NIKKEI: MAS rejected two Chinese-affiliated family office applications since January

SINGAPORE: Since January, the Monetary Authority of Singapore (MAS) has reportedly denied two family office applications with Chinese-affiliated wealth, following the city-state’s major crackdown on the S$3 billion money laundering case in August last year.

According to sources familiar with the matter, as reported by Tokyo-based media outlet Nikkei Asia, the recent rejections by MAS include applicants holding only a Chinese passport and those with additional foreign passports.

The rejections were communicated in written form without providing a detailed explanation, as indicated by an email seen by Nikkei Asia.

Conversely, at least one recent approval has been granted to a non-Chinese national applicant, one of the sources disclosed.

MAS does not disclose a breakdown of applications or rejections.

Individuals from China seeking to establish family offices in the city-state are reportedly facing more rigorous scrutiny this year, with investigations extending to factors such as the number of passports held by applicants and any mainland regulatory actions affecting entities associated with them, which could impact Singapore’s anti-money laundering efforts.

A source familiar with the matter stated that MAS previously did not outright reject applications, but rather prolonged the process, with waiting times extending from 12 to 24 months. However, this year has seen instances of outright rejections.

A rejection implies that MAS will not reconsider the application, the source added.

These rejections coincide with Singapore’s ongoing investigation into its landmark money laundering case.

In August, police arrested 10 individuals of Fujian origin, holding various nationalities from countries including China, Turkey, Cambodia, Cyprus, Vanuatu, Dominica, and St. Kitts and Navis, in connection with the case.

This significant case has sent shockwaves across Singapore as authorities seized a vast array of assets, including 152 properties and 62 vehicles, collectively estimated at over S$3 billion.

Intensified scrutiny on private banks and family offices amid early General Election speculation

Another source mentioned that MAS is intensifying its inquiries into private banks and family offices regarding their anti-money laundering processes.

Although there are still pending applications, the process has slowed significantly.

A private banker told Nikkei that ahead of the upcoming election, the primary focus of Singapore’s ruling party is not to attract additional family offices but rather to tackle the widening wealth gap resulting from a substantial influx of funds that has driven up real estate prices.

Singapore is slated to conduct a general election by November 2025, and Prime Minister Lee Hsien Loong is anticipated to transition leadership to Deputy Prime Minister Lawrence Wong later this year.

MAS: Family office rejections predated August 2023’s S$3B money laundering investigation

In a statement provided to Nikkei Asia, MAS acknowledged past rejections, noting that these occurred even before the money laundering scandal, although specific figures or a breakdown of applications by nationality were not provided.

A MAS spokesperson elaborated, stating, “All applications for tax incentives from Single Family Offices (SFOs) are assessed against a set of criteria, which include assets under management, number of investment professionals hired and an assessment of money laundering risks.”

“The set of criteria applies to all applicants, regardless of nationality. Applicants that had failed to meet [MAS’s] criteria were rejected. This has always been the case.”

Regarding the timing of rejections, the spokesperson noted, “There have been rejections before the money laundering investigation in August.”

They also mentioned that the city-state central bank continues to receive a steady stream of applications for tax incentives from SFOs.

DPM Wong confirms 1,400 Single Family Offices received tax incentives by December 2023

The scrutiny on Single-family offices (SFOs) in Singapore has intensified after an investigation revealed possible connections between one or more of the accused in the S$3 billion money laundering case and the establishment of an office that received tax incentives, as revealed by Minister of State for Trade and Industry Alvin Tan in Parliament earlier on 3 October 2023.

Single-family offices can opt for tax incentives by submitting applications to MAS, although they can operate in Singapore without these benefits.

To qualify for the 13O tax incentive program, they must invest S$20 million in funds, S$200,000 in local businesses, and employ at least two professionals.

High-net-worth individuals can deposit funds in Singaporean private banks independently.

In response to a parliamentary query from PAP MP Patrick Tay, DPM Wong, also serving as Finance Minister and MAS Chairman, in a written reply dated 6 March disclosed that as of 31 December 2023, approximately 1,400 Single-family offices had received tax incentives.

The MP’s inquiry sought details on the number of family offices, their demographics, and employment breakdown.

DPM Wong revealed that the majority of SFO employees are locals, with a diverse foreign workforce primarily from Asia.

Gender-wise, slightly over half are male. Regarding age, around 10% are under 30, 35% are aged 30-40, and 55% are over 40.

Most SFOs have fewer than 20 employees, with only a few employing more.

Despite the request for a nationality breakdown for SFO owners, DPM Wong provided only employment-related figures.

Notably, despite the MP’s inquiry for a breakdown of family offices by nationality, DPM Wong did not disclose these figures, instead focusing solely on employee statistics.

Mr Tay also queried whether family office classification extends beyond the Singapore Standard Industry Classification code 66306.

In response, DPM Wong outlined that besides 66306, family offices classify themselves under other SSIC codes, including those within the 663 SSIC family about fund management activities (e.g., 66301 for Traditional/Long-only asset/Portfolio management) and the 702 SSIC family for management consultancy activities.

At least five family offices in Singapore linked to 10 accused in S$3B money laundering case

In December last year, Bloomberg report unveiled that among the 10 accused individuals, there are at least five family offices linked to them. However, it remains unclear whether all five entities benefited from tax breaks.

In the October 2023 Parliamentary sitting, Minister of State (MOS) Alvin Tan clarified that SFOs seeking tax incentives from MAS must demonstrate proof of having opened accounts with local financial institutions.

“At the point of application, no adverse information of note related to the individuals and entities had surfaced,” Mr Tan said.

At the time, Tan refrained from disclosing whether these SFOs still receive tax incentives when queried by MPs due to ongoing investigation. He stressed MAS’s commitment to enhancing checks and terminating incentives, where necessary.

However, MOS Tan defended the significance of family offices in Singapore’s financial landscape, cautioning against generalizing all SFOs based on the actions of a few implicated ones.

“We have just completed the consultation, which will enable us to tighten some of these processes, but we remain open as the other Ministers and I have mentioned – to talent, to investments as well as to financial flows, including those in SFOs. ”

“Our regime is strict. Our regime is in line with international best practices, and so, these two prongs of making sure that we are dynamic and open, and that we also have strong robust controls, remain central to our functioning as a vibrant and trusted financial centre,” he told the Parliament on 3 Oct 2023.