Guide to Know Your Customer (KYC) in Singapore Before Incorporation

KYC Before Incorporation

Since its independence in 1965, Singapore has grown in stature as a trusted international financial and business centre. However, due to its simple and easy incorporation process, a handful of newly registered entities have been found to be laundering money, or abused by criminals in setting up complex or unusual business structures to conceal beneficial ownership, and reduce the transparency of transactions.

In a bid to put a stop to this, Singapore has implemented anti-money laundering laws and regulations since 2007. The Accounting and Corporate Regulatory Authority (ACRA), the body governing corporate services providers, public accountants and companies in Singapore, has also stepped up on regulations since 2015 to raise professional standards among corporate services providers and to further boost Singapore’s reputation as the choice investment destination.

ACRA’s Enhanced Regulatory Framework, which is aligned wtih recommendations issued by the global Financial Action Task Force, is aimed at safeguarding against money laundering and terrorism financing. It is also aimed at protecting corporate services providers from unknowingly engaging in illegal activities. Corporate services providers are now required to conduct due diligence checks and have robust systems and processes in place to prevent abuse of corporate vehicles for criminal or other illegitimate purposes.


What Does It Mean For Me?

Anyone who wishes to register a new business in Singapore must comply with ACRA’s Enhanced Regulatory Framework. In addition, you must undergo a screening procedure as per “Know-Your-Customer” or KYC guidelines.

To satisfy KYC, you will be required to provide your corporate services provider with:

  • Full Name, Identification Proof (such as Identity Card or Passport), Residential Address, Date of Birth and Nationality of each of the Directors, Shareholders, and the Ultimate Beneficial Owners of the company;
  • A resolution by the company’s board of directors;
  • Copy of the company’s certificate of incorporation;
  • Copy of the company’s business profile; and
  • Copy of the company’s Memorandum and Articles of Association (M&AA)

KYC is required so that your corporate service provider is able to ensure and confirm your identity before proceeding with the registration of your company.


How Will My Company Be Screened?

To identify customers with higher money laundering or terrorism financing risks, your corporate services provider will consider your:

  • Background
  • Business activities
  • Source of income or revenue
  • Country of origin and residence
  • Nature and purpose of your accounts, or linked accounts
  • And that of any persons acting on your behalf

Specifically, your corporate services provider will assess if:

  • You are from a jurisdiction with inadequate anti-money laundering or counter-terrorism financing measures (a list of high-risk jurisdictions can be found here)
  • Contacting your existing clients is easy and hassle-free
  • You or your clients are Politically Exposed Persons (PEPs), such as Heads of state, senior politicians or government officials, political party officials, judicial or military officials, senior executives of state-owned corporations, or family members or close associates of those
  • You are too secretive and appear to be avoiding face-to-face meetings
  • You have issued unusual instructions regarding cash or loans; or
  • Your company structure is overly complex or unusual
  • You are accepting losses though unusual transactions; and
  • Money is going in and out of your company’s accounts

Your entity will be assessed based on the above factors, as well as its ownership structure, nature of trade dealings and country or territory risk factors. Your corporate services provider will then rate your entity as either high-risk or low-risk. “Low-risk” entities are usually publicly-listed companies, as they would have been subject to various disclosure requirements. As such, corporate services providers are likely to perform full due diligence processes for “high-risk” clients, while adopting simplified measures for “low-risk” clients.

In addition, your corporate service provider must also document and store updated information on all its customers. This documentation must be kept throughout its relationship with your company, and at least five years after the termination of the formal business relationship.


When Will I Be Screened?

Due diligence procedures must be performed by corporate services provider once it accepts a client, or once a business relationship has been established with a new client. Your corporate service provider may also perform due diligence processes anytime if it has reason to suspect that your company may be laundering money, or if it has doubts about the accuracy or authenticity of documents that your company provides. All client information must be kept up-to-date in your corporate services provider’s records.


How Long is the Screening Process?

After performing due diligence and screening your company, your corporate services provider will be expected to continue monitoring its clients. As such, expect regular inspections based on standard risk assessment procedures. Your corporate service provider may also review the level of risk of all its clients whenever necessary.

Given that Singapore has a vibrant economic climate, regulations are necessary to uphold the integrity of its business environment and to minimise the risk of corruption. While these new compliance measures may require your corporate services provider to ask you questions or request for documentation, it is important to note that a number of countries are also taking similar steps to prevent money laundering and financing of terrorist activities.


Engage a One-Stop Corporate Solutions Provider

To ensure you start your business on the right foot in Singapore, consider engaging a one-stop professional corporate services provider that will help you be effective at governance. From keeping and maintaining statutory books and registers, to helping you meet the various compliance requirements and deadlines, Corporate Services Singapore ensures that your start-up never misses a statutory filing or requirement.

At Corporate Services Singapore, we can assist you in incorporating your company in full compliance of the law. To keep up with the latest regulatory updates in Singapore, give us a call at 6602 8286 or email us at today.

Posted in Company Incorporation.