The Monetary Authority of Singapore (MAS) – in response to its July 2023 consultation paper setting out a proposed framework for single family offices (SFOs) in the city-state, and with an eye to enhancing oversight and flexibility – has presented a finalized approach that refines the regulatory exemption for SFOs.

SFOs are exempt from licensing under the Securities and Futures Act 2001 (SFA), and the proposals are aimed at balancing the criteria for a simplified class exemption regime while also addressing potential money-laundering risks posed by SFOs.

This consultation aims to harmonize the criteria for SFOs to operate under a class exemption, targeting consistent treatment across family offices while managing risks of financial misconduct.

The recent S$3 billion (US$2.26 billion) money-laundering scandal in Singapore highlights the need for enhanced regulatory vigilance across financial entities, including family offices. And the case underscores the importance of the MAS’ tightened controls under the new SFO framework, particularly the anti-money laundering (AML) and countering of financing terrorism (CFT) requirements.

For instance, by mandating SFOs to establish relationships with MAS-regulated banks for rigorous AML/CFT checks, the updated framework reflects the authority’s proactive stance on maintaining Singapore’s financial integrity amid increasing global scrutiny.

Key areas addressed in the consultation included ownership criteria, permissible structures, AML/CFT requirements, reporting obligations and an implementation timeline.

SFOs qualifying for the class exemption must be family-owned, the MAS clarifies, either directly or indirectly. Following industry feedback, the authority agreed to allow SFOs to be structured through diverse vehicles – such as trusts, foundations and other entities – provided they are solely funded by family assets.

Preventing misuse

In addition, the MAS has expanded the scope to allow SFOs to manage assets for family-linked charitable foundations without licensing, as long as these foundations do not exert control over the assets.

Acknowledging feedback on potential conflicts, the authority stipulates that SFOs may manage funds for specific non-family key employees, such as executive directors or investment professionals, capped at 10% of total assets under management (AUM).

This limit was designed to prevent misuse of the SFO structure to manage unrelated third-party funds. To support retention and alignment with family interests, the MAS also permitted these key employees to hold a non-controlling stake of up to 10% in the SFO. This reflects the authority’s responsiveness to industry calls for flexibility, particularly for investment staff incentivization.

AML/CFT requirements

To mitigate money laundering and terrorism financing risks, the MAS requires SFOs to establish and maintain relationships with MAS-regulated banks for conducting AML/CFT checks. This ensures the integrity of financial flows while balancing the operational burden on SFOs.

The MAS clarifies that both the SFO and its associated fund vehicles must comply with this requirement, recognizing that transactions often flow through these entities.

The authority has also refined several procedural aspects, including extending the initial notification period to 14 days after business commencement. Annual reporting deadlines were also aligned with existing tax incentives, allowing SFOs up to four months post-financial year-end to submit their declarations.

The MAS required annual declarations on AUM and a list of MAS-regulated banks involved in the SFO’s operations, keeping reporting requirements focused and manageable.

In response to industry feedback, the MAS has set a 12-month transition period to allow existing SFOs to align with the new exemption criteria. Although some respondents requested more case-by-case exemptions, the authority stresses that the framework is sufficiently inclusive and generally will not permit individual exemptions moving forward.

Defining family

To clarify the scope of “family” in SFO eligibility, the MAS defines family members as lineal descendants of a common ancestor within five generations, a scope that includes adopted children, stepchildren, parents-in-law and siblings-in-law.

The five-generation limit aims to prevent distant relatives from using the exemption improperly, aligning with feedback for both flexibility and regulatory control.

In summary, the authority says its response reflects a balanced approach to supporting the growth of SFOs in Singapore, while safeguarding against misuse.

By refining the framework with targeted exemptions, clarity on ownership structures, and AML/CFT compliance, the MAS aims to keep attracting family offices while upholding Singapore’s standing as a robustly regulated financial hub.