The Panama Papers scandal has unfolded a series of regulatory changes by governments across the globe, whereby the scrutiny on Beneficial Owners (BO) of corporate/legal entities has become tighter. As part of the measures to combat money laundering (ML) and financing of terrorism (FT), even non-financial entities have come under the ambit of such scrutiny. The Financial Action Task Force (FATF) for Anti-Money Laundering and Counter-Terrorist Financing Mutual Evaluation Report on Singapore, released in September 2016, highlighted that Singapore needs to enhance the transparency of beneficial ownership of legal persons.
The Accounting and Corporate Regulatory Authority (ACRA), which is also the registrar of companies in Singapore, maintains an electronic register of shareholders and directors of private companies and the register is available to the public. Professional service providers such as corporate service providers (CSP) and financial institutions such as banks are required to maintain information on BOs and controllers. However, inadequacies were pointed out by FATF in the evaluation. Though Singapore has recently extended the AML/CFT supervision obligations to Designated Non-Financial Business and Professions (DNFBP) such as public accountants, real estate agents, casinos, company service providers, developers, lawyers as well as the non-profit organisations such as the charities, the FATF evaluation highlighted significant gaps and deficiency and observed that the DNFBPs face challenges in obtaining BO information.
New Regulation – Register of Controllers (RoC)
Pursuant to the observation made by FATF, amendments were made to the Companies Act and Limited Liability Partnership (LLP) Act. Accordingly, effective 31 March 2017, Singapore registered companies, Singapore registered LLPs and Singapore registered foreign companies will have to maintain a register of controllers. Singapore listed companies and Singapore financial institutions are exempted from the requirement because the listed companies are required to fulfil exhaustive disclosure of interest obligations prior to their listing and the Monetary Authority of Singapore (MAS) conducts thorough ‘fit and proper’ checks on the directors and shareholders of financial institutions.
Besides enhancing the transparency of legal persons and to prevent them from being used for ML and FT purposes, the objective behind such a register is to ensure that the information on the BOs is accurate and adequate and the competent authorities have timely access to such information.
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Beneficial Owner Defined
FATF defines “beneficial owner” as the natural person who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. Thus, the definition centers on effective significant control and ownership and they are defined as follows.
- Significant control: the right to appoint or remove a majority of directors, and the right to exercise, or the actual exercise of, significant influence or control over certain matters, particularly if this is provided for in the company’s constitution and
- Significant interest: having an interest in more than 25% of the shares or voting rights or, where the entity has no share capital, the right to share in more than 25% of the capital or profits
Obligations Under the New Regime
Companies and LLPs that are required to maintain a RoC shall
- take reasonable steps to identify their controllers and obtain information on their controllers, by sending out notices to anyone whom they know or have reasonable grounds to believe to be controllers, knows the identity of the controllers or is likely to have that knowledge;
- maintain registers of controllers at prescribed places (e.g. their registered offices or their registered filing agent’s registered offices);
- ensure that the registers of controllers are up to date by updating the registers within 2 days of receiving information on the controllers;
- declare in their annual return filed with ACRA that their registers of controllers are kept up to date; and
- make registers of controllers available to the Registrar and law enforcement authorities upon request and not to the public.
The controllers have the obligation to inform the company/LLP within 30 days of becoming a controller and any change in their particulars must be promptly notified. Non-compliance is an offence
Information to be included in the Register of Controllers (RoC)
The following information must be included in the RoC
- Full name;
- Residential address;
- Identification particulars e.g. NRIC or passport number;
- Date of birth;
- Date on which the person becomes, and if applicable, the date on which the person ceases to be a controller; and
It must be noted that the reporting entity is prohibited from disclosing the register of controllers or any particulars contained in that register to the public. Besides this prohibition, the information that are subject to legal privilege may be withheld from disclosure.
The Need for Register of Controllers (RoC)
The public electronic register maintained by the ACRA will merely show the organisation of a company reflecting the first level of ownership and control. Though the CSPs and other DNFBPs are required to perform a detailed tracing of the ownership and control to determine the ultimate BOs who are invariably natural persons, at times, intermediaries such as foreign CSP and entities are involved, making the arrangement too complicated to trace up the chain. Therefore, the new regime requires the companies and LLPs to maintain a RoC. The DNFBPs are required to continue their supervision and fulfilment of their BO obligations.
International Scenario of BO Regime
Although there are slight variations in the definition of BO among the jurisdictions, almost all of them have mandated a register of BOs. Hong Kong has also made it mandatory for legal persons to have a register of persons with significant control (PSC) and similar to Singapore, the register will be made available to competent authorities and not the general public. The USA has a state level register of beneficial ownership and had announced plans to have a central non-public register. Germany recently promulgated a law requiring all German companies to have the Beneficial Ownership Register (BOR). The United Kingdom implemented a central public register of BOs in 2016 while countries such as France, Netherlands, and Nigeria have committed themselves to soon implement a central public register. Australia, New Zealand, Indonesia, and Ireland are exploring the implications of having a public register. Recently, the British Virgin Islands implemented a central database of BOs called Beneficial Ownership Secure Search (BOSS) system, to which the law enforcement authorities have access. In February 2017, the European Union members agreed to a proposal that would allow information contained in BO registries to be made available to the public who demonstrate ‘legitimate interest’ by which journalists, lobbyists and the likes would be precluded from accessing the information in the registers.
Excluding countries such as Canada and Japan, almost all major countries and offshore jurisdictions are adopting the FATF recommendations and are falling in line with the AML/CFT regulations by requiring the legal persons, be it companies, LLPs or trusts or other legal arrangements to maintain a BO register. Investors must be wary of this evolving landscape when they are considering jurisdictions to park their wealth or establish their companies. If they are concerned about their confidential information being made public, it would be prudent to avoid jurisdictions where the register is made public. It must be noted that the new Singapore regulation is largely reflective of the UK’s BO regime but significantly differs from it in terms of its accessibility whereby the RoC is not to be made public and companies can withhold information that is subject to legal privilege. Singapore’s BO regime enhances the transparency of legal persons without compromising on the confidentiality of natural persons.
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