Debated in Parliament on 14 Apr 2014.
Order for Second Reading read.
Mdm Speaker, I beg to move, "That the Bill be now read a Second time."
Singapore has garnered a strong reputation as a trusted international financial and business centre with a robust regulatory framework against money laundering and terrorist financing. Since 1992, Singapore has been a member of the Financial Action Task Force (FATF), the global standard setter for anti-money laundering and counter terrorism financing. As a responsible member of FATF, Singapore ensures that the framework applied here is constantly updated and aligned with established international standards.
With money laundering and terrorist financing activities becoming increasingly sophisticated, regulatory authorities and enforcement agencies need better tools to effectively address emerging risks. Although there are existing controls for sectors, such as banks and casinos, one area where they need to be strengthened is for corporate service providers, which are individuals or businesses that provide services, such as corporate advisory, office hosting, companies' set-up, corporate secretarial services and statutory filing of documents with the Accounting and Corporate Regulatory Authority (ACRA).
Corporate service providers do not typically handle services that involve large amounts of cash. However, there is a risk that the companies they help to incorporate may be abused by criminals to set up complex or unusual business structures to conceal beneficial ownership, and reduce the transparency of transactions.
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Hence, there is a need to enhance the regulatory framework for corporate service providers. Besides mitigating the risks of money laundering and terrorism financing, regulatory enhancement will also raise the professional standing of corporate service providers.
This Bill and the new supporting subsidiary legislation will put into law the obligations of the Singapore Government as a member of FATF.
I will now elaborate on the key amendments in the Bill.
First, corporate service providers who perform statutory filings for their customers using ACRA's electronic filing system known as Bizfile will need to be registered as filing agents. The professionals whom the filing agents employ or appoint will need to be registered as qualified individuals. Both filing agents and qualified individuals must be fit and proper persons and satisfy competency and experience requirements.
Second, the amendments will impose new requirements on registered filing agents, through the subsidiary legislation. These requirements will be consistent with the relevant FATF recommendations, including the obligations to perform customer due diligence and transaction monitoring on customers, and to consider whether it is necessary to file suspicious transaction reports. For example, as part of customer due diligence, registered filing agents will be required to obtain beneficial ownership information of their customers. The availability of beneficial ownership information increases the transparency of transactions and makes it more difficult for money laundering and terrorism financing activities to be carried out.
Third, the amendments introduce enforcement powers for ACRA to sanction registered filing agents and registered qualified individuals who breach their legal obligations. These sanctions include issuance of a censure, suspension or cancellation of registration, or financial penalties. ACRA will take a calibrated approach in imposing sanctions, taking into account the seriousness and/or frequency of the breach.
As of March 2014, there are approximately 3,000 businesses and 3,600 individuals registered with ACRA as corporate service providers. These registered persons include advocates and solicitors, public accountants, members of the Institute of Singapore Chartered Accountants, the Association of International Accountants (Singapore Branch), the Institute of Company Accountants, Singapore, and the Singapore Association of the Institute of
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Chartered Secretaries and Administrators, as well as corporate secretarial agents.
ACRA intends to manage the transition carefully. Outreach programmes will be conducted and corporate service providers are encouraged to attend these programmes to familiarise themselves with the stricter regime. Thereafter, there would be a window period for the corporate service providers to decide if they wish to continue performing their business activities under the enhanced regulatory framework.
Existing providers who opt in during this window period will be transitioned to the new regime as registered filing agents and qualified individuals until end 2015, regardless of whether they meet the competency and experience requirements. ACRA will also waive the registration fee for them. After the transition period, they are required to renew their registration annually and meet these new requirements.
ACRA has also formed a working group, comprising professional bodies whose members are corporate service providers, to draft practical guidelines and templates to enable them to comply with their new legal obligations. This includes what corporate service providers should do when performing customer due diligence and what they should consider when setting up internal policies, procedures and controls.
Overall, the legislative amendments will raise the professional standards of corporate service providers in Singapore, and significantly reduce risks of money laundering and terrorism financing.
Madam, this Bill also proposes amendments to the ACRA Act to clarify and enhance ACRA's powers in several areas.
First, for better protection of ACRA's name and acronym against infringement, the amendments will make it an offence for anyone making unauthorised use of ACRA's name and acronym.
Second, the amendments will give additional powers to ACRA officers to facilitate enforcement, consistent with the Acts of newly set up regulatory authorities in Singapore. These include the powers to examine a person orally and to reduce such statements into writing, to enter premises for the purpose of investigating an offence, and to take photographs or video recordings.
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Third, the amendments will raise the maximum composition fine that ACRA may impose from $1,000 currently to half of the maximum fine or $5,000, whichever is lower. This will align the ACRA Act with other ACRA-administered legislation.
Finally, this Bill stipulates that monies which are collected by ACRA are to be paid into the Government Consolidated Fund. This change is to keep ACRA's funding separate from the monies it collects from penalties and composition sums. Mdm Speaker, I beg to move.
Question proposed.
