Singapore ‘s ACRA’s enhanced regulatory framework: anti-money laundering & counter terrorism financing obligations of corporate service providers – On 9 April 2015,

• the Accounting and Corporate Regulatory Authority (“ACRA”) announced that the ACRA (Amendment) Act 2014 and its related regulations, will take effect from 15 May 2015.
• The ACRA (Amendment) Act 2014, is supported by
  1. the ACRA (Filing Agents and Qualified Individuals) Regulations 2015 and
  2. the ACRA (Authorised Users of Electronic Transaction System) Regulations 2015,
• the above introduces various new provisions which seek to enhance the regulatory framework for corporate service providers (“CSPs”).
• These provisions serve mainly to ensure alignment with the international standards on anti-money laundering (“AML”) and counter terrorism financing (“CFT”) established by the Financial Action Task Force (“FATF”).

Enhanced Regulatory Framework

• Companies and other business entities are commonly used by criminals to facilitate money laundering or the financing of terrorism.
• CSPs thus face a potential risk of abuse by criminals who could set up complex business structures concealing beneficial ownerships and illegal transactions.
• To mitigate against such risks, registration and operational requirements are imposed upon CSPs via the enhanced regulatory framework.

Registration as Filing Agents and Qualified Individuals

• Unless exempted, CSPs that provide statutory filing services to their clients using ACRA’s electronic filing service are required to be first registered as Filing Agents (“FAs”) under section 28F of the new Part VIA of the ACRA Act (Cap. 2A) (the “Act”).
• Professionals whom the FAs employ or appoint, and who fall within the definition of a qualified individual under regulation 4 of the ACRA (Filing Agents and Qualified Individuals) Regulations 2015 (the “Regulations”), must also be registered as Qualified Individuals (“QIs”) under section 28G of the Act.
• Employees who do not qualify can still assist registered QIs with filing in their capacity as employees.

Both FAs and QIs are required to:

1. be fit and proper persons satisfying the experience and qualification requirements;
2. comply with the legal obligations contained in the new Part VIA of the Act; and
3. comply with the applicable terms and conditions imposed by the First and Second Schedule of the Regulations .
4. Current CSPs, which provide statutory filing services, that do not (i) apply for registration as FAs; and (ii) register their prescribed persons as QIs by 8 May 2015, will not be able to file transactions with the ACRA from 15 May 2015 onwards.

Operational AML/CFT obligations

• Part II of the First Schedule of the Regulations, entitled “Anti-Money Laundering and Anti-Terrorism Financing Measures”, imposes the FATF recommendations on registered FAs.
• These terms and conditions are applicable to a registered FA when it, by way of business, prepares to carry out or carries out transactions for a customer concerning activities specified in the Regulations.

Registered FAs are required to establish and maintain appropriate and risk-sensitive internal policies, procedures and controls to prevent activities related to money laundering and financing of terrorism, including:

1. Identifying and assessing its money laundering and financing of terrorism risks in relation to its customers, the countries or territories where its customers are from, and the services it provides, and ensuring that controls (e.g. customer due diligence (“CDD”) and  on-going monitoring) are  commensurate  with the  level of risk.
2. Enhanced  controls  should be established where the risks are higher, while reduced controls may be used where lower risks are present.
3. Conducting screening of its customer, as soon as practicable after establishing a business relationship, against relevant money laundering and financing of terrorism sources, as well as lists and information provided by ACRA and any relevant authorities in Singapore to determine the level of risk in relation to the customer. Details of the risk assessment have to be duly documented.
4. Performing CDD by identifying and verifying the identity of customers, agents and beneficial owners and obtaining information on the purpose and the intended nature of the business relationship. CDD measures must be performed when the registered FA
   1. (i) establishes a business relationship;
   2. (ii) suspects that there is money laundering or the financing of terrorism;
   3. (iii) doubts the veracity or adequacy of identification or verification information; or
   4. (iv) at other appropriate times based on its assessment of materiality and risk.

Suspicion

• Where a registered FA is unable to apply CDD measures or suspects or has reason to believe that any transaction may be connected to money laundering or financing of terrorism, the registered FA must cease dealing with the customer and consider if a disclosure or suspicious transaction report should be filed.

Performing on-going monitoring of business relationships with existing and new customers by

• scrutinising transactions undertaken through the course of the relationship (including, where necessary, the source of funds) to ensure consistency of transactions with the customer’s business and risk profile;
• keeping CDD information up-to-date;
• reviewing every business relationship based on risk assessment; and
• taking appropriate after-action review.

Other operational requirements

• Keeping records sufficiently detailed such that a satisfactory audit trail may be made from them, and which may establish a financial profile of any customer.

• Records should be kept for at least 5 years from the date on which the business relationship with the customer ends.

• Assessing and documenting regularly, the effectiveness of internal policies, procedures and controls. The information documented should be provided to ACRA when required to do so.
• Implementing and maintaining an independent audit function to regularly assess the effectiveness of the internal policies, procedures and controls.

• Developing compliance management arrangements, and appointing an employee or officer in a management position as the compliance officer in relation to AML/CFT.

• Implementing and documenting screening procedures for the hiring of fit and proper persons as employees, while ensuring proper training of the employees on matters relating to AML/CFT.

• Assisting and cooperating with the relevant law enforcement authorities in preventing money laundering and the financing of terrorism by furnishing such information as and when required.

• In the event of a suspected breach of any of the terms and conditions under Part II of the First Schedule of the Regulations, ACRA will be able to investigate and, if appropriate, take action against an offending registered FA.

Enforcement

• Registered FAs, as well as QIs who fail to fulfil the obligations will face censures and sanctions from ACRA, including cancellation or suspension of registration, restriction of use of Bizfile or imposition of financial penalties.

Drafting Guidelines

• A set of draft Guidelines has also been issued by ACRA to assist CSPs in understanding the new legal requirements, particularly the Operational AML/CFT requirements.
• The draft Guidelines contain a template AML policies and procedures which CSPs can adopt, a template client acceptance form as well as examples of suspicious transaction indicators.

The consultation period for feedback on the draft Guidelines has closed on 15 April 2015.