Corporate Service Providers Bill

Mdm Deputy Speaker, I beg to move, "That the Bill be now read a second time."

Madam, this Bill is linked to the next Bill on the Order Paper, the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill. As such, 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.

Yes, please proceed.

Thank you. Mdm Deputy Speaker, the Ministry of Finance (MOF) and Accounting and Corporate Regulatory Authority (ACRA) 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's anti-money laundering regime.

First, the Corporate Service Providers Bill (CSP Bill), to enhance our regulatory regime for corporate service providers; and 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 (LLPs).

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 ACRA's ongoing enhancements and were in development even before the case was uncovered.

Let me start with the CSP Bill. Corporate service providers (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. 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 ACRA to ensure that they fulfil their obligations.

Today, non-residents looking to set up companies in Singapore must engage a CSP to do so. While this is not mandatory for locals, many locals still opt to engage CSPs to facilitate company incorporation. Regardless of whether their clients are Residents or not, all CSPs must conduct customer due diligence before incorporating a company.

This Bill will enhance our regulatory regime for CSPs to deter the misuse of companies and bolster our efforts to combat money laundering. There are three key areas of the CSP Bill.

First, all entities carrying on a business in Singapore of providing corporate services must register with ACRA as a CSP. Under the current regime, only CSPs that carry out transactions with ACRA on their customers' behalf are required to register with ACRA. These transactions involve the statutory filing of documents in the course of providing corporate secretarial services. There are nearly 3,000 CSPs regulated by ACRA today, and filings done by these CSPs account for 70% of ACRA's filing transactions.

With this Bill, we will expand ACRA's regulatory scope to include Singapore-based entities that provide corporate services, even if they do not transact with ACRA. These could be, for example, entities that provide corporate services exclusively to overseas clients and, hence, do not transact with ACRA. 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.

The widened coverage of ACRA's 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.

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.

Today, ACRA already imposes sanctions on CSPs and their registered qualified individuals for non-compliance with ACRA's 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, ACRA has taken an increasingly strict stance over CSPs and registered qualified individuals found to be non-compliant. Between 2021 and June this year, ACRA 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.

We will tighten our regulations for breaches of obligations to combat financial crime. 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.

Additionally, the senior management of such firms, such as the chief executive officer (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. Then, upon conviction, they can, likewise, be fined up to $100,000.

The third area of the CSP Bill, will address the potential misuse of nominee directorship arrangements. A nominee director is a person who is appointed as a director of a company, but acts according to another person's directions.

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. Nominee directors have the same legal obligations as other directors. Those who fail in discharging their duties can face sanctions, including disqualification and debarment.

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's requirement for an ordinarily resident director. 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. We will, therefore, do more to tackle the misuse of nominee directorship arrangements.

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.

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.

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's anti-money laundering regime.

There are two sets of amendments in this Bill which will help to enhance the transparency of companies and LLPs.

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. 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.

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.

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 who do not update their registers in a timely manner already face penalties under the Companies Act and LLP Act.

This Bill makes three enhancements.

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.

Next, we will make it an offence for persons to provide false or misleading information about their registers to ACRA, 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 ACRA.

Third, we will require companies and LLPs to verify and update their controllers' information on an annual basis.

The second set of amendments will further enhance transparency around nominee arrangements. 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 ACRA.

To promote even greater transparency, the Bill will require companies to provide the full information of nominee arrangements to ACRA, such as the particulars of the nominee directors and shareholders, as well as the identities of the nominators behind these nominees. This information will only be available to ACRA and other public agencies for the enforcement of any written law. However, ACRA will make public which of the company's directors and shareholders are nominees. In other words, an individual's status as a nominee director will be made public, although the identity of the nominator will not be disclosed. 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.

Mdm 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 AML obligations. Mdm Deputy Speaker, I beg to move.

Question proposed.

Mdm Deputy Speaker: Mr Lim Biow Chuan.

Sir, I wish to declare my interest in speaking on this Bill as a practising lawyer. I am also a Registered Qualified Individual (RQI) and my company is a Registered Filing Agent (RFA) under the ACRA Act.

Under the ACRA (Filing Agents and Qualified Individuals) Regulations, a qualified individual means either an advocate and solicitor, a public accountant registered under the Accountants Act, a member of the Institute of Singapore Chartered Accountants and so on. Essentially, a QI must be properly qualified and be a fit and proper person before he can be a QI. And every RFA must act by or through a registered QI.

The RFA must also attend a mandatory anti-money laundering course (MAML) or a Countering of the Financing of Terrorism (CFT) course and pass a proficiency test once in every two years. An RFA also needs to have a documented Internal Policy, Procedures and Control (IPPC) and an AML policy. As an RFA, I have to attend the AML course and I have taken the proficiency test.

What does an RFA do? An RFA helps businesses navigate the huge amount of rules and regulations relating to the operation of the company. According to ACRA, there are almost 600,000 businesses registered in Singapore. Thus, RFAs are needed to help these businesses keep their statutory records and registration. RFAs also help to incorporate companies, draft directors and shareholders' resolutions, help file the company's annual returns and so on. If a company wishes to increase its capital or pay dividends to its shareholders, to take a bank loan or to buy or sell property, they will need to ask an RFA to assist in the required paperwork and update their ACRA records. If the company has given a security over its assets, the RFA will help to register a charge on the company.

Sir, this Bill seeks to do a few things.

First, to require companies and other entities that carry on a business in Singapore of providing any corporate service to be registered as a registered CSP. This is so, even if they do not file transactions on behalf of their customers with ACRA. This will cover companies that provide registration of shell companies in overseas jurisdictions. It also means that the term RFA will no longer be used and will be replaced by the term "corporate service provider" or CSP.

Second, to require companies and other business entities that carry on a business in Singapore of carrying out any "designated activity" in relation to the provision of any accounting service to be registered as CSPs. Designated activity is also defined in clause 2 of the draft Bill and would include buying and selling of real estate, managing of client money or assets. The Act imposes criminal liability on registered CSPs and their senior management with hefty fines of up to $100,000 for each breach.

The third objective of the Bill is to disallow a registered CSP from arranging for a person to act as a nominee director of a company, unless the CSP is satisfied that the person is fit and proper. In determining whether the person is fit and proper, the registered CSP must take reasonable steps to satisfy himself that the person, who is a nominee director, is not disqualified from acting as a director of a company under any written law, and consider other factors prescribed in subsidiary legislation.

Finally, the Act seeks to require CSPs to comply with requirements to detect and prevent money laundering and terrorism financing.

Madam, in principle, I support the need for tightening the regulations to ensure that all entities offering specific accounting and corporate secretariat services are properly registered under the CSP Act and I support the principle that they must comply with AML/CFT requirements. So, I believe that all parties must do their part to ensure that we deter dishonest entities from carrying out illegal activities and then laundering the illegally obtained funds through our financial system.

However, Madam, I do have a few concerns. Many RFAs, now to be known as CSPs, provide critical services to many small companies and businesses to ensure that these businesses and companies do comply with the Companies Act and ACRA regulations. These CSPs are already required to attend AML/CFT courses and to pass the mandatory test every two years. To impose too many requirements and to impose such high penalties of up to $100,000 fines, seem to be an excessive reaction to the current action against money launderers.

As it is, within the last three years, ACRA has cancelled the registrations of 17 RFAs and 17 RQIs, based on The Straits Times report today. They are cancelled for breaching the ACRA regulations. So, Madam, there are already penalties imposed for breach of such regulations.

Many RFAs typically provide company secretariat services and do not deal with huge flow of funds or monies into the companies. This is unlike the banks or financial institutions, remittance companies or dealers of precious metals. So, to impose onerous requirements on the CSPs to carry out stringent customer due diligence for every company that they incorporate or service and even CDD on existing clients that they know, seems to be an overkill to me. There will be a higher cost of compliance and this will invariably have to be passed on to the businesses. And many of these businesses may be small companies which have to pay for the higher compliance costs just to run a small family business.

