Family offices to see longer wait times for SG licenses with incoming rules
Singapore’s plans for a new regulatory framework will further lengthen application approval timelines for single family offices (SFOs), as scrutiny increases and licensing exemptions are streamlined.
Compliance and anti-financial crime experts said the new framework, while tougher, will weed out bad actors and in general, be welcomed by single family offices.
“The application process to get a license for a single family office can now take about 18 months; two or three years ago, it could be granted in about 6 months,” said Rod Francis, partner, anti-financial crime, Oliver Wyman.
“Singapore’s biggest ever money laundering case shows that some of the bad actors found their way into specific family office structures.
“Now the process for approving licenses to set up a SFO has become much tougher and the scrutiny has stepped up,” he said.
Singapore has seen an explosion of SFOs in recent years: they totalled 1,650 at the end of August 2024, up from 400 in 2020.
These refer to SFOs that qualified for MAS tax incentives, although family offices can be set up via different vehicles.
MONEY LAUNDERING SCANDAL IMPACT
Singapore courts began handing out sentences in the city-state’s biggest money-laundering case earlier this year, which saw several Chinese nationals charged for laundering $2.2 billion generated from criminal activities overseas.
The scandal’s dragnet included multiple banks, commodity traders and six SFO funds, among other entities.
The scandal prompted the central bank in July 2023 to launch a public consultation on a revised framework to strengthen surveillance and defence against money laundering (ML) risks in Singapore’s SFO sector.
The framework aims to streamline licensing exemptions and enhance notification and reporting requirements for single family offices operating in Singapore.
Family offices will be granted a ‘class exemption’ if they meet specific criteria and existing single family offices will have a transitional period of six months to comply with the new framework.
AsianInvestor has previously reported that the new guidelines are set to increase costs and reporting requirements for SFOs.
The consultation period ended in September that year, and on November 6, 2024, MAS issued its response to public feedback.
HIGHER COSTS, YET WELCOME MOVE
MAS is keen to show it is taking action and the right steps, especially from a risk management perspective, said Oliver Wyman's Francis.
“SFOs will likely welcome the new frameworks as they enhance the jurisdictions' reputations for transparency and compliance, which can be beneficial for attracting international clients, Lee Yishan, managing director of regulatory compliance for Singapore at IQ-EQ, told AsianInvestor.
That’s a view echoed by Francis: “From a client perspective, these rules are good since they will weed out bad actors,” he said.
IQ-EQ’s Lee added that given most SFOs already maintain relationships with regulated banks, the new requirements will be seen as a minor adjustment rather than a major overhaul.
“Some SFOs might express concerns about the complexity of compliance, especially if the new frameworks require significant changes in their internal processes,” Lee added.
HK, SG STAY VIGILANT
Singapore and Hong Kong, nevertheless, have created conducive environments for family offices, both from a regulatory and tax perspective.
The new framework is unlikely to diminish Singapore’s appeal as a family office hub or give Hong Kong an edge, since it too has tough anti-money laundering rules.
“Hong Kong's regime is known for its stringent regulatory oversight, which includes robust anti-money laundering and counter-terrorism financing (CTF) measures,” Lee noted.
The tax incentives for SFOs in Hong Kong are contingent on maintaining business relations with locally regulated financial institutions.
“Singapore's approach is similarly rigorous but often seen as more business-friendly, with a focus on facilitating ease of doing business while maintaining high compliance standards,” she added.
Still, there is an acceptance that the rules for the single-family office sector will become tougher.
“It [regulatory framework] is already quite extensive, in terms of the information that financial institutions and the regulators seek, particularly with regards to source of wealth. The expectation is that the diligence requirements will be further enhanced,” added Oliver Wyman’s Francis.
This story has been updated to correct the name of the Oliver Wyman spokesperson.