Singapore’s approach towards Single Family Offices (SFOs) focuses on addressing money laundering risks, said Gan Kim Yong, Deputy Prime Minister and Chairman of the Monetary Authority of Singapore (MAS).
However, he cautioned that imposing unnecessary regulations would increase compliance costs and undermine Singapore’s position as a global business and financial hub.
Gan’s comments were in response to a Parliamentary question filed by Associate Professor Jamus Lim, Workers’ Party Member of Parliament for Sengkang GRC, on 8 April.
Lim raised several concerns regarding the governance of Family Offices (FOs) seeking tax incentives under the fund tax incentive schemes, asking whether such entities are required to implement fraud prevention mechanisms, undergo third-party audits, or provide whistleblower protections.
Lim also questioned why these FOs are not required to undertake mandatory risk assessments for fraud vulnerabilities and what percentage have been subjected to intensive supervision or compliance reviews in the past three years.
In a written response on behalf of the Prime Minister, Gan explained that SFOs manage only the family’s own private wealth and do not handle third-party funds.
As such, it is the responsibility of the family to establish the necessary governance and controls, as well as to hire the right personnel to manage their wealth vehicle.
“They do not need to be regulated nor subject to specific corporate governance standards beyond those that apply to all corporate entities, whether they receive tax incentives or otherwise,” said Gan, who is also Minister for Trade and Industry.
Gan referenced the recent case of alleged misappropriation of funds by former employees of a Chinese family office.
He noted, “Misappropriation of funds is a risk faced by all businesses and is not unique to SFOs.”
He stressed that businesses should establish appropriate controls to mitigate such risks.
“Where misappropriation of funds occurs, Singapore’s legal framework allows for recourse against such misconduct.”
Fraud Case Involving Chinese Family Office
A recent Singapore High Court ruling revealed a case where Zhong Renhai, a Chinese billionaire, was defrauded of S$74 million by former employees of his family office.
The court upheld a worldwide freezing order (WFO) against four individuals, citing fabricated documents and financial misappropriation.
The case, involving the companies Panda Enterprise and Lee Fung International (LFI), uncovered a sophisticated scheme in which funds were siphoned over several years by former employees Goh Sock Ngee (Shannon), Lim Wee Siew (Alice), Eileen Ealham, and Yap Shin Tze (Richard).
This case adds to a series of financial scandals in Singapore’s wealth management sector, including a S$3 billion money laundering case last year, which involved multiple SFOs and led to increased scrutiny by MAS.
As private wealth management vehicles, SFOs in Singapore do not require a license to operate, making them more vulnerable to insider fraud.
While they are subject to tax incentive regulations, they are not monitored as strictly as commercial banks or multi-family offices, raising concerns among industry experts about the potential for misuse.
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