Madam, the feedback which I have received from RFAs, eventually to be known as CSPs, is that many huge sums of monies or funds come through the banks, financial institutions or even remittance companies. Surely, these banks, financial institutions or remittance companies are better placed to have stringent AML/CFT measures to stop the flow of illegal funds. The banks and financial institutions make huge profits every year and they should bear a larger share of compliance costs to detect money laundering of illegal funds.

Madam, I am not saying that CSPs do not have a role to play in detecting money laundering activities. However, the question is who is in a better position to detect money laundering activities and which entity should bear the greater part of the compliance costs. Here, I would submit that banks and financial institutions are in a better position to be the gatekeeper against money laundering, rather than CSPs, because the funds flow through the banks and financial institutions. Thus, there should not be a need to impose such huge penalties on CSPs who may have been careless or negligently failed to carry out their CDD.

So, may I urge the Minister to consider the culpability of the CSP when imposing criminal liabilities on CSPs. In this case, the question would be whether the CSP had directly facilitated the illegal flow of funds into Singapore.

Next, may I ask the Minister whether there would be clear guidelines issued to enable CSPs to determine who is considered a fit and proper person to be a nominee director. The criteria must be clear and easy to comply with. Is it the duty of the registered CSP merely to ensure that a nominee director is not disqualified from acting as a director? Or must the CSP check how many directorships is the nominee director holding? Or are there other factors that the CSP must consider.

For example, the classic advice in AML/CFP literature is that a CSP has to carry out CDD to assess for country risk and then assess whether the customer is a politically exposed person (PEP). When the customer is a PEP, then the CSP and many financial institutions would have to carry out enhanced CDD. PEP, in this case, would include politicians like us Members, judges, senior civil servants and so on.

For financial institutions that choose to take the easy way out, they simply reject a PEP as its customer, because they are concerned whether they will be penalised if they process wrongly someone who is a PEP as their customer. Likewise, the easy way out would be for a CSP to reject any PEP so that they do not have to take unnecessary risks.

Madam, without clear guidelines, the concern will be that it will be more difficult for innocent customers, whether local or foreign, to do business in Singapore. A former Nominated Member of Parliament (NMP) had shared with me that he had many difficulties trying to open a bank account more than 10 years after he had stepped down as an NMP. Personally, I, too, have been rejected by banks when I tried to open a simple deposit account with the bank simply because I am a PEP.

Thus, I urge the Government to provide clear guidelines to CSPs so that they know what are the criteria they have to assess in complying with AML and CFT requirements. If a foreigner has to wait for months to start a business or to open a bank account in Singapore, the risk is that we will lose our competitive edge as a business-friendly country.

Madam, The Straits Times had previously reported about a nominee director who was a director of 980 companies. Does ACRA check on the directorships held by any person? Would ACRA not want to set a limit as to the number of directorship that a director can hold? I hope the Minister can provide some clarifications on my concerns.

Mr Louis Chua.

Mdm Deputy Speaker, the CSP Bill is an important piece of legislation that is begging to be enacted in the face of rising concerns over the use of Singapore as a home base or transition country by financial criminals. Over the past year, Singaporeans and many others across the world were shocked and captivated by the discovery of one of the largest money laundering operations globally happening on our shores, even as memories of the money laundering of 1MDB funds remain fresh in our minds.

As we reflect on the money laundering risks and vulnerabilities in the wake of these incidents, it is important that the reputation of our country cannot be associated with that of money laundering or "Singapore-washing", a term which I first read about in a Financial Times article from November 2022 and which was once again brought up in a Bloomberg Opinion article in June last month titled "Singapore-washing Has Hit a Wall".

We need to send a clear message to the world that we are not a haven where our financial system can be easily exploited. When it comes to tightening our regulations, we need to err on the side of caution, even as we continually enhance our supervisory and enforcement methods, as we should. And it is in this spirit that I wish to raise several areas of concerns and seek clarifications to the CSP Bill in this House today.

One of the key areas of concern when it comes to the role of CSPs in facilitating or abetting money laundering operations is the misuse of nominee directors and the multiple layers of companies involved in money laundering networks. This arises from the requirement for companies to have at least one director who is ordinarily resident in Singapore and, hence, a foreigner may engage CSPs to incorporate companies in Singapore while procuring nominee director services from CSPs.

In December last year, it was reported that a Singaporean was helping his clients from China set up companies in Singapore and became a director of a whopping 980 companies. He was subsequently sentenced to multiple charges of failing to exercise his duties as a director and other related charges under the Companies Act, with more than US$5 million being laundered through some of the companies under him.

The Companies Act requires each company to have at least one director who is ordinarily resident in Singapore. Additionally, foreigners must engage the services of CSPs to incorporate a Singapore company. As such, a foreigner might also procure nominee director services.

In a Ministerial Statement in October last year, Minister Indranee shared that, "ACRA has been studying restrictions on directorships, both to ensure that nominee directors are fit and proper to take up the role and whether it would be useful to limit the number of nominee directorships that one can hold".

While the introduction of clause 16 of the Bill meant that a registered CSP must not arrange for a person to act as a nominee director of a company unless he is satisfied that the person is fit and proper, the proposal to require CSPs to ensure appointed nominee directors satisfy prescribed training requirements if they hold more than a legally prescribed number of nominee directorships by way of business was, ultimately, not proceeded with. I view this as a lost opportunity.

The proposal first introduced in ACRA's public consultation already provides for qualified persons to be exempt from such requirements, where qualified persons include an advocate and solicitor of the Supreme Court of Singapore, registered public accountants and members of the Institute of Singapore Chartered Accountants.

Moreover, the requirement is merely to ensure that such persons satisfy prescribed training requirements. Today, banks have to take steps to ensure that all of its employees are regularly and appropriately trained on anti-money laundering laws and their responsibilities in combating money laundering and terrorism financing. Even property agents have to fulfil an increased number of training hours a year from October 2025 onwards. For nominee directors, whose legal obligations are the same as other directors in discharging their duties responsibly, I do not think that minimum training requirements that were initially considered are a step too far but are, in fact, essential.

While it can be argued that it is difficult to come up with a "magic number" on the prescribed number of nominee directorships, the key here is that the proposed legislation would not have prevented non-qualified persons from taking on such nominee directorships. ACRA's justification in not proceeding with this proposal was that it will "enhance its supervisory and enforcement efforts on persons who hold a large number of nominee directorships and exhibit other high-risk indicators". My question then is: does this have to be mutually exclusive? What is the Minister's estimate of the number of nominee directors who would have been covered under this new proposal, especially when 99% of directors hold fewer than 10 directorships and that many nominee directors are likely to be qualified persons themselves?

I do hope that the Government will reconsider this training requirement proposal in due course to further strengthen our regulatory safeguards against the abuse of nominee directorships.

I have several other clarifications specific to the Bill.

Firstly, in relation to the appointment of nominee directors and the requirement for CSPs to take all reasonable steps to be satisfied that the person he or she is appointing is a fit and proper person, I understand that such details will be provided in subsidiary legislation or guidance. In what way would such guidelines and thresholds be similar or different to that of the Monetary Authority of Singapore guidelines on the fit and proper criteria?

Given that all directors, nominee or otherwise, owe a fiduciary duty to the company and have a range of other serious duties and responsibilities, it is important that we uphold high standards in determining the fit and proper criteria that should be expected of the nominee directors appointed by CSPs. Doing so will uplift the corporate governance standards of the companies on which they serve on and also complement the work of regulators in anti-money laundering efforts.

At the same time, support in the form of training and resources should also be made available to CSPs in guiding them on making such fit and proper assessments, as well as on other broader matters relating to money laundering, terrorism financing and proliferation financing. Would the relevant agencies and Ministries be spearheading such training and briefings on a regular basis, to ensure that the conduct of fit and proper assessments is aligned with both legislation and the latest AML developments?

Next, I recognise that there are close to 2,800 Registered Filing Agents (RFAs) and 3,500 Registered Qualified Individuals in Singapore as at the end of 2023. Within this sizeable group of CSPs, there could be many which are very small entities and could also be largely dominated by one or two dominant customer groups. In such cases, the independence of judgement in the assessment of money laundering risks may be at risk of being clouded in view of commercial considerations. Are there requirements for CSPs to declare their customer concentration risks to certain groups of customers, which are ultimately related to the same beneficial ownership? Doing so could aid ACRA in its risk assessment of the broad swathe of CSPs currently.

