Anti-Money Laundering Regulations and Your Business: What You Need to Know

Last updated on January 7, 2018

Changes proposed to the Companies Act will take effect come 31 March 2017, and key amendments are targeted towards making ownership of companies more transparent to reduce opportunities for using companies as a front for illegal purposes.

Singapore takes a firm stance towards money laundering and terrorism financing, where policy objectives stated by the Ministry of Finance (MOF) include detecting and deterring money laundering and terrorism financing as well as protecting the integrity of the system from illegal activities.

As a business owner, it is important to be aware of new changes and anti-money laundering regulations for compliance purposes.

Existing anti-money laundering regulations

Offences

The main legislation that governs money laundering related offences is the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA). There are several types of money laundering offences, found mainly within Part VI of the CDSA.

Sections 43 and 44 of the CDSA relate to a person who had assisted others to retain benefits of drug dealing and criminal conduct. This refers to a person who knowingly entered into an arrangement to facilitate the retention of benefits from drug dealing or criminal conduct, and includes arrangements to help secure funds and to acquire property. Defences for this type of offence includes proving that there was no knowledge or reasonable grounds to believe that the arrangement was related to proceeds from drug dealing or criminal conduct. The penalty for such offences entails a fine not exceeding $500,000 or to a maximum prison term of 10 years or both (for an individual) or a fine not exceeding $1 million (for a person who is not an individual).

Sections 46 and 47 of the CDSA involve acquiring, possessing, using, concealing or transferring benefits of drug dealing and criminal conduct. This is a more direct means of money laundering, as the offences involve the actions of a person concealing or disguising his own benefits from criminal activities. Aside from concealment, converting or transferring the property or removing it from the jurisdiction as well as acquiring, possessing or using that property are also considered actions which constitute an offence. Similarly, penalties include a fine not exceeding $500,000 or to a maximum prison term of 10 years or both (for an individual) or a fine not exceeding $1 million (for a person who is not an individual).

Section 48 of the CDSA is quite self-explanatory, where a person knows or has reasonable grounds to suspect that an authorised officer is about to or is conducting investigations into another person’s activities and discloses information to that person which may prejudice the investigations. This is more commonly known as “tipping-off”. “Tipping-off” may result in a fine not exceeding $30,000 or to imprisonment for a term not exceeding 3 years or to both.

The above are some specific activities that constitute money laundering offences, and small business owners should be mindful and careful when entering into arrangements or when conducting their business activities.

Reporting obligations

By virtue of section 39 of the CDSA, failure to disclose any suspicious transactions to the authorities is by itself an offence. This means that any suspicious or illegal activities encountered in the course of “trade, profession, business or employment” should be reported to the Suspicious Transaction Reporting Officer as soon as it is practicable. A person who contravenes section 39 may be liable to a fine not exceeding $20,000.

Therefore, even small businesses have a duty to disclose and report any suspicious transactions, if they have reasonable grounds for such a belief.

Additionally, it should be noted that there may also be guidelines and notices specific to certain industries. For instance, the Monetary Authority of Singapore (MAS) had previously released a notice on the prevention of money laundering for holders of licenses for money changing and remittance services.  Such licensees are required to perform customer due diligence, by verifying the identity of the customer and inquire if there are any beneficial owners involved. Further, the licensees are required to monitor their relationships with customers on an ongoing basis.

Other reporting obligations are imposed on certain industries. For instance, Precious Stones and Metals Dealers (PSMDs) are obliged to file a cash transaction report (CTR) with the Suspicious Transaction Reporting Office of the Commercial Affairs Department (CAD) within 15 business days when they conduct any cash transaction exceeding SGD 20,000, or its equivalent in foreign currency. More information on the various reporting obligations can be found on the Commercial Affairs Department (CAD)’s website.

Generally, all legal and natural persons should screen customers against the lists of designated individuals and entities (see MAS website) before engaging in any business transactions with them.

Changes to the Companies Act

Aside from existing obligations, new obligations will arise after 31 March 2017, when key amendments made to the Companies Act come into effect.

There are certain changes specific to increasing the transparency of businesses, and business owners should take note of the following changes to the Companies Act:

  • Companies (except listed companies and Singapore financial institutions) and LLPs registered in Singapore are required to maintain registers of beneficial owners at prescribed places (e.g. company’s registered office or the registered filing agent’s registered office);
  • Foreign companies registered in Singapore are required to maintain registers of beneficial owners and public registers of shareholders;
  • A liquidator is required to retain records of wound up companies and LLPs for five years instead of two;
  • Remove the options for companies and LLPs to destroy records early if they are wound up by their members, partners or creditors;
  • Officers/ partners/managers of struck off companies and LLPs required to retain accounting records and registers of beneficial owners for five years;
  • Void the issuance and transfer of bearer shares and share warrants by foreign companies registered in Singapore; and
  • Require nominee directors/managers to disclose their nominee status and nominators to their companies/LLPs

Another amendment related to anti-money laundering is the amendment made to The Accountants Act, which will be amended to clarify that a breach of ethical requirements related to mandatory anti-money laundering and countering the financing of terrorism requirements for professional accountants will be grounds for disciplinary action under the Act.

For more information on amendments to the Companies Act, please refer to the government’s website at “Public Consultation on Proposed Changes to the Companies Act, Limited Liability Partnerships Act, And Accountants Act”.

If in doubt, please contact one of our corporate lawyers to advise you on regulatory compliance matters.

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