Singapore's financial institutions are heavily regulated, as they are responsible for detecting, deterring, and preventing money laundering(ML), terrorist financing(TF), fraud, and other illegal activities. As a result, Know Your Customer (KYC), Countering the Financing of Terrorism(CFT), and Anti Money Laundering (AML) Singapore checks are frequently required by fund managers, financial experts, insurance brokers, trust managers, and payment service providers.
What is KYC, CFT, AML in Singapore?
KYC refers to the procedure of verifying your clients' identities, either before or after they begin doing business with you. The word "KYC" also refers to bank customer identification verification processes that are regulated in order to assess and manage client risk. The KYC procedure is also a legal requirement designed intended as an anti-money laundering (AML) measure.
The Importance of KYC
In the financial sector, Know Your Customer (KYC) is a typical business practice. It's also necessary for financing and mergers and acquisitions. The checks protect all parties involved and the financial interests of businesses, investment firms, and investors. Especially if a large sum of money is at risk. If a company or issuer follows KYC standards, the financial risks of their commercial dealings with specific clients are reduced.
Many seasoned investors consider KYC checks to be a vital step in building confidence and reducing risk. Although these stringent inspections might be time-consuming, they help to establish a safe and trustworthy environment in which to conduct financial or investment transactions.
Money laundering and terrorism financing have increased due to the ease with which companies may be formed and registered in Singapore. In addition, while some investors use unique corporate structures, shareholders keep their transactions concealed.
The Accounting and Corporate Regulatory Authority (ACRA) and the Financial Action Task Force (FATF), an international regulating organization, developed a set of laws to tackle the problem. The goals of this framework are to enhance professional standards and protect the financial system from abuse.
Anyone who wants to start a business in Singapore must follow the Know Your Customer (KYC) rules to verify that their identification is legitimate and transparent. Companies should supply the following information before the screening process:
- Proof of identification (Valid IDs, Residence, Date of Birth, Nationality of shareholders and members of the beneficial owners)
- A copy of the Board of Directors' decisions;
- A copy of the company's Memorandum of Association
Your clients would be evaluated and identified by the corporate service provider. They'd look into your past and prior transactions if you had:
- Easy communication with existing clients
- Clients who are Politically Exposed Persons (PEP)
- A corporate structure that is unusual or complicated
- Clients are tolerant of out-of-the-ordinary transactions
- If money is flowing in and out of the company's records
Regular Monitoring and Record-Keeping
Corporate service providers should track the customer's activities once the prerequisites and relevant papers have been confirmed. This includes, if required, a review of the company's history and risk profile. Agencies would observe the highest type of danger.
Following the monitoring, copies of information and supporting documentation concerning customer identities must be retained for at least five years after the commercial relationship has ended.
Penalties for Non-compliance
If a firm fails to comply with KYC rules and the ACRA suspects a flaw in the process, the agency has the authority to investigate. If non-compliance is stated, the corporate service provider will be penalized and will be unable to offer services. Furthermore, the commercial establishment is severely harmed. This may include:
- Withdrawal or cancellation of the company's ACRA registration;
- Denial of rights to ACRA's Bizfile business interface;
- Financial penalties.
Because KYC requirements in Singapore organizations address unlawful business activities and non-compliance with the constitution, below are some relevant legislation. Individuals or investors who are found guilty will be subject to the following restrictions. The punishment and requirements may differ depending on the evidence obtained.
- The ACRA Act and the Singapore Company Constitution.
- The Terrorism Act.
- The Corruption, Drug Trafficking, and Serious Crimes Act.
- Other anti-money laundering and anti-terrorism laws.
Incorporate Your Business in Singapore
Despite its reputation as the world's top location for commercial institutions and companies, Singapore must contend with insensitive owners and grifters of its company constitution. Fortunately, organizations and government authorities have strengthened their structures to ensure that investors' identities are protected.
As a result, business owners should carefully select their corporate service providers. If you wish to incorporate a company in Singapore, it will be most successful if the leading business services supplier directs you. Besides that, Sanction Scanner offers superior technological compliance services to businesses. You can request a demo and get in touch with us for further information.