In addition, under section 9(1)(e) of the Bill, registration or renewal of a CSP will be refused if any of the key appointment holders did not successfully complete a prescribed course or training. What is the level of intensity or duration of such prescribed courses or training? In addition, as the definition of key appointment holders is sufficiently broad such that "any person who is principally responsible for the management and conduct of X's business activities in providing corporate services" would be considered a key appointment holder, there could be a large number of company employees that would have managerial responsibilities, albeit being a junior member of the company, and the level of scrutiny and standards required of a qualified individual (QI) supervising the CSP should be well higher than that of a junior assistant manager.

Finally, a group of companies that are connected to one another may provide different corporate services to the same set of clients. To what extent do the current provisions in the Bill mean that duplicate registration is required and, hence, duplicate monitoring of the clients for money laundering risks? For example, there could be efficiency gains for such companies and for ACRA in holding a Qualified Individual responsible for the implementation of the CSP Bill requirements.

To conclude, Mdm Deputy Speaker, while we do not want to unnecessarily stifle legitimate activities and investments, it is important that we do our utmost to prevent and detect money laundering and the use of our financial systems to facilitate illicit fund flows. I am confident that most professionals in the legal, accounting and finance functions in Singapore carry out their duties diligently and ethically and a tightening of rules and regulations could be seen as unnecessary, given that they are doing no wrong. But when it comes to our commitment to tackling money laundering and illegal activities, we need to take a clear and strong stand, making sure that we examine the sector with a fine-tooth comb and not water down regulatory standards, so that current and prospective businesses which are legitimate can have the confidence of operating in Singapore and dealing with entities operating in Singapore.  Notwithstanding my clarifications, I support the Bill.

Mr Desmond Choo.

Mdm Deputy Speaker, I rise in support of the Bill. Over the past decades, Singapore has emerged as a global financial centre. We have a good reputation for our robust regulatory framework and our commitment to uphold high standards of integrity in the financial sector.

However, recent data from Moody's show that money laundering events in Singapore surged by 79% year-on-year. This is not surprising, considering that Singapore faced and tackled decisively the largest money laundering incident last year involving S$3 billion of illicit funds. This episode occurred despite our regular reviews of our AML strategy, such as the 2022 requirement for companies to maintain registers of nominee shareholders and directors.

Bad actors will continue to find their ways to mask their activities. As Singapore strives to maintain its reputation as an open and transparent financial hub, stringent legislation at all levels is necessary. We must protect our financial sector from illicit activities and strengthen global investor confidence.

This Bill is timely. It aims to strengthen the regulatory regime governing CSPs. It ensures they rigorously adhere to AML protocols and align with international standards set by bodies, such as the Financial Action Task Force (FATF). CSPs can act as key gatekeepers against money laundering, serving as part of our first line of defence.

Under the proposed Bill, CSPs can only conduct business if they are registered for the type of corporate service they provide. Section 9 outlines the Registrar's responsibilities, including the mandate to refuse applications or renewals under specific circumstances. Notably, section 9(2)(f) stipulates that the Registrar must decline re-registration applications for CSPs whose previous registration was cancelled within two years due to non-compliance, serving as a "cooling-off" period.

To enhance the Bill's effectiveness against money laundering, we should consider extending this mandatory "cooling-off" period beyond two years. The duration of this period should also differ, based on the severity of the non-compliance. This will underscore the seriousness of regulatory compliance and act as a stringent deterrent against non-compliance.

The Bill also mandates CSPs and qualified individuals to complete prescribed courses or training related to Customer Due Diligence (CDD) requirements and AML best practices. Sufficient time should be provided for CSPs to meet such requirements. The Labour Movement, through NTUC Learning Hub, is ready to partner ACRA and the Ministry to deliver these courses. The Ministry should also consider providing training subsidies to facilitate broader access and affordability.

Section 8(3) grants the Registrar discretion to impose different conditions on registered CSPs based on various classes or circumstances. I agree that tailored conditions would ensure robust AML safeguards while not causing unnecessary compliance costs. Clarification is needed, however, on what are these circumstances that would justify differing conditions. This would better guide companies in deciding whether they are required to register as a CSP and, as for the existing CSPs, how could they prepare to meet escalated conditions. Certainly, for CSPs with international operations and, thus, facing heightened risks in managing international transactions, enhanced requirements must be imposed.

Section 17 introduces stringent measures to combat money laundering, proliferation financing and terrorism financing. Registered CSPs must perform comprehensive CDD in various crucial circumstances: before providing any corporate service, upon suspicion of illicit activities and when there is reason to doubt previous CDD findings. Non-compliance carries significant penalties, with fines up to $100,000 for the CSP and its senior management.

A critical requirement is conducting CDD based on previous findings, necessitating CSPs to reassess and update their CDD measures periodically. Can I seek clarification on whether there will be a prescribed look-back period or if CSPs must undertake a full review of their current CDD for all existing customers? It is essential to strike a balance that ensures AML compliance while considering the operational feasibility for CSPs.

Mdm Deputy Speaker, the Bill marks a decisive step in fortifying Singapore's financial integrity. By tightening the regulatory oversight of CSPs, we reaffirm our commitment to global leadership in combating financial crime. As we move forward, let us remember: "The price of freedom from financial crime is eternal vigilance." Let us ensure Singapore retains its position as a trusted financial hub in the international space. With this, I support the Bill.

Ms Usha Chandradas.

Mdm Deputy Speaker, under the new Corporate Service Providers Bill, corporate service providers and qualified individuals who provide or supervise the provision of corporate services, will be regulated. The Bill imposes on them a duty to detect or prevent money laundering, terrorism financing and proliferation financing . I will refer to these as AML/CFT/PF, for short. While I support this Bill, I seek seven clarifications from the Minister.

My first few clarifications relate to how the proposed Bill will apply to law firms, especially when they provide tax-related legal services.

Clause 3(1) of the Bill includes in its definition of "taxation services" four different types of services namely – the ensuring of compliance by an entity with written law relating to tax in the course of preparing tax returns, the making of tax calculations for the purpose of preparing accounting entries for an entity's financial statements, the provision of advice in relation to tax and tax planning; and the provision of assistance in the resolution of tax disputes. If these services are rendered in relation to certain "designated activities" they then become "corporate services" which are within the scope of the new Bill.

Clause 3(2) then goes on to state that such services will not be caught by this new law "unless they require the application of an accounting or related skill." This might at first glance seem to exclude lawyers providing tax services, but the boundaries of the Bill are not so clear.

Certain tax provisions for example, section 34A and section 34AA of the Income Tax Act 1947 relating to the taxation of financial instruments, directly import the application of financial reporting standards, such as FRS 39 and FRS 109, into tax law. While financial accounting rules are generally not definitive of tax positions, the outlook may be different where tax legislation directly refers to financial reporting standards. So, in other words, if a tax lawyer was looking to advise on section 34A or section 34AA of the Income Tax Act, he or she would necessarily have to refer to and apply financial reporting standards, as well as the law.

If for example, a tax lawyer is engaged to work on a matter involving the application of section 34AA of the Income Tax Act, and this arises in the wider context of a corporate restructuring exercise that his or her firm is working on and the deal involves "the buying and selling of business entities" what would the relevant treatment be? Would this then result in the law firm's tax work being covered by the Bill because some "accounting or related skill" is necessarily being applied?

Or is it the case that the standard of accounting skill involved has to be something higher? Does it have to be equivalent to that of a professional practising accountant, before regulation under the Bill is triggered? In this regard, I am aware that the term "accounting or related skill" is currently found in the Accounting and Corporate Regulatory Authority (Prescribed Accounting Services and Conditions) Regulations 2023. These regulations apply to situations where a non-accounting entity voluntarily wishes to apply to ACRA to be described as a "Chartered Accountant of Singapore". This might suggest that a high standard of accounting skill, equivalent to that of a professional practising accountant, must be involved before the Bill is triggered for any "taxation services". However, this is not immediately apparent from the plain wording of the proposed Bill. The context of the term's use in the existing legislation appears to be different from that which is proposed in the Bill today. It would be helpful if the Government could clarify the legislative intent on this point and on what is meant by the term "accounting or related skill" as it is referred to in this Bill.

