S’pore lifts veil on nominee directors, shareholders to strengthen anti-money laundering regime

SINGAPORE – Singapore is enhancing transparency around nominee directors and shareholders through legislative changes passed on July 2, which require companies to provide the full information on nominee arrangements to the Accounting and Corporate Regulatory Authority (Acra).

Acra will also make public which of a company’s directors and shareholders are nominees.

A nominee director is a person who is appointed as a director of a company, but acts according to the instructions of another person or a beneficial owner.

Such individuals are required by law to disclose their particulars and nominee status to their companies, but previously there was no requirement for them or their companies to share this information with Acra.

This will change with the passing of the Companies and Limited Liability Partnerships (LLPs) (Miscellaneous Amendments) Bill in Parliament on July 2, as part of efforts to strengthen Singapore’s anti-money laundering regime.

The information companies must provide to the regulator includes the particulars of the nominee directors and shareholders, as well as the identities of the nominators behind these nominees.

Second Minister for Finance Indranee Rajah told Parliament the information would be available only to Acra and other public agencies for the enforcement of any written law.

However, Acra will make public which of a company’s directors and shareholders are nominees. In other words, an individual’s status as a nominee director will be made public, although the identity of the nominator will not be disclosed.

“This information will be useful to banks, corporate service providers and other gatekeepers who may, for instance, wish to conduct additional checks on companies with many nominee directors or shareholders,” said Ms Indranee during the debate on the Bill.

To ensure the accuracy of registers, the maximum penalties for companies and LLPs that commit offences relating to their registers will be raised to $25,000, from $5,000.

A person who provides false or misleading information about their registers to Acra can be fined up to $25,000.

Companies and LLPs will be required to verify and update their controllers’ information on an annual basis.

Meanwhile, the Corporate Service Providers Bill, which was also passed on July 2, addresses the potential misuse of nominee directorship arrangements too.

Ms Indranee said while nominee directorship arrangements are a legitimate service provided by many corporate service providers to help their overseas-based clients fulfil Singapore’s requirement for an ordinarily resident director in order to set up a company in Singapore, they can be vulnerable to abuse.

“As important gatekeepers in the ecosystem, corporate service providers cannot arrange for nominee directorships in a cavalier manner. In some cases, we have observed individuals who are clearly unfit to bear the responsibilities of being a director, but were arranged by errant corporate service providers to act as nominee directors,” she said.

In one case, Grab driver Leonard Koh was fined $28,000 for failing to conduct due diligence as a nominee director. He was a nominee director for more than 45 companies. From 2019, he was paid $100 a month for every company of which he was a nominee director until July 2020.

In another case, Xie Yong, a Singaporean director of 980 companies, was jailed after US$5 million (S$6.8 million) was laundered through China-linked firms under him.

Under the new laws, to tackle the misuse of nominee directorship arrangements, individuals can act as a nominee director only if this was arranged by a corporate service provider, unless the individual himself is the sole proprietor of a registered corporate service provider.

Those found guilty of breaching this requirement can face a fine of up to $10,000.

Corporate service providers must ensure that the individuals they arrange to act as nominee directors are fit and proper, and possess the necessary competencies.

These firms should also conduct checks on these individuals to evaluate if they have the capacity to take on additional directorships. Corporate service providers found guilty of breaching this requirement can face a fine of up to $100,000.

Corporate service providers and, in some circumstances, their senior management that do not comply with their obligations to detect and prevent money laundering could be fined up to $100,000.

Ms Indranee said the two Bills were in development even before the $3 billion money laundering case was uncovered in 2023.

The Acra (Registry and Regulatory Enhancements) Bill was also passed on July 2. Ms Indranee said it will strengthen data protection, facilitate digital communications between the Government and businesses, and streamline the corporate regulatory framework.

The key changes include empowering the registrar to collect additional information to enable Acra to send secure digital communications through BizFile, as part of enhancements expected to be launched by the end of 2024; and boosting Acra’s regulatory oversight and streamlining processes.

Business owners and company officers filing a residential address with Acra will also need to file a physical contact address, which will be made public instead of the residential address, for greater data protection.

Ms Indranee said the best practices of leading jurisdictions were studied and adapted for the local context.

For example, Singapore’s approach to not disclosing residential addresses of individuals associated with businesses is similar to what is done in Britain and Hong Kong.