ACRA Takes Action Against Unethical Corporate Service Providers in Singapore
The Accounting and Corporate Regulatory Authority (ACRA) is intensifying its efforts to identify and eliminate unethical corporate service providers (CSPs). Subsequently, to prevent companies from being exploited for illegal activities such as money laundering and scams.
In addition, according to ACRA’s assistant chief executive, Leong Weng Tat, a specialized unit was established in November 2023. This unit harnesses data and technology to detect anomalous activities during company formation. Furthermore, to enhances surveillance of those involved in incorporating companies.
Enhanced Surveillance and Enforcement
In the first six months of 2024, ACRA acted against 14 registered filing agents and qualified individuals who provide corporate services. Thus, these actions included canceling the registrations of CSPs that facilitated the misuse of nominee directorships. Between 2021 and 2023, ACRA canceled the registrations of 17 entities for similar reasons.
Importance of Swift Action
“We have learned that swift action is crucial,” said Mr. Leong, head of ACRA’s compliance and legal group. “If unethical CSPs retain their registration, they can continue to incorporate companies.” He emphasized that while most CSPs are law-abiding and essential to the ecosystem, a few bad actors can tarnish the sector.
The Role of CSPs in Singapore
CSPs are integral to Singapore’s business landscape. They assist in company formation, provide registered office addresses, and arrange for directors or nominee shareholders. Additionally, about 2,900 CSPs are registered with ACRA, responsible for approximately 70% of corporate filings. Singapore has around 575,000 registered corporate entities.
Addressing the Risks of Nominee Directorships
The misuse of nominee directorships has been a significant concern. The situation worsened during the Covid-19 pandemic as more activities moved online, including opening bank accounts. Indeed, all companies set up in Singapore must have at least one local resident director, leading foreign-owned companies to appoint nominee directors. As a result, this requirement can be exploited by individuals with ill intent.
Legislative Measures and Future Steps
Under the Corporate Service Providers Bill, due for debate in Parliament on July 2, ACRA aims to address these issues more effectively. The Bill will help ensure CSPs are accountable for the nominee directors they source, requiring them to be “fit and proper.”
ACRA has already started monitoring nominee directors with a high number of directorships and the CSPs behind them. Since 2024, ACRA has issued debarment orders against six nominee directors who failed to meet compliance obligations, with two more potentially being added.
Conclusion
Hence, the efforts by ACRA to regulate CSPs and nominee directorships are crucial for maintaining the integrity of Singapore’s corporate ecosystem. By leveraging data and technology, and introducing new legislation, ACRA is poised to mitigate risks and uphold the high standards expected in the business community.
Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Feel free to contact us to consult with our professional advisors team for personalized advice and guidance.
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