Secondly, I note that the provision of assistance in resolving tax disputes is deemed to be an "accounting service" referred to in the Bill, if it requires the application of an "accounting or related skill".

To this end, I would like to refer to CDD recommendation No 22 issued by FATF for designated non-financial businesses and professions such as lawyers and accountants. This recommendation adopts very similar language to that of the proposed Bill, and it is recognised there that representing clients in disputes and mediations, as well as the provision of advisory services on regulations, are not specified activities covered by FATF's CDD requirements. The Bill's definition of "designated activities" draws from FATF's standards and it is unclear when some of the "accounting services" defined at clause 3(1) of the Bill would as a matter of practical effect, be covered as "designated activities". This includes matters such as tax disputes work and tax advisory work, as well as other types of accounting work such as "internal audit work". This is fundamentally something that is not transactionally-oriented as a service.

In other words, does the link to "transactional" activity unnecessarily narrow down the scope of the proposed Bill? It would be useful if the Government could comment on this point and provide some guidance on the intended interaction between the terms defined as "accounting services" and "designated activities" for the purposes of this Bill.

Thirdly, another related point is this. In Singapore, taxation services in themselves are currently not covered by any CDD regulations. The Bill proposes to remedy this, but only to the extent that it is done as a part of providing "accounting services". I appreciate that the Government's intention may be to align the scope of regulation with the requirements of FATF and to go no further. But a question that nonetheless deserves to be asked is whether persons providing "taxation services" should be regulated for AML/CFT/PF purposes regardless of whether these tax services have any connection to accounting at all. This is particularly in light of the fact that serious tax offences are, in themselves, predicate offences for AML/CFT/PF purposes and may in fact be considered to be an area of heightened risk.

I understand that some other jurisdictions, including the UK and Germany, do extend CDD obligations to providers of tax services as such. So, my third clarification is this: has the Government considered whether all persons providing taxation services should simply be regulated for AML/CFT purposes, and if so, why the scope of regulation in the proposed Bill has been limited in the way that it is?

Fourthly, further to clause 7(2) of the Bill, accounting firms will automatically be treated as registered for the purposes of the new proposed law. There is however no similar carve-out for law firms. In any event, law firms are already required to conduct extensive due diligence checks under the Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules 2015. I would be grateful if the Minister could clarify whether the Corporate Service Providers Bill will be applicable to practicing lawyers and law firms, if at all. In my view, it would be more correct in principle to completely exclude practising lawyers from the Bill, in order to avoid law practices from being subject to two sets of overlapping AML/CFT/PF obligations. Being subject to overlapping but similar CDD regimes is not ideal.

My fifth and sixth clarifications relate to clause 29 of the Bill. Could the Minister clarify how the requirement to prove a corporation's "state of mind" will be assessed? Will objective or subjective standards be applied? It is also unclear as to what will constitute "action towards creating and maintaining a corporate culture that does not direct, encourage, tolerate or lead to non-compliance" under the new rules. Is the Minister able to clarify if further guidance will be issued on these points and on whether regulated corporate service providers will be assisted with the training and tools necessary to support their own compliance with these new rules?

My last clarification has to do with future plans by the Government in the AML/CFT/PF regulatory space. FATF has identified trade in art, antiquities and other cultural objects as a market that is vulnerable to money laundering and terrorist financing risks; and so my last question is this: are there any plans to specifically include the art market within the scope of Singapore’s AML/CFT/PF regulatory framework? Notwithstanding these clarifications I support the Bill.

Mr Yip Hon Weng.

Mdm Deputy Speaker, both Bills are significant commitments to our ongoing efforts to fortify the foundations of corporate governance in Singapore.

In recent times, our headlines have been marred by high-profile cases of money laundering. This is alongside a worrying trend in cybercrime. These incidents are not just isolated events; they are symptomatic of a larger issue that threatens the very fabric and integrity of our economy. These Bills are tabled with the presumption that they will serve as a bulwark against the misuse of our financial system.

By regulating CSPs, we are taking a significant step towards safeguarding our economy from the perils of money laundering, proliferation and terrorism financing, which are critical for maintaining national and international financial integrity. In a globalised era where cross-border operations are the norm, mandating that foreign companies lodge returns on their registers sends a clear message that Singapore is committed to a level playing field where every corporate entity, both local and foreign, are held to the same stringent standards.

While the intentions of the Bills are clear, I have several clarifications.

First, Mdm Deputy Speaker, how will the Bills concretely improve transparency and accountability within CSPs, LLPs and all relevant business and companies? Mandating the registration of CSPs is a commendable move to maintain industry standards. However, it is imperative that these criteria emphasise not just qualifications, but also the reliability and integrity of the entities. Can the Minister elaborate on the mechanisms that will be employed to vet and verify the qualifications of CSPs?

What mechanisms are in place to ensure that the information provided by company controllers is accurate and up-todate? Foreign entities are expected to have the same standard as local entities when it comes to registering their nominee directors. How will ACRA ensure that such registration is correct regarding foreign entities?

Moreover, given the recent surge in money laundering cases, it is also critical to understand how the lessons learnt have been woven into the considerations of these Bills. How have insights from these cases shaped the registration and information-sharing criteria? Given that financial crime prevention is one of the key goals, what specific outcomes are expected in this regard? How will the success of these measures be quantified and evaluated?

Second, Mdm Deputy Speaker, for these Bills to be truly effective, awareness and enforcement are necessary to ensure regulatory compliance. It is imperative that the regulatory actions and enforcement mechanisms outlined are not only stringent but also practical and implementable. How will the enforcement mechanisms outlined in the Bills discourage malpractice among service providers?

What steps will be taken to monitor and warrant compliance? Can the Government also provide more details on the prescribed frequency and form of notifications to registrable controllers to ensure ample notice and awareness?

Third, Mdm Deputy Speaker, it is important to strike a balancing act between transparency and data protection. In enhancing transparency, how does the CLLP Bill balance the need for openness with the protection of sensitive information? What measures are in place to prevent unauthorised access to the registers of nominee directors and controllers?

Fourth, Mdm Deputy Speaker, can the Minister elaborate on mechanisms in place for appeals and legal protections? The inclusion of an appeal process for service providers to challenge decisions made by the Registrar is commendable. It establishes a robust system for review and ensures that fairness and due process are upheld. How will the CSP Bill ensure that the appeals process upholds the principles of fairness and transparency? In this connection, clause 23(2) of the CSP Bill states that a person who appeals the decision of the Registrar must specify the grounds of appeal. However, it is unclear if the Registrar will provide the grounds of the Registrar’s decision. The lack thereof may hinder the said person from submitting substantive grounds of appeal.

Fifth, Mdm Deputy Speaker, we must comprehend the extent of these Bills' impact on businesses and proactively provide support to alleviate any foreseeable negative consequences. Has the Ministry conducted an assessment on the administrative and financial impact of these amendments on businesses? In recent months, we have seen a surge in new bills and policies introduced in response to the increase in financial crimes. However, there is a concern that businesses may struggle to keep pace with these rapid changes.

Providing a clear implementation timeline empowers companies to proactively plan and adapt to the new requirements of the Bills. How will the Registrar ensure timely updates and accuracy in the registers?

What support or guidance will be available to companies, especially small and medium enterprises, as they adapt to the new regulatory framework? Are there provisions in the CLLP Bill to assist businesses to transit to the new regulatory framework, such as training or grants?

Sixth, Mdm Deputy Speaker, we must remain cognisant of our duty to serve the public interest without causing undue disruption. What provisions are in place to ensure that the day-to-day function of corporations or individuals who wish to incorporate new corporate entities are not disproportionately inconvenienced by these new regulations, which may reduce the number of CSPs in the short term? Are there additional financial costs to businesses?