Mdm Speaker, thank you for allowing me to speak on this topic that is pertinent to the accountancy profession as well as to corporate governance in Singapore.
It is also a Bill that I take great interest in professionally. As Members of the House may know, I am a member of the accountancy profession in Singapore and I also wish to declare my interest as Vice-President of the Institute of Singapore Chartered Accountants (ISCA), one of the bodies that have played an important role in the formulation of this Bill.
As the national accountancy body, ISCA has studied the Accounting and Corporate Regulatory Authority (ACRA) (Amendment) Bill and is supportive of ACRA's decision on the new regulation governing Company Service Providers, or CSPs in short.
Professionalism of Industry. We believe that the revised licensing and supervisory regime will help ensure all CSPs are regulated according to the same standards, thereby raising the professionalism of CSPs and the quality of services provided in the industry. Similarly, this will raise the standard and image of ISCA members who are service providers in this field.
The revised regime will also assist in addressing the anti-money laundering and anti-terrorist financing matters. This is vital in helping to maintain Singapore's reputation as an international financial centre.
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Whilst we are supportive of the revised regime, we have some feedback on the Bill and key policies, including those received from our members.
Qualified Individuals (QI) Applications. Firstly, point 2 (a) of the Key Policies in the ACRA (Service Providers) Regulations proposes the categories of people who may apply to be "Qualified Individuals" (QI). Whilst it is good to name the institutions to be included in the categories of the people who may apply to be the QI, we recommend that the background of these institutions be evaluated from time to time to ensure that only institutions which are recognised internationally be included.
Madam, sections 28F and 28G call for the introduction of the fit and proper consideration for applications to be filing agents and QI. This is to ascertain if the applicant's previous conduct in either of these two roles had been satisfactory and, in the case of applications for filing agent, an additional assessment of whether the conduct of their directors or management members was satisfactory.
While it is agreed that fit and proper consideration is appropriate, such consideration could be judgemental from both the business and regulatory points of view. Instead, we suggest that the following factors be taken into consideration: the competency of the applicant; the relevant and number of years of experience the applicant possesses; and appropriateness of experience and type of exposure the applicant has. In addition, specific requirements for each of these factors should also be set out in the regulations. This will allow for more objective and relevant assessment of the applicant.
ACRA has responded that the fit and proper requirements are that the applicant must not have been convicted of an offence involving fraud or dishonesty punishable with the imprisonment of three months or more and must not be an undischarged bankrupt. The competency and experience of an applicant will also be considered as the Regulations state that only advocates and solicitors, public accountants registered under the Accountants Act, members of the various professional bodies and those with relevant experience as corporate secretarial agents are eligible to register as qualified individuals.
Due diligence. Section 28F (9)(a) states that every registered filing agent should perform such customer due diligence measures to detect and prevent money laundering and financing of terrorism.
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This calls for the requirement to apply customer due diligence matters when establishing business relationships with the customer, when there is a suspicion of money laundering or terrorism financing or when the identification or documentation involved appears dubious.
Although registered filing agents already conduct due diligence procedures of their own with respect to clients, these may vary. So, it is important to provide specific guidance to registered filing agents to help them determine the extent of the customer due diligence to perform for different categories of customers, including foreign entities.
Due diligence procedures need to be enhanced when dealing with politically exposed persons. Besides providing specific guidance on this, we further suggest that assistance be extended to smaller firms, that is, who may not have sufficient resources to maintain or subscribe to a list of politically exposed persons on the identification of politically exposed person when dealing with foreign customers. It is also important that a central database be maintained which lists all foreign countries that have deficient anti-money laundering or anti-financing of terrorism measures, and any changes to this list be communicated to all registered filing agents.
The registered filing agents also need to establish and maintain appropriate internal policies, procedures and controls. We propose that examples of appropriate policies and procedures or templates be provided to help registered filing agents to implement.
We have submitted our feedback and comments to ACRA during the public consultation exercise in November 2013 and ACRA has responded to the feedback. Some of the comments raised by ISCA which were accepted by ACRA include the following:
We suggested that guidelines be issued to help the Corporate Service Providers implement and determine the extent of work, namely, the qualifying criteria and customer due diligence measures; and
We proposed that a list of foreign countries that have deficient anti-money laundering or anti-financing of terrorism measures be maintained centrally and any new addition or removal of the list be communicated to Corporate Service Providers.
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ACRA's response to these recommendations was that it will issue a set of guidelines to assist registered filing agents in their compliance with the terms and conditions on anti-money laundering and counter-terrorism financing measures. Where possible, links to the public lists of terrorists, politically exposed persons, or countries with deficient anti-money laundering or counter-terrorism financing measures will be published online so that registered filing agents may refer to them when doing their necessary due diligence.
We wish to commend ACRA for its time and efforts in obtaining comments from the public, as well as holding dialogue sessions with professional bodies, including the Singapore Association of the Institute of Chartered Secretaries & Administrators (SAICSA), the Institute of Singapore Chartered Accountants (ISCA) and the Law Society of Singapore.
