SINGAPORE -- Singapore's financial regulator is pushing family office applicants to respond promptly to scrutiny, or risk having their efforts to obtain tax breaks rendered fruitless, as the Southeast Asian financial center tightens procedures around foreign wealth inflows in the wake of a massive money laundering bust.
According to three industry sources with knowledge of the matter, the Monetary Authority of Singapore (MAS) will give a maximum of one month for applicants to reply to the regulator when it asks for additional information. In the past, no hard deadline was given. Going forward, applications are set to be disregarded if the deadline is not met.
"MAS has requested for applicants to respond to queries within a month, so that the processing of applications can be completed more expeditiously," the regulator spokesperson said in a reply to Nikkei Asia's request for comment. "Where applicants require more time to respond, MAS will consider requests to extend this timeline."
Industry sources told Nikkei that the MAS earlier in March communicated the one-month time frame to people who help wealthy clients apply for tax incentives for single-family offices. Such offices manage the investments of wealthy families. Accounting or law firms can help these families apply for the tax breaks.
"So, it must mean that someone says, 'Stop all these games,'" one of the sources told Nikkei. "If you can't dig and find [the information] within 30 days, what does it mean?"
Scores of family offices have opted to submit applications to the MAS to qualify for tax breaks, but they can also choose to operate in the city-state without using those incentives.
There were 1,400 single-family offices that qualified for the incentives as of the end of last year, a 27% increase from the end of 2022, the latest official figures show. Singapore's incentives include 100% tax deductions for overseas philanthropic donations, under certain conditions.
The latest tightening of the application procedures comes as Singapore continues to investigate the biggest money laundering case in its history.
Inquiries to set up family offices in Singapore also slowed in the months following the money laundering probe, lawyers and wealth advisers told Nikkei in late October last year.
In August, police arrested 10 people from China, Turkey, Cambodia, Cyprus, Vanuatu, Dominica, and St. Kitts and Navis in connection with the case. Authorities have seized or frozen assets worth over 3 billion Singapore dollars ($2.3 billion).
In October, it was disclosed in Singapore's parliament that one or more of the accused caught up in the money laundering bust may have been linked to single-family offices that were given tax incentives. It was also said in parliament that the MAS would review its internal incentive administration processes for family offices, and tighten them as necessary.
The MAS since January has denied two family office applications with Chinese-affiliated wealth, according to industry sources working on the cases. These include people who hold only a Chinese passport and those who hold additional foreign passports. The written rejections were seen by Nikkei.
Chinese nationals looking to set up family offices in the city-state are also facing closer scrutiny this year, the sources said, with inquiries covering everything from how many passports the applicants hold to whether any entities connected to them face mainland regulatory action that could have implications for Singapore's anti-money laundering efforts.
Observers told Nikkei that the move to tighten procedures will be helpful in drawing high net worth families who wish to use Singapore legitimately as a wealth management hub, and weed out applicants who potentially want to exploit the Asian financial center as a base to shelter ill-gotten gains.
"MAS doesn't want all these applications to be dragged out," an industry source with knowledge of the regulator's move to impose a one-month deadline told Nikkei. "I suppose maybe there's a suspicion that if you try and drag things out, then maybe they suspect that you have something to hide."