It is critical that our approach to combat financial crimes does not inadvertently cause more detriment to us. We must ensure that while casting our net wide to catch the perpetrators, we do not entangle ourselves in red tape and undermine our business efficiency. Our efforts should be precise and targeted. What are the risks that these new measures will deter potential investments by individuals seeking to relocate here?

In conclusion, Mdm Deputy Speaker, the provisions in both Bills are indispensable in the wake of the massive money laundering cases that have recently come to light. These cases have imparted valuable lessons, emphasising the pivotal role of CSPs in our business ecosystem and their inadvertent link to money laundering activities.

CSPs may be used, on purpose or heedlessly, to create complex corporate structures that can obscure the true ownership and control of assets. This makes it difficult to trace illicit funds. It is important for CSPs to maintain a high standard of compliance. This is to prevent their services from being misused for money laundering or other illicit financial activities.

By ensuring that the particulars of controllers, nominee directors and shareholders are meticulously maintained and regularly updated, we are establishing a robust framework that deters illicit activities and fosters a more transparent business environment. We will also have a better picture of who are behind companies to ensure greater accountability and ease for culpability, should there be any illicit activities.

These Bills are Singapore's commitment to ensure that companies operate within a framework that is not just stringent but also just. By establishing high standards of regulation, we are not only fortifying our defenses against financial crimes, but also enhancing the attractiveness of Singapore as a premier business hub. Increased trust and transparency are the cornerstones upon which businesses thrive and the two Bills are a beacon that signals to the world that Singapore is synonymous with integrity.

They are a crucial step in safeguarding Singapore's financial system against misuse and in preserving the sanctity of our economic sovereignty. I support both Bills.

Mr Neil Parekh.

Mdm Deputy Speaker, thank you for allowing me to join this debate on a topic of great importance for Singapore's continued success as a business and financial centre. In parallel with Singapore's rapid development as a financial centre, the CSP sector have seen significant growth, providing a wide range of fiduciary and administrative services to corporates, investment managers and high-net-worth individuals.

The CSP Bill, along with the ACRA and CLLP Bills mark significant strides to solidify Singapore's regulatory landscape. These legislative measures aim to enhance transparency, combat illicit financial activities and maintain Singapore's reputation as a trusted global financial hub. By imposing stricter compliance requirements and heavier penalties, the Bills seek to ensure that CSPs uphold rigorous anti-money laundering standards.

The CSP Bill seeks to regulate entities offering corporate services, ensuring they are registered, meet the necessary criteria and operate in compliance with legal and regulatory standards.

The Bill also aims to prevent money laundering and the financing of terrorism by imposing stringent requirements on CSPs. The legislation will also provide training opportunities for staff employed in the sector, to help them keep up-to-date with the latest developments in the industry and ensure they do not fall short of the law in their work.

The Bill also establishes the role of the Registrar of CSPs and details registration processes, renewal requirements and obligations of registered providers. Penalties for non-compliance include fines, imprisonment, suspension or cancellation of registration and regulatory actions, such as censuring and financial penalties. However, I believe this Bill could also bring about challenges to businesses and owners.

Firstly, the Bill introduces increased administrative burden for businesses. To comply, companies in this sector need to prepare extensive documentation to register as CSPs or to ensure their own service providers are properly registered. These new administrative tasks demand considerable effort and resources from small businesses, diverting attention from other critical activities.

Secondly, the additional financial costs associated with compliance will be substantial. This reallocation of resources, in terms of time and people and system upgrades to meet new standards, can cause temporary interruptions in service delivery.

Lastly, stricter regulations might also result in fewer service providers meeting the new criteria. In my view, smaller, specialised CSPs will continue to play an important role in this sector. We just need to ensure we do not stifle growth of this very important sector by bringing about major changes at too rapid a pace.

Madam, now, I have a few clarifications which I wish to raise with the hon Minister: first, could the Minister please elaborate on the additional information that will be required for the registration and renewal of CSPs, including the necessary documentation; and the specific form and manner designated by the Registrar, as outlined in clause 8? Understanding these aspects ensures that applicants can comply effectively with the registration process quickly, avoiding any delays or rejections.

[Mr Speaker in the Chair]

Secondly, will businesses be provided financial support to alleviate increased costs from operational disruptions?

Lastly, could the Minister clarify what constitutes adequate supervision and the specific responsibilities involved, as defined in the Bill? Providing such clarity upfront will ensure that CSPs maintain compliance with the regulatory standards and uphold the integrity of their services.

As we deliberate upon this Bill, it is important to underscore the significant benefits it holds for our economy. I believe it will enhance trust and credibility, improve compliance and governance and eventually boost operational efficiency. Laws like the one before us will further strengthen and enhance Singapore's financial stability and investment climate. The CSP Bill is not just about regulation; it is also about creating a better business environment for all.

Despite the short-term challenges, the Bill will facilitate a better future for our economic growth and will create an enhanced investment climate for all investors in Singapore. Sir, notwithstanding my clarifications, this Bill has my full support.

Mr Louis Ng.

Sir, the CSP Bill and the CLLP (Miscellaneous Amendments) Bill will strengthen the regulation of CSPs and increase the transparency of beneficial ownership of corporate entities. I thank ACRA for conducting a public consultation on the proposed changes and for publishing its responses to the feedback received.

I have three points of clarifications to raise. My first point is on the duties imposed on CSPs. Section 16 will impose duties on CSPs to ensure that a nominee director is a fit and proper person. Section 16(2) requires a CSP to take all reasonable steps to be satisfied that the person is not disqualified from acting as a director and to consider prescribed factors. Can the Minister elaborate on the extent of reasonable steps that must be taken? Can the Minister also provide examples of the factors which will be prescribed?

In the public consultation, respondents asked whether these requirements apply retrospectively to nominee directors' appointments made before the CSP Bill might come into force. MOF and ACRA clarified that this requirement will not apply retrospectively. Notwithstanding that the requirement will not apply retrospectively, in the event that a CSP discovers that an existing nominee director is not considered a fit and proper person based on any prescribed factors, can the Minister clarify what the CSP will be obliged to do in this situation?

In the public consultation, MOF and ACRA also clarified that the obligation to ensure that a nominee director is fit and proper is an ongoing one. Can the Minister provide further guidance on the steps that a CSP must take to discharge this ongoing obligation?

My second point is on CSPs' duties to perform customer due diligence. Section 17(1) requires a CSP to perform customer due diligence measures in certain circumstances. However, under section 17(3), a CSP may choose not to perform or complete any customer due diligence measure, if the CSP has reason to suspect that the transaction relates to money laundering, proliferation financing or terrorism financing and performing the measures will tip-off the customer or any person.

Further, under section 17(4), if a CSP is unable or chooses not to complete any customer due diligence measure, the CSP must decline to provide or terminate ongoing corporate services. If the reason for not performing or completing any customer due diligence measure is because doing so will tip the customer off, the CSP's refusal to provide or termination of corporate services may also risk tipping-off any person. Can the Minister clarify how CSP should proceed in refusing to provide or terminating its services, if it is concerned about the risk of tipping-off any person?

My third and final clarification is on regulatory breaches. Under sections 19(2)(d) and 21(2)(d), financial penalties of $25,000 and $10,000 respectively may be imposed for each contravention or non-compliance of regulations. For certain continuing offences, the Bill prescribes additional fines to be imposed for every day during which the offence continues after conviction. Can the Minister clarify whether the provisions on regulatory breaches gives the Registrar the power to treat each day of continuing regulatory breaches as fresh instances of contravention or non-compliance which can be separately penalised?

Under sections 18(4)(b)(iii) and 20(4)(b)(iii), the Registrar may determine that there was a contravention or non-compliance of regulation and decide not to take regulatory action. Can the Minister clarify whether the CSP or individual involved will be informed that the Registrar determined that there was a contravention or non-compliance, and decided not to take regulatory action?

Can the Minister also clarify whether the Registrar can take into account this earlier determination that there was a contravention or non-compliance as an antecedent if the CSP or individual later commits an offence or regulatory breach? Can the Minister also share what other implications will arise from the Registrar determining that there was a contravention or non-compliance, even if no regulatory action is taken?