As one of the representatives in the ACRA's Corporate Service Provider Working Group, ISCA will continue to provide feedback on the guidelines to be issued by ACRA for Corporate Service Providers in future. But we also hope that our other proposals will be taken into account as it will help strengthen the regulations and the industry, to the betterment of Singapore. Mdm Speaker, on the whole, I support the Bill.
Mdm Speaker, I thank Mr Dhinakaran for his support of the Accounting and Corporate Regulatory Authority (Amendment) Bill. I would also like to take this opportunity to thank all respondents to the public consultation exercise which was held last year including ISCA. As Mr Dhinakaran has pointed out, MOF and ACRA have incorporated a number of ISCA's comments. Let me now address Mr Dhinakaran's specific comments today.
Mr Dhinakaran had raised suggestions that are related to the key policies of the ACRA Service Provider Regulations. This document only outlines the broad policies, whereas the details will only be formulated as a set of regulations after the Bill is passed. ACRA will take on board ISCA's suggestions when drafting the regulations. However, for the benefit of other Members, I will broadly address some of Mr Dhinakaran's points.
First, Mr Dhinakaran suggested that ACRA also consider factors, such as the competency and experience of the applicant, when qualifying applicants for registration as filing agents and qualifying individuals. In fact, these factors are
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already part of today's regime and will be retained. The amendments we are proposing aim to enhance the current regime through setting higher eligibility criteria. This includes requiring an applicant to be a fit and proper person, not to have been convicted of any offence involving fraud or dishonesty with imprisonment for three months or more, and not to be an undischarged bankrupt. So, the current amendments build on existing requirements, which already incorporate Mr Dhinakaran's suggestion.
Second, Mr Dhinakaran also suggested where corporate secretarial agents are concerned, that only those with at least three years' experience as a company secretary and who have been in the business of providing corporate secretarial services be eligible for registration. In fact, this is already in the existing requirements and will be retained.
Third, Mr Dhinakaran suggested that only members of professional bodies which are internationally recognised should be eligible for registration. I should explain that the enhanced regime does not enlarge the categories of persons that are allowed to register. Members of the old professional bodies that we currently allow have carried out their duties satisfactorily thus far, and there are no strong reasons to exclude any one of these professional bodies. Under the enhanced regulatory framework, members of these bodies however, who do not meet the requirements will no longer be registered. So, this will help to ensure that the quality of services provided by our Corporate Service Providers is not compromised.
Madam, let me now turn to the more technical but, at the same time, very important aspects of the Bill raised by Mr Dhinakaran and they have to do with the filing agents' obligations for customer due diligence.
We agree with Mr Dhinakaran that it is necessary to provide clarity and specific guidance to Corporate Service Providers on the new obligations under the revised framework. The working group that ACRA has set up and of which ISCA is a part, is mindful of this need. As one of the members of the working group, ISCA has also been actively providing useful feedback to ACRA.
Thus far, the working group has completed a draft, which is a set of practical guidelines based on international and local precedents for Corporate Service Providers, focusing on the extent of customer due diligence requirements. Now, depending on the assessed risks of each applicant, different levels of customer due diligence, either enhanced, normal or simplified will have to be performed. In other words, there is already a broad
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tiering of the extent of due diligence that will be required, depending on the assessed risks of different types of customers.
The guidelines will provide examples of risk factors and suspicious behaviour that filing agents will have to consider during the risk assessment. In addition, the guidelines will also include links to FATF's list of countries that have anti-money laundering or counter financing of terrorism that are considered high risk or deficient in terms of their controls, or enforcement. The FATF's list will likely be the most current one that anyone should refer to if they are in need of checking up on or for an assessment of the adequacy of controls and enforcements in any particular regime.
The guidelines will also provide examples of appropriate internal policies, procedures and controls that filing agents should maintain within their own organisations. In situations where a filing agent is unable to apply proper customer due diligence measures, a suspicious transaction report should be made to the Commercial Affairs Department (CAD).
Often, this is a judgement call whether to file a report or not. The Working Group has, therefore, specifically consulted CAD on the factors that ought to trigger the filing of a suspicious transaction report. A list of these factors will similarly be provided in the guidelines, together with a template containing the type of information required to be provided.
Finally, when deciding on the frequency of audit checks, ACRA intends to adopt a risk-based approach and consider factors, such as size and type of filing agents. ACRA will be formulating its audit policies and will share them with the industry in due course.
In conclusion, Madam, I would like to assure Members of the House that ACRA will do its best to provide corporate service providers with clear guidelines accompanied by the conduct of adequate and appropriate training.
Once again, I thank Mr Dhinakaran for his thoughtful comments and support for the Bill.
*Question put, and agreed to.*
*Bill accordingly read a Second time and committed to a Committee of the whole House.*
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*The House immediately resolved itself into a Committee on the Bill. – [Mrs Josephine Teo].*
*Bill considered in Committee; reported without amendment; read a Third time and passed.*
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