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SINGAPORE — From this week, the work undertaken by Ramesh Moosa and his team of 30 specialists in accounting giant EY’s Singapore-based Forensic and Integrity Services unit is undergoing conspicuous change.
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The group is among scores of professionals at six firms that the Southeast Asian city-state’s financial regulator has enlisted to conduct detailed vetting of high net worth individuals looking to park assets in the country via family offices.
“What we are trying to do is to check for any skeletons in the closet,” Moosa told Nikkei Asia on the screening process for the Monetary Authority of Singapore (MAS). “We kind of want to understand who they are, where they came from, what’s their background.”
Previously, the MAS shouldered the bulk of such duties. But amid rising demand for family offices — the wealthy get tax breaks in return for investing a certain amount in Singapore — and mounting concern about financial crime, the regulator has tightened its rules. This has required drafting in outside help to check whether applicants, their immediate family members and related associates have ties to money laundering, terrorism financing or other offences.
The bolstered screening process comes in the wake of Singapore’s reputation as a prized regional wealth hub being tarnished by a massive money laundering case last year.
“Singapore is so successful in attracting wealth,” said Mandeep Nalwa, group chief executive officer of Taurus Wealth — a multi-family office serving high net worth people in the region out of the city-state. “It’s normal that the not-clean money will try to find an abode here, [the owners] hoping that if they escape the scrutiny, then once it’s based in Singapore, then it will get a veneer of credibility,” he said.
The embarrassing case for Singapore resulted in the conviction of 10 criminals of Chinese origin, dubbed the “Fujian gang” after the Chinese province from where they came originally, for laundering ill-gotten gains. Assets worth over 3 billion Singapore dollars ($2.34 billion) were seized in connection with the activity.
Six single-family office funds that had received government tax breaks were linked to the criminals. A single-family office is an institution set up to manage assets and investments of one high net worth family. Such practices need at least SG$20 million under management to be eligible for government incentives.
After the gang members’ arrests, Singapore raced to tighten oversight of wealth management. Apart from the new, more rigorous screening reports, the MAS also tightened the timeframe for family office tax incentive applicants to reply to the vetting process.
The reaction was understandable, according to Tim Peters, chief marketing officer at Enghouse Systems, a software supplier to financial services firms for use in regulatory compliance, “The reputation of Singapore and Hong Kong as safe, secure financial hubs could be tarnished if they become associated with financial crime,” he said. “Any significant scandal involving money laundering or other financial misconduct could deter future investments and damage their standing.”
An analysis by U.S. consulting firm McKinsey published last month showed what is at stake.
Movements of personal financial asset holdings from China to Singapore totaled $400 billion at the end of 2023, according to the analysis. The city-state had also taken in $140 billion from Indonesia, $130 billion from India, $70 billion from Hong Kong and $370 billion from the rest of Asia as of 2023, according to McKinsey. In contrast, Hong Kong had received $555 billion from mainland China and $735 million from the rest of Asia as of the end of last year.
“Hong Kong and Singapore punch far above their economic weight as financial hubs, and that distinction extends to family offices,” McKinsey said. “The two cities together are home to approximately 15% of the world’s single-family offices, with authorities there having made it a point to attract more of them.”
Singapore’s growing popularity as a hub for single-family offices is striking, with the total rising from 400 in 2020 to 1,650 as of the end of August this year, according to the government.
At a conference last month, Singapore’s Second Finance Minister Chee Hong Tat said the city-state expects the number of new single-family offices this year to surpass the 300 that were added in 2023.
“Robust regulations and proper safeguards can go hand in hand with an environment that is also business-friendly — and that is what we want to achieve,” he said at the meeting. “Singapore will continue to welcome legitimate wealth, genuine investments and complementary international talent from around the world.”
Industry players said that pockets of China’s wealthy valued cultural similarities in Singapore, with its ethnically Chinese-majority population, as motivation for establishing offshore family offices in the city-state. But some of these rich people have been ruffled by the added scrutiny.
A consultant to millionaires who made their fortunes in China’s technology sector said that “as a matter of principle,” wealthy Chinese he advised think the city-state should be welcoming them with open arms for selecting Singapore as a wealth management hub, instead of adding layers of bureaucracy on them to get a foot in the country.
“They are definitely concerned … if the Singapore government will actually be requested by Chinese authorities to sort of, look into the wealth that’s brought into Singapore,” the consultant said on condition of anonymity. “It (has) become more of a common knowledge that, you know, more of Chinese wealth is coming into Singapore.”
Other service providers to rich families from China said that as a result of Singapore’s heightened scrutiny, some wealthy Chinese are looking to Hong Kong as an alternative jurisdiction for their assets.
In addition to welcoming Chinese wealth, Singapore has also relaxed restrictions on inbound Chinese travel. In February, the city-state and Beijing rolled out a plan whereby their citizens can enter the other country without a visa for stays of up to 30 days. However, this has also triggered concerns in Singapore over the risks of rising crime.
In August, Chinese nationals believed to be tied to international criminal syndicates broke into Singapore mansions and stole close to SG$4 million. Three suspects were arrested, and police said they were hunting another 14 Chinese nationals tied to the case.
However the government has told parliament there has been no increase in the number of arrests of Chinese nationals after the start of the visa exemption plan.
“A visa regime is not a foolproof way to keep unwanted characters away,” said Minister of State for home affairs Sun Xueling last month.
Observers note that amid the competing pressures of attracting wealth and reassuring citizens, the Singapore authorities cannot just impose more rules.
“The bad actors are becoming increasingly sophisticated,” said Yam Wern-Jhien, director at law firm Setia Law. “It is not just enhancing regulation, but it has to be coupled with introducing tools and educating people … it has to be a holistic approach.”