For instance, will this record be considered in any future application by the CSP or individual? If there are potential future implications from the Registrar's determination that there was a contravention or non-compliance, even if no action is taken, the CSP or individual should be informed of the determination, so that they can decide whether to challenge the determination.

Under section 23(1), any regulatory action by the Registrar can be appealed to the Minister. It does not appear that a determination of contravention or non-compliance can be appealed against. If a determination of contravention or non-compliance may have future implications, even when no regulatory action was taken, how can the CSP or individual challenge the Registrar's determination?

Sir, notwithstanding these clarifications, I stand in support of both Bills.

Mr Don Wee.

Mr Speaker, Sir, I declare that I am a counsel member of the Institiute of the Singapore Chartered Accountants, but I do not have any interests with any CSP.

Being an open economy and a leading global financial centre, Singapore is exposed to significant money laundering risks. The $3 billion money laundering case last year and more recently, a case of US$1 million in scam proceeds channeled through two companies incorporated here, are two examples of money launderers trying to take advantage of our financial system. A Bloomberg article, dated 17 June, coined the term "Singapore-washing". These two Bills are timely and will plug the loopholes being exploited. Mr Speaker, Sir, in Mandarin.

(In Mandarin): I would like to seek clarifications regarding some of the clauses in the Bill.

Clause 7 expands the registration requirements for CSPs, even if they do not file transactions on behalf of their clients. How will the proposed registration requirements ensure that all CSPs comply effectively with Anti-Money Laundering, Combating the Financing of Terrorism and Proliferation Finance regulations? What mechanisms will be put in place to monitor compliance and prevent regulatory overlaps or impose excessive burdens on CSPs?

May I recommend that the Government consider implementing a phased approach for the registration of CSPs, accompanied by detailed guidance and support for compliance with AML/CFT/PF regulations? Would the Ministry share more information about its measures to establish a robust monitoring and evaluation framework to assess the effectiveness of the new requirements while minimising regulatory burdens?

(In English): Clauses 3 and 7 require the inclusion of companies which carry out any designated activities, in relation to the provision of any accounting service as registered CSPs. What specific risks have been identified that justify extending AML/CFT/PF requirements to all accounting service providers and how will ACRA ensure that these providers are adequately prepared to comply with these new regulations? Is ACRA able to ensure that the CSPs employ qualified accounting professionals to provide accounting and bookkeeping services to companies incorporated in Singapore? The unqualified professionals do not answer to any accountancy body, like ISCA or CPA Australia.

I would like to suggest that the Ministry conduct a risk assessment to clearly identify and communicate the specific risks posed by different types of accounting service providers. I recommend that targeted training and resources be provided to ensure that they understand and comply with the new requirements while minimising disruptions to their operations.

Clauses 16, 17, 29 and 30 imposes criminal liability on registered CSPs and their senior management for breaches of AML/CFT/PF requirements. How will this impact the willingness of individuals to take on these roles and what safeguards will be in place to protect against undue penalties?

May I recommend that the Government consider implementing a clear framework that distinguishes between minor compliance issues and serious breaches as well as ensuring that penalties are proportionate to the severity of the offences? Additionally, would the Ministry provide a mechanism for senior management to appeal decisions or demonstrate due diligence to avoid unjust penalties?

Regarding clauses 16 and 37 for the new requirements for nominee directors, I would like to ask, what criteria will be used to determine if an individual is "fit and proper" to act as a nominee director and how will CSPs verify this information without access to comprehensive background data? "Fit and proper" must be clearly defined and the nominee director should be required to attend workshops relating to director's duties and responsibilities.

Organisations, like ISCA, also run programmes to help new and aspiring directors to acquire new knowledge, build competencies and attain board readiness as well as for existing directors to keep themselves abreast of developments in the corporate governance space. I suggest that the Ministry develop a standardised set of criteria and a verification process, including access to relevant databases, that CSPs can use to assess the fitness of nominee directors. This process should be transparent and ensure that CSPs can perform these checks efficiently and effectively.

About the introduction of clause 17 to detect and prevent the proliferation financing of weapons of mass destruction (WMDs), how will the requirement for CSPs to comply with this new regulation be integrated with existing AML/CFT frameworks and what specific challenges might CSPs face in meeting these new obligations?

I propose that the Ministry align the new requirements with existing AML/CFT frameworks to ensure consistency and avoid duplicative efforts. CSPs should be provided with clear guidelines and examples of best practices for detecting and preventing PF and offered regular training sessions to help them stay informed of evolving threats and compliance strategies.

I would like to sum up with five recommendations for this Bill.

Firstly, phased implementation. Implement the new regulations in phases, starting with high-risk CSPs and gradually include other entities. This approach allows for adjustments based on feedback and ensures that all entities have adequate time to comply.

Secondly, support and training. Provide comprehensive training programmes and support resources for CSPs to help them understand and comply with the new requirements. This includes workshops, online courses and access to advisory services. It will be better if additional training grants can be provided to these CSPs.

Thirdly, monitoring and feedback. Establish a robust monitoring system to track compliance and gather feedback from CSPs. The Government can use this feedback to refine regulations and support mechanisms, ensuring that they are effective and not overly burdensome.

Fourthly, proportional penalties. Ensure that penalties for non-compliance are proportionate to the severity of the breach. Implement a clear distinction between minor infractions and serious violations, with appropriate penalties for each category.

Finally, transparency and communication. Maintain transparent communication with CSPs about the rationale for the new requirements, the expected benefits and the processes involved. Regular updates and open channels for feedback will help build trust and compliance. I would like to conclude with my support for both Bills.

Second Minister for Finance.

Mr Speaker, I would like to thank the Members for their support of the Bills.

In their speeches, Members made reference to the $3 billion money laundering case. I just want to emphasise, as I did to my opening speech, that the proposals in the Bills were actually already in development even before the case was uncovered. So, the amendments do not stem from nor are they solely in response to that particular case.

But that said, we refined certain proposals to incorporate the insights gleaned from the ongoing Inter-Ministerial Committee as well as lessons learnt from the case. For instance, as part of the CLLP Bill, we are strengthening upstream controls and corporate transparency by ensuring that persons exercising control of legal persons behind-the-scenes, or registrable controllers in short, are identified at the point of incorporation. Such information would be immediately available to relevant authorities.

With this context, let me now address clarifications on the Corporate Service Providers Bill or CSP Bill, before moving on to the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill.

First, on the CSP Bill, Members raised queries around three main themes. First, the registration criteria and obligations of CSPs; second, nominee directors; and third, penalties and avenue for appeals, which I will address in turn.

Mr Neil Parekh, Mr Yip Hon Weng and Mr Desmond Choo asked about the criteria to register as a CSP. These requirements and mechanisms to register as a CSP are similar to our existing regulatory regime for Registered Filing Agents or RFAs. In summary, CSPs are required to be a registered business entity with ACRA and must appoint a Registered Qualified Individual (RQI) who meets the qualification requirements. Key appointment holders and RQIs will be subjected to screening checks by ACRA and the CSP must also complete a prescribed AML/CFT course before their application for registration will be considered. More details of the registration requirements for CSPs can be found at clauses 8 and 9 of the Bill. Any conditions on registration will be published by ACRA.

Mr Don Wee asked about the requirement for accounting service providers to be registered as CSPs. Amongst accounting service providers, only those that carry out any designated activity defined by FATF to have money laundering risks, need to register as a CSP. Examples of designated activities include, carrying out transactions for a customer relating to the management of client monies and bank accounts and the buying or selling of real estate. For accounting entities that are already registered with ACRA under the Accountants Act, they do not need to apply to ACRA to be separately registered as CSPs. They will be automatically be registered as CSPs.

To Ms Usha Chandradas' queries, other professionals, like practising lawyers and law firms who provide legal services on tax matters, do not need to be registered with ACRA. They are actually heavily-regulated, but that is under a separate legislation and regime. This Bill is also not intended to cover other services, such as taxation services provided by non-accountants and the art market.

Mr Lim Biow Chuan, Mr Desmond Choo, Mr Neil Parekh and Mr Louis Ng inquired on the obligations of CSPs. The measures in this Bill do not fundamentally affect CSPs' obligations insofar as customer due diligence and AML/CFT checks are concerned. They reinforce the existing measures that the industry is already familiar with.

