Clear guidelines, checks on foreigners registering firms in S’pore, say corporate service providers

There are clear and robust guidelines for foreigners seeking to register companies in Singapore, said corporate service providers that support such initiatives.

As for the implementation of the guidelines, it is left to the corporate service providers to act accordingly as middlemen, they added.

Those who spoke to The Straits Times acknowledged that there are differing standards – which they set for themselves – when it comes to matters such as verifying information about prospective directors and shareholders.

Corporate service providers came under the spotlight after ST reported recently that one Singaporean man said he did not know that his personal details, including his NRIC, had been used to register four companies in the Republic.

All four companies were set up by foreigners through corporate service providers, with one allegedly owing its investors at least US$1.5 million (S$2.02 million) and facing reports filed with the Singapore police, as well as the Federal Bureau of Investigation and Securities and Exchange Commission in the US.

To incorporate a company here, foreigners must engage a registered filing agent and name at least one Singaporean director. Corporate service providers are registered filing agents. 

Such agents are supposed to verify the information provided and perform checks to prevent the financing of terrorism and money laundering before registering the company with the Accounting and Corporate Regulatory Authority (Acra).

Besides helping clients incorporate companies in Singapore, corporate service providers also provide other business services, including accounting and tax filing.

Such service providers help new companies save time and costs by handling the administrative aspects of setting up a company, while ensuring compliance with local laws and regulations.

Mr Lancaster Lee, the managing director of corporate service provider One Tax CM, stressed that it is illegal under the Acra Act for registered filing agents and registered qualified individuals to produce any document or provide any information or explanation which they know to be false or do not believe is true.

They also cannot be reckless with regard to the authenticity of the information.

Besides facing a fine of up to $50,000 and a jail term of at least two years, errant firms can be struck off from Acra’s list of registered filing agents.

Negligence is not an excuse, with those found to have failed in exercising reasonable diligence in the discharge of their duties under the Companies Act possibly being fined up to $5,000 or jailed for up to 12 months over each offence.

On Oct 11, 2023, a woman and her corporate service provider firm were taken to task after she was found to have wrongly declared that a local resident had consented to be the director of three firms.

She had depended on a third party to get consent, and did not personally view the consent form the individual needed to sign, nor take steps to determine if the individual had indeed consented. On April 1, she was fined $6,500 by the State Courts.

The punitive measures, coupled with the guidelines, make for a robust system, say corporate service providers.

But ultimately, the extent to which a firm conducts its due diligence checks is up to it.

Mr Lee said One Tax CM employees would insist on at least Zoom meetings with foreign clients to ensure their identities match any identification records submitted.

It is also compulsory for One Tax CM staff to contact the Singaporean nominee director, either by meeting in person or through Zoom.

“This eyeball check allows us to verify if the person is indeed who they say they are,” he said.

ContactOne Professional Services, which says on its website that it has had more than 10,000 clients, requires clients to hold up their identification cards if any communication is done through a videoconferencing platform, said its senior business consultant Ryan Lim.

Both ContactOne Professional Services and One Tax CM use screening software to check a client’s identity and business records, among other details. One Tax CM also uses the Google search engine to check for negative news reports about a prospective client, which would influence the firm’s decision to accept the registration request or not.

But the process differs across the industry, said Mr Eric Chin, the group chief commercial officer of Singapore-headquartered InCorp Global, which has offices in countries such as Australia, Indonesia and Vietnam.

Acra provides only a set of general guidelines, with firms having the leeway to decide how to screen the information, he said, adding: “How in-depth, and how much detail a corporate service provider needs to obtain to satisfy itself is dependent on each firm.”

For InCorp Global, besides communicating with clients either face to face or through video conferencing, clients must notarise their passport details and proof of address, while the company uses LexisNexis – a know-your-customer platform used by banks – to screen them.

Additionally, it has a dedicated team of compliance officers who will take up nominee directorships for clients, instead of relying on external parties.

These officers not only have to communicate with the clients themselves – either face to face or via videoconferencing – but also fully understand the clients’ business.

Acra’s guidelines for registered filing agents to counter money laundering and the financing of terrorism – published in January 2023 – stipulate what is required by corporate service providers helping an individual to register a company.

Necessary details include the person’s full name, as well as his identity card, birth certificate or passport number, among other requirements.

A checklist is included in the guidelines to assist corporate service providers when they conduct due diligence checks.

Also, records should be kept for at least five years after a corporate service provider terminates its business relationship with a client.

To strengthen its oversight over corporate service providers, the regulator and the Ministry of Finance have proposed a new Corporate Service Providers Bill.

The plan is to introduce steeper financial penalties of up to $100,000 per breach, for firms and senior management who fail to comply with obligations to prevent money laundering and the financing of terrorism.

The authorities are also seeking to combat the misuse of nominee directorship arrangements by preventing people from acting as nominee directors unless the appointments are arranged by registered corporate service providers that have assessed them to be fit and proper.

Mr Chin acknowledged the balancing act the Government has to carry out in regulating the industry while ensuring that individuals are not deterred from setting up businesses in Singapore, but added that the new penalties may not completely eliminate the industry’s black sheep.

“At the end of the day, people are the ones doing the processing and making the final judgment,” he said.

However, Mr Lee and Mr Lim saw the proposed new law as a filter that would separate legitimate businesses from bad apples.

Said Mr Lee: “With all these new regulations, instead of making Singapore a less business-friendly place, they show that we want to do business, but in the right way. We want to attract the right group of investors to come here.”

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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