the application for registration or

renewal as a filing agent has been rejected by ACRA?

A: ACRA will inform the applicant of the rejection. The

applicant may appeal to the Minister against the decision

within 30 days of ACRA’s notification.

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Q&A

Q: Is an FA required to register his employees in NGB?

A: A registered FA will not have to register his employees in

NGB.

No registration is required for employees. After the application

for registration or renewal as a FA is approved, the registered

QI who have been appointed by him will have to submit via

NGB the particulars of the employees who will be carrying out

transactions under the QI’s supervision.

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Cancellation of

registration as registered FA

A registered FA may at any point in time apply to ACRA

for his registration to be cancelled.

ACRA has the discretion to refuse to cancel the

registration if there is suspicion that he has breached any

of the terms and conditions of registration.

If the registered FA is under investigation, ACRA will only

consider the FA’s application after investigation is

completed and an outcome is reached.

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Sanctions that errant

FAs can face

Cancel the registered FA’s registration;

Suspend the registered FA’s registration for a

period not exceeding 12 months;

Impose financial penalty of up to $25,000 for

each breach;

Restrict the registered FA’s access of NGB; or

Censure the registered FA.

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Registration and renewal of registration as QI

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A Qualified Individual is an individual who satisfies such criteria as

may be prescribed in the Regulations, and who performs filing with

ACRA.

To register as QI

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Online application

via NGB &

submission of

declaration

Payment of

$100

application fee

If application

approved,

registration is

valid for 1 year.

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Online application

not earlier than 60

days and not later

than 30 days

before expiry of

registration

Renewal

Payment of

$100 application

fee

If renewal

approved,

valid for 1 year.

To renew registration as QI

Important notes

An applicant must not be:

convicted (whether in Singapore or elsewhere) of any

offence involving fraud or dishonesty punishable with

imprisonment for 3 months or more; or

an undischarged bankrupt, whether in Singapore or

elsewhere.

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Important notes

ACRA has the discretion to reject the application if the “fit

and proper” requirements or any other requirement

imposed by the Chief Executive are not met.

ACRA has the discretion to consider whether the

applicant’s previous conduct has been satisfactory.

For example, ACRA may consider whether his previous

registration as a QI has been suspended; or whether he

has had a financial penalty imposed on him during his

previous registration as a QI and he has not paid the

financial penalty in full.

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Time-bar

If a person’s registration had been cancelled because of:

a breach of a term or condition of registration; or

a failure to pay a financial penalty imposed because of a

breach of such a term or condition

he cannot make a fresh application until 2 years have

elapsed from the date the previous registration was

cancelled.

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Q&A Q: What happens after a person’s application for registration or

renewal as a qualified individual has been approved by ACRA?

A: ACRA will inform the applicant that his application is successful.

Q: Can a registered QI start filing transactions using

NGB after his successful registration?

A: No. The registered QI can only do so if he is appointed, employed or

engaged by a registered FA to be his registered QI, or is a registered

FA himself.

Q: Do the employees of the registered FA who file transactions

have to be registered?

A: Employees do not have to be registered. However, the registered QI

has to provide the particulars of the employees via NGB.

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Q&A Q: What is the procedure for using NGB to carry out

transactions?

A: ACRA will issue the registered FA with a professional

number, which has to be used by the registered QI, together

with the registered QI’s authentication code, SingPass, in

order to file transactions. Employees may file transactions

under the registered QI’s supervision.

Q: What happens if a person’s application for registration

or renewal as a QI has been rejected by ACRA?

A: ACRA will inform the applicant. The applicant may appeal

to the Minister against the decision within 30 days of ACRA’s

notification.

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Cancellation of

registration as registered QI

A registered QI may at any point in time apply to ACRA

for his registration to be cancelled.

ACRA has the discretion to refuse to cancel the

registration if there is suspicion that he has breached any

of the terms and conditions of registration.

If the registered QI is under investigation, ACRA will only

consider the QI’s application after investigation is

completed and an outcome is reached.

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Sanctions that errant QIs can face

Cancel the registered QI’s registration;

Suspend the registered QI’s registration for

period not exceeding 12 months;

Impose financial penalty of up to $10,000 for

each breach;

Restrict the registered QI’s access of NGB; or

Censure the registered QI.

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Steps taken by ACRA CSP Enforcement & Regulation Department (CERD) has been

set up

Create a dedicated module on ACRA’s corporate website for

CSP matters

A working group comprising ACRA, SAICSA, ISCA, Law Society,

AIA (Singapore Branch) and ICOMA developed guidelines to

help FAs interpret and apply the new requirements

The guidelines will contain a IPPC template and “Know-Your-

Customer” acceptance form (available on ACRA’s website in

due course)

Future training for FAs, QIs and employees on compliance with

FATF requirements

Dedicated email address for any queries that CSPs may have:

Contact_CERD@acra.gov.sg 67

How you can get ready for

the enhanced CSP regime

Know the legal obligations under the new legislation

Familiarise yourself with ACRA’s guidelines

Decide if you want to opt into the enhanced CSP regime

when you are notified by ACRA to make a decision

Establish IPPC based on the ACRA IPPC template

Train your employees

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