Fujian gang, Prince Group money laundering incidents unlikely to dent Singapore’s appeal as wealth hub

Singapore has risen to become one of the top wealth hubs globally in the past few years despite growing competition.

Even in the face of scandals – such as 2023’s S$3 billion money laundering case, as well as the links with Cambodian scam ring operator Prince Group – the Republic has been able to maintain its stature, industry observers said.

And to maintain a competitive edge, the Monetary Authority of Singapore (MAS) will likely go ahead with its plan to simplify the single family office (SFO) tax incentive framework, they added.

“If anything, these developments have reinforced Singapore’s positioning as a credible and well-governed wealth hub,” said Edmund Leow, senior partner at Dentons Rodyk.

“Singapore has never sought to be an offshore tax haven; rather, it has built its reputation on strong regulatory standards and the rule of law.”

Seah Ching Ling, director of tax and private client services at Drew & Napier, added that the fact that the Singapore government moved quickly and transparently in both cases signals that the city-state still takes compliance seriously.

While Singapore’s image may be “slightly bruised” from the cases, she does not expect a drop in the number of clients setting up SFOs here.

In fact, industry observers that spoke to The Business Times do not expect the two cases will cause a drop in the number of clients.

The publicised withdrawal of incentives and increased regulatory oversight may deter risk-averse applicants or those with less transparent structures, said Ryan Lin, director at Bayfront Law.

But legitimate wealthy families may find the tighter regulatory environment reassuring, as it reduces the risk of being associated with bad actors and strengthens confidence in Singapore’s financial ecosystem, he said.

Simplifying framework to meet competition

When news of the Cambodian scam ring first broke, Singapore had just announced that it was going to simplify its SFO tax incentive framework, to better suit industry needs.

In the September announcement, MAS said it would reduce the documentation needed for applications, ease reporting requirements and expand the types of investments eligible for the fund tax scheme.

Amid rising scrutiny, Drew & Napier’s Seah said it is possible that MAS may require clearer evidence of source of wealth and source of funds for new applicants.

Denton Rodyk’s Leow also noted that much will depend on how the central bank continues to work with private banks, given that the latter are the first line of defence in onboarding prospective family office clients.

Nevertheless, Singapore will likely go ahead with its tweaks, industry observers said.

The simplification was not to deal with money laundering but to make Singapore a more attractive destination in view of stiff competition in recent times, said Joanna Yap, Deloitte Private family office leader for South-east Asia.

Seah also said MAS’ decision to simplify is driven by strategic trade-offs of maintaining high regulatory standards, while avoiding overly onerous paperwork for bona fide applicants.

“With Hong Kong and Dubai increasingly competing for family office business and offering a far simpler establishment process, Singapore must calibrate its requirements to remain attractive without compromising regulatory credibility,” Seah said.

She noted that her clients find it “too difficult and cumbersome” to set up a family office in Singapore compared to these two jurisdictions, which could erode Singapore’s competitive edge.

Heightened standards

With the simplification, MAS still has a robust substantive review of applicants, and the eligibility conditions of the tax incentives have not been relaxed, Leow said.

“These changes are aimed at facilitating applications from genuine, high-quality applicants rather than reversing the earlier tightening,” he said.

Leow noted that Singapore earlier tightened the framework to filter out applicants who did not genuinely require a Singapore family office to manage their wealth.

While overall applicant numbers have remained lower since, the quality and seriousness of applicants have improved, he said.

“Perhaps that is the objective of the MAS – to attract fewer applicants, but higher quality ones,” Leow said.

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

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