Singapore and Europe Enhance AML Framework to Fight Financial Crimes Effectively
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Singapore and Europe have emerged with enhanced AML requirements for corporate services businesses and crypto assets exchanges to fight financial crimes.
Singapore’s regulatory authorities have brought up significant enhancements in the country’s anti-money laundering measures while introducing hefty fines for corporate service providers (CSPs) and increased restrictions for companies’ nominee directorships.
Parliament passed two bills on July 2nd, 2024, amending current CSP governing and Limited Liability Partnerships (LLPs) laws. These enhancements came after a debate in which MPs questioned Indranee Rajah, the Second Finance Minister, including queries on the new nominee director requirements. According to the latest changes, a CSP can only arrange a nominee directorship unless the nominee is a sole proprietor of a registered CSP. At the same time, entities breaching the law are subject to a fine of up to $10,000.
For the CSPs, the law mandates that they must ensure that the arranged nominees are “fit and proper,” else CSPs can face a fine of up to $100,000
Indranee Stated, “The fit and proper factors… would include assessing an individual’s conduct and compliance history, integrity and whether the person has the competency, capacity, and capability to fulfill his obligations as a (nominee) director. However, suppose the CSP has reasons to believe that this appointed nominee director is no longer fit and proper after the appointment. In that case, it should also take appropriate action, such as informing the company involved to replace the individual concerned.”
In response to the Workers’ Party MP Louis Chua, Indranee said that the proposed change to the law broadens the scope of supervising individuals with many nominee directorships, however, they don’t cap the number they can hold. Additionally, for suggesting a cap on nominee directorship, he said this could be “a blunt tool that is unnecessarily restrictive.”
Indranee said that a cap “would make it difficult for individuals who are capable of fulfilling their obligations, despite holding more than the prescribed number, and who may have legitimate reasons for holding multiple nominee directorships simultaneously. At the same time, bad actors can always find ways to get around the prescribed number.”
She also said that the amendments were in development even before the country witnessed a $3 billion money laundering case in 2023. To overcome this, the Ministry of Finance and Accounting and Corporate Regulatory Authority (Acra) reviews the country’s AML compliance system to curb increasingly sophisticated financial crimes. However, in light of the recently updated, all businesses providing corporate services must register with ACRA as CSPs.
Said Indranee: “The widened coverage of Acra’s regulatory regime will ensure that all entities providing corporate services from Singapore, regardless of whether they serve local or foreign clients, have the same obligations in our fight against financial crime.”
The new amendments introduce more harsh penalties and fines. CSPs that fail to meet regulatory obligations or detect money laundering activities are subject to a $100,000 fine, up from $25,000. Companies and LLPs can face a fine of up to $25,000, up from $5,000, in case they fail to have updated information in their registers. For providing misleading or false information about the registers to ACRA, a whopping $25,000 fine will be imposed.
Along with other obligations, companies, and LLPs must also share information on nominee director arrangements with ACRA. She said, “This information will be useful to banks, CSPs, and other gatekeepers who may, for instance, wish to conduct additional checks on companies with many nominee directors or shareholders.”
Like Singapore, Europe has also amended its Travel Rule. According to the European Banking Authority’s (EBA) July 4th statement, the rule’s scope has been expanded to include Crypto Asset Service Providers (CASPs) and intermediaries.
From December 30th, 2024, the new Travel Rule requirements will come into effect, and all crypto exchanges operating in EU member states will be mandated to follow the guidelines. Under the updated requirements, exchanges are obliged to provide information regarding funds and crypto asset transfers to the EBA.
The amendment is a part of the EU’s commitment to secure the financial ecosystem from money laundering and terrorist financing. Due to blockchain’s decentralized nature, cryptocurrencies are being widely used for money laundering. Thus, EBA aims to ensure the traceability of crypto assets for investigation purposes. From the day of enforcement, all the payment services providers (PSPs), intermediary PSPs, CASPs and intermediary CASPs will have two months to meet the requirements.
EBA stated: “The deadline for competent authorities to report whether they comply with the Guidelines will be two months after the publication of the translations into the official EU languages.”
According to the new guidelines, customer data is to be gathered in order to identify the type of tractions linked to other transfers of service. Additionally, CASPs are also required to have definite policies regarding international payments or transfers.
The regulatory authority states that the guideline will offer long-term benefits and supports the EU’s existing Markets in Crypto-Assets (MiCA) law, aiming to develop unified regulations in the region.
The regulator added: “Its main objective is to make the abuse of funds and certain crypto-asset transfers for terrorist financing and other financial crime purposes more difficult, and to enable relevant authorities to fully trace such transfers where this is necessary to prevent, detect or investigate money laundering and terrorism financing (ML/TF).”
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