Mr Don Wee also asked about the new requirement for CSPs to detect and prevent the proliferation financing of WMDs. These duties would be similar to the existing duties of CSPs to counter money laundering and the financing of terrorism. CSPs will be required to screen against sources of information, like the relevant regulations under the United Nations Act. The sources of information will be prescribed in subsidiary legislation and ACRA will also publish guidelines to raise the industry's awareness and understanding of proliferation financing. We do not expect this requirement to significantly increase the CSPs' compliance obligations.

Mr Don Wee and Mr Yip Hon Weng also asked how the requirements in this Bill will be enforced to ensure that CSPs comply with their obligations. Today, ACRA already conducts regular inspections to ensure CSPs comply with their anti-money laundering obligations. During these inspections, ACRA will assess, among other things, the CSPs' approach to assessing money laundering or terrorism financing risks; obtaining of beneficial ownership information; record-keeping; and customer due diligence procedures. If CSPs are found to violate or be negligent in any of their obligations, they could be subject to fines and regulatory action from ACRA, including cancellation of their registration as a CSP.

Following a cancellation, entities and individuals are not allowed to reapply for registration for a period of two years. Mr Desmond Choo referred to this as the two-year "cooling off" period and suggested to extend its duration. An entity or individual may reapply to ACRA after two years, but this does not mean that their registration would necessarily be successful. ACRA will subject all applications received after the "cooling off" period to higher scrutiny. In instances where applicants did not meet the requirements, such as the "fit and proper" criteria, ACRA will not approve their re-registration, even after two years.

Besides enforcement, ACRA also publishes guidance and participates in industry fora to share best practices and raise awareness, so as to better support the sector in discharging its AML/CFT obligations.

Let me turn now to questions pertaining to nominee directors.

Mr Don Wee, Mr Louis Ng and Mr Lim Biow Chuan sought clarifications on the requirement for CSPs to be satisfied that the individuals they arrange to act as nominee directors are "fit and proper". The "fit and proper" factors will be prescribed in subsidiary legislation, but would include assessing an individual's conduct and compliance history, integrity and whether the person has the competency, capacity and capability to fulfil his obligations as a director. ACRA will also provide additional guidance on how CSPs can fulfil this obligation. However, CSPs must also exercise their professional judgement when making arrangements for individuals to be nominee directors.

Mr Ng also asked how CSPs should discharge this ongoing obligation to ensure that nominee directors are "fit and proper". Once an individual is appointed as a nominee director, it is the company's obligation, under the Companies Act, to ensure that their directors, nominee or otherwise, remain "fit and proper". However, if the CSP has reasons to believe that its appointed nominee director is no longer "fit and proper", after the appointment, it should also take appropriate action, such as informing the company involved to replace the individual concerned.

Again, I would like to repeat the general principle from my opening speech, which is that ultimately, each CSP must exercise professionalism and undertake responsibility for its actions or lack thereof.

Mr Louis Chua had asked about the issue of whether or not we should have a regime where we specify the number of nominee directors or have a threshold of nominee directors. On this, it was previously mentioned that ACRA was studying if it would be useful to limit the number of nominee directorships that one can hold. We studied the proposal closely. It is included in the inter-agency discussions and conducting of public consultation.

But after considering the feedback received, we decided not to go ahead with that proposal. This was because prescribing the number of nominee directorships that an individual can hold, could be a blunt tool that is unnecessarily restrictive. It would make it difficult for individuals who are capable of fulfilling their obligations, despite holding more than the prescribed number and who may have legitimate reasons for holding multiple nominee directorships.

At the same time, bad actors could always find ways to get around the prescribed number. It could also inadvertently raise the cost of doing business as companies may need to source from more individuals to fulfill this requirement.

So, that said, we still remain committed to addressing this issue. Earlier, I had spoken about two new measures that we are introducing: the requirement for CSPs to arrange for the appointment of individuals as nominee directors by way of business and for the CSPs to ensure that the nominee directors appointed through them are fit and proper.

Beyond these legislative amendments, ACRA has also stepped up their supervisory and enforcement efforts for those who hold a large number of nominee directorships and exhibit other high-risk indicators and ACRA will continue to do so.

Moving on to the third bucket of queries around penalties and avenues for legal protection. Mr Wee and Mr Lim asked about the criminal liability that will be imposed on registered CSPs and their senior management for breaching their obligations to combat financial crime and the quantum of the fines.

Imposing criminal liability for breaches relating to anti-money laundering obligations is consistent with the legislation governing other gatekeepers in Singapore, and better reflects the serious nature of the breaches. Such liabilities would be adjudicated and determined by the Courts.

To Mr Lim’s suggestion for the banks to be held accountable for money laundering breaches rather than CSPs, I would say that guarding against money laundering is a whole-of-society effort and the CSPs must play their part. I agree that banks are a critical gatekeeper, and they do have onerous obligations and there are existing AML regulations in place for banks. Banks will similarly face sanctions, including fines, if they breach any obligations.

The quantum of up to $100,000 for the maximum fine of such breaches is also consistent with those of other designated non-financial businesses and professions in Singapore. It is a maximum quantum and the actual amount of fine meted out would depend on the facts of each case.

To Mr Wee's suggestion to distinguish between minor compliance issues and serious breaches, this has and will remain in place as ACRA will still be able to take regulatory action for breaches of a less serious nature.

On a related note, Ms Chandradas asked how a corporation's "state of mind" will be proven under clause 29 of the Bill. This will depend on the wording of the particular offence and the general principles of criminal law.

As for avenues for legal protection and appeals, if a CSP is found to have contravened any of their obligations, ACRA will first inform the CSP of the contravention, regardless of whether there is any regulatory action against the CSP. In cases where ACRA intends to take regulatory action, a "show cause" letter will be sent to the CSP, setting out the contraventions. The CSP will then have the opportunity to make written representations to ACRA to explain as it were. This is provided for in clause 22 of the Bill. If further actions are taken, clause 23 of the Bill allows for appeals to the Minister for regulatory actions.

Mr Speaker, I will now address questions raised on the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill.

Mr Yip asked about the measures that are implemented to ensure data accuracy of our various corporate registers. First and foremost, it is the responsibility of companies to ensure that the information they maintain in their registers is accurate. While we understand that companies depend on the information provided to them from their controllers or nominee directors, the companies will be responsible for sending notices to their controllers annually to ensure that the information is kept up to date.

In addition, ACRA leverages data analytics and conducts ongoing inspections to verify that the information contained in the various registers is accurate and up to date. Companies that do not maintain accurate and up to date information in their registers can face fines, which we are enhancing as part of this Bill.

The measures and underlying principles broadly apply to both local and foreign companies that are required to maintain the registers.

Next, data protection. As Mr Yip mentioned, the data that is contained in these registers is of a sensitive nature and must be safeguarded appropriately. Hence, it is critical to strike the right balance between the need for transparency and data protection.

This is why we always monitor this trade off and are prepared to introduce changes where necessary. For example, we have introduced a new framework for differentiated information disclosure, not in this Bill but in the ACRA (Registry and Regulatory Enhancements) Bill that was just read earlier. The framework will protect confidentiality of personal information by limiting public access, while still allowing selected, specified parties to access the information to fulfil their legal obligations.

On ease of doing business, I also agree with Mr Yip, Mr Wee and Mr Parekh about the need to balance between compliance cost, ease of doing business and the extent of controls and safeguards to combat financial crime. This is why we have consulted stakeholders extensively and carefully calibrated the requirements in both Bills to ensure that on one hand, appropriate measures can be taken in relation to those who breach their obligations, while on the other hand, we continue to ensure that Singapore remains open and friendly to legitimate businesses, and the cost of compliance remains manageable.

On the whole, we do not expect the new requirements in the Bills to significantly increase compliance costs on CSPs or affect the ease of doing business in Singapore. The requirements in the Bill are existing best practices that CSPs should already be adopting.

In addition, we have taken steps to ensure that the transition will be as seamless as possible.

