By Polka Mishra, Partner and Managing Director, Javelin Wealth Management

Protecting Wealth While Ensuring Integrity – Are Family Offices Ready for the New AML Landscape in Singapore?

In July 2023, the Monetary Authority of Singapore (MAS)  opened a public consultation on a revised framework to better safeguard the family office sector from money laundering risks. While the tightened regulations are definitely necessary to address money laundering risks in a growing industry, single family offices (SFOs) are feeling the brunt of the pressure as requirements become more onerous. Without specialised compliance expertise, SFOs will likely have to incur a higher cost to meet the requirements, creating yet another obstacle.

The new framework for SFOs requires them to:

1) Notify MAS upon starting operations, including confirming that all family member owners comply with specific money laundering/terrorism financing/proliferation financing (ML/TF/PF) criteria;

2) Provide an annual report on the assets under management; and

3) Maintain business relations with at least one MAS-regulated financial institution.

In addition to the financial regulatory framework, Singapore adheres to international standards on the prevention of ML/TF/PF set by organisations such as the Financial Action Task Force (FATF). As such, SFOs are also required to implement robust policies and procedures to mitigate the risk of financial crimes. This includes:

1) Ensuring appropriate Customer Due Diligence (CDD) and Know Your Customer (KYC) measures are in place to verify the identity, source of wealth, and risk profile of family members;

2) Monitoring transactions and reporting any suspicious activities to the Suspicious Transaction Reporting Office (STRO) of the Singapore Police Force; and

3) Maintaining comprehensive records of the assets under management, transactions done, and ML/TF/PF prevention measures.

With rising business costs, the industry expects SFOs to consolidate into multi-family offices (MFOs) allowing for costs to be shared across the different clients. There is also another alternative – seeking out an independent wealth management company.

In view of these Anti Money Laundering (AML) and regulatory compliance challenges, SFOs may find partnering with an independent wealth management company to be highly beneficial for the following reasons:

• Specialised Compliance Expertise: Independent wealth management companies often have experience and expertise in the relevant AML regulations and compliance procedures. As such, they can provide valuable guidance for SFOs on navigating complex and evolving regulatory environments, thus ensuring the SFOs remain continuously compliant with the necessary ML/TF/PF requirements.
• Technology Solutions & Resources: SFOs can leverage on the technology solutions and resources used by wealth management companies to streamline their compliance processes and handle tedious tasks such as transaction monitoring. This translates to cost savings for SFOs and allows them to focus their resources on investment decisions.

Having in place robust AML and compliance practices are crucial for an SFO’s success and reputation, underlined by the recent money laundering case in Singapore where actions have been taken against at least one individual suspected to be linked to an SFO. Thus, collaborating with an experienced wealth management company can save time and resources for the SFO to concentrate on managing the family’s wealth effectively and responsibly, and mitigate potential risks.