For the requirement for all CSPs to register as CSPs, even if they do not transact with ACRA, existing Registered Filing Agents will be transited seamlessly and need not re-register with ACRA, until their existing registration expires. Entities that have not yet registered with ACRA will have six months to do so after the commencement of the new CSP regime. ACRA will communicate the effective date of commencement in advance, provide the necessary support, such as guidance, and sufficient lead time for CSPs to implement the necessary changes.

Similarly, for the registers-related requirements, ACRA will notify companies ahead of time of the timeline and the means to file the necessary information.

I also agree with Mr Choo and Ms Chandradas on the necessity of training. We will explore working with the relevant stakeholders, such as the professional bodies and the labour union, to develop training courses to support individuals in acquiring the necessary skills to fulfil the obligations in these Bills.

I think there were a couple of other queries which Mr Louis Chua had raised. He had asked, I think, whether in a situation where you have a group of companies connected to each other providing different corporate services to the same set of clients, whether it is necessary for them to have duplicate registration and whether there will be duplicate, I think – there will be duplication in maintaining the due diligence for the AML risk.

The first thing to understand is that, if it is different companies providing different corporate services, the different entities each must comply and register. I mean, it depends on the nature of what they are doing. But if you are an entity that is providing corporate services and you have two entities, then it has to be two registrations. If you are providing different services, you still have to register separately. It is not a duplication though. It goes by entity. This is also because they would be providing different services, which are associated with different risk. So, you go by entity.

And I think he asked about the definition of key appointment holders under the Act. There is a definition under the CSP Act of key appointment holders. That would be under section 2, the general interpretation section and it defines "key appointment holders", in relation to any person. Let us call that person X. So, a key appointment holder means this in relation to any of the following persons: where X is a sole proprietorship, then the sole proprietor is the key appointment holder. Where X is a partnership, or limited partnership, then a partner of the partnership or limited partnership. Where X is a company, then a member of the board of directors or an individual for the time being holding the office of chairperson or chief executive officer of the company. Where X is the limited liability partnership, then it would be a partner or manager of the limited liability partnership and, I think, in other cases it would be persons principally responsible for the management and conduct of X's business activities in providing corporate activities. So, that is set out in the Act.

Then I think he asked what if any of the key appointment holders did not successfully complete the prescribed course of training and what is the level of intensity or duration of such courses. The CSPs must complete mandatory AML/CFT courses, as part of the registration and renewal. So the course is mandatory at the point of the CSP's registration or renewal.

My understanding on the intensity of the course and this is not set in stone because, obviously, this may be adjusted. But at the moment, it is a half-day course by professional instructors with about a one-hour test, subsequently; and the pass mark is 80%. Subsequently, of course, the CSPs must ensure that the employees are adequately trained in the AML/CFT laws and regulations.

I think that covers the queries. So, Mr Speaker, Sir, let me conclude by thanking the Members for their support of the two Bills.

The Government has always taken our responsibilities to combat financial crime seriously, even before the authorities uncovered the $3 billion money laundering case last year. Since then, however, money laundering has been a prominent topic in the media. So, I am grateful for the support and for our unity, as a society, in recognising the need for and the importance of combating financial crime.

These amendments will further advance our efforts to combat financial crime, by strengthening our regulatory regime for CSPs and minimising the misuse of legal persons. I would like to conclude with a word of encouragement to the gatekeepers who have been diligently fulfilling their anti-money laundering obligations. Your efforts are not in vain, they are deeply appreciated and crucial in maintaining Singapore's reputation as a trusted business hub. Mr Speaker, I beg to move.

Clarification time. Mr Louis Chua.

Thank you, Mr Speaker. Just two quick clarifications for the Minister.

I think the first, in terms of the nominee directors, my proposal is not so much about the capping of the nominee directorship per se. But I think in ACRA's original consultation paper, they did suggest that for those who hold more than a legally prescribed number of nominee directorships, then you will have to satisfy the prescribed training requirements. I also acknowledge Minister's point about the enhanced supervisory and enforcement effort, so, I think that is definitely necessary and important. But my question is more of, why is it that we cannot have the enhanced supervision while prescribing the minimum prescribed training requirements for those who hold excessive number of nominee directorships?

The second is in terms of the key appointment holders. Indeed, just a small clarification because given the definition of the key appointment holders for, basically, those who are principally responsible for the management and conduct of X's business activities. In that sense, the question is more of when it comes to someone who is holding a – whether it is a junior assistant managerial position, the level of requirement versus that of, say, the qualified individual supervising the CSP, whether or not then there is a distinction there and, I think, some of CSPs may be concerned that every single manager that I have would be covered.

On the second point, I think it is very difficult to define really precisely, but when you have a term like key appointment holder, the definitive word is "key". So, if it is a junior officer in the company who does not really have a lot of responsibility for the decisions which are taken, then obviously that person would not be regarded as a key appointment holder. It would be a question of fact in each case, but I think it is generally recognisable.

It is not a question of age, because you may have somebody who maybe young, but let us say, in a company that happens to be the shareholder's son. All the other directors or appointment holders may be older, but if the director's son says this has to be the case, everybody goes along with that. Depending on the circumstances, he could well be a key appointment holder.

So, you can see from the definition, that the definition laid out certain well-recognised key appointment holders, which is the sole proprietor himself, the partner, the director. But you do not want to be so tight that you actually leave out people who may really be the persons having the control or the say. That is why the last provision needs a little bit of room for a court or any regulatory agency, when looking at the facts, you identify somebody who really acts in all ways as the key appointment holder and it would land on that person. So, I hope that addresses the question.

On the first question, if I understood Mr Chua correctly, he was saying, "Can we still not have training courses when a person exceeds a certain number of directorships". Is that the question? Okay. I think that would have been in the background when you are setting a certain number. But what we have moved to in these two Bills, is a regime where: first, if you are a CSP and if you are a nominee director, you have certain obligations. A nominee director has the same obligations as any other directors – you have fiduciary duties and this is certain minimal level of competence. We decided that it would be better for the individuals and the persons appointing them and the companies to determine whether this person is fit and proper and has the right competence.

There are some people who are extremely good with the corporate governance, the corporate law and they are practitioners; they can be easily be nominee directors for a large number of companies. Because for them, the knowledge is at their fingertips. So, if you set a number of 10, a number of 20 and then say, that at company number 21, you must go training, it makes no sense. I would not say to a top corporate lawyer, who happens to be a nominee director that, that is something that they have to do, because they are practising that every day.

But it is quite different from somebody else, who, let us say, it is only a nominee for one company, but has completely no idea about corporate matters and is just put there because he happens to be a friend of somebody, but truly, he knows nothing about accounts, or anything. So, even one nominee directorship for him would be too much.

So, when we were looking at this, setting a number did not really advance our attempt to strengthen the regime. So, we thought it is much better for people to pay attention, think about how much they themselves can actually cope with; whether they actually have the right skills in competencies, have the CSP to look at that, also have the company to look at that and you make that determination. But, of course, obviously the agencies will keep on eye on that as well.

Ms Usha Chandradas.

Thank you, Mr Speaker. I thank the Minister for her answers. I appreciate that my question may not be immediately relevant to the Bill that is being moved today, but to the extent that it applies to future plans by the Government to expand our regulatory framework under our AML/CFT/PF rules, can I ask the Minister if there are any specific plans underway to include the art market within the scope of our AML/CFT/PF regulatory framework?

All I can say is that I have not been looking at that, at this stage. So, I could not rule it out sometime in the future, but as far as I am aware, and I am not speaking for any other Ministries, but in the course of looking at the work, we were not looking for a regulatory regime for the art market.

That said, it does not mean that art would be excluded from examination in the context of looking at anti-money laundering. Anything which is an asset and has value can potentially be a receptacle for illicit funds to be parked in and then later on, transacted.

I think the best way I can summarise it, is that there is no, at the moment, an intention to do a legislative regime for this. But art, given its value – some art are very valuable, some are not so – but it is potentially something that could be used in money laundering and we will obviously look at it if it looks suspicious.

Any other clarifications for the Minister? I do not see any.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Indranee Rajah].

Bill considered in Committee; reported without amendment; read a Third time and passed.