6 Asian Legal Business | January-February 2025 Singapore’s family office framework overhaul Increasingly dubbed as the “Switzerland of Asia”, Singapore has been leveraging its stable socio-economic environment and advantageous location to become a global wealth centre, rolling out tax benefits and policy incentives to attract family offices. Under the government’s push, the number of Single-Family Offices (SFOs) has shot above 1,600 in Singapore as of November 2024. However, in the wake of recent corruption scandals. SFOs have also come under additional scrutiny in line with Singapore’s enhanced efforts to tighten its regulatory environment in the area of anti-money laundering, countering the financing of terrorism and proliferation financing. In November of last year, the Monetary Authority of Singapore (MAS) introduced a new regulatory framework for SFOs, marking a significant evolution in the city-state’s approach to managing these private wealth management structures. This overhaul came in response to the growing number of family offices establishing a presence in Singapore and the need for clearer, more specific regulations tailored to their unique characteristics, lawyers say. 1 What are the key changes introduced? Previously, SFOs had to either operate under the related corporation exemption or apply for individual exemptions from MAS. Stephanie Magnus, principal and head of the financial services regulatory and fintech practices at Baker McKenzie Wong & Leow in Singapore, points out that the exemption for related corporations was not drafted specifically with SFOs in mind. “Using it had its limitations given the unique nature of family offices where entities other than corporations (such as trusts and partnerships) are often used,” says Magnus. With Singapore’s rising prominence as a global financial hub, the need for a more specialised regulatory approach became evident. The new framework introduces a class licensing exemption system with several essential criteria. First, regarding family ownership, SFOs must be wholly owned by members of the same family. However, there is allowance for non-family ownership, where executive directors, CEO, CFO, and investment professionals may hold up to 10 percent non-controlling stake to incentivise performance. “Unlike the related corporation exemption previously used, this exemption is structure agnostic, and the SFO can be held by a trust, foundation or any other structure, as long as the funding for such structures originate from the family,” explains Magnus. Second, in terms of fund management scope, management activities must be conducted exclusively for family members and extend to charitable organisations funded solely by the family. “This recognises that SFOs and families often have charitable objectives, and this condition is therefore wide enough to allow for such objectives to be met,” notes Magnus. In addition, there is a clear incorporation requirement stipulating that SFOs must be incorporated in Singapore, ensuring local presence and oversight. 2How can the new framework address illicit financial activities related to SFOs? Under the new MAS framework, Magnus points out that while eligible SFOs do not need to be licensed, there is an acknowledgement that SFOs introduce AML/ KYC risk. “The new regime strikes a good regulatory balance by not requiring licensing of the SFOs but by ensuring that AML/KYC checks are performed by a Singapore financial institution,” she says. This regulatory intention is evident in the fourth criterion required for class licensing exemption, which requires mandatory establishment and maintenance of business relations with at least one MAS-regulated bank. “As SFOs often need the services of Fis, to ensure that AML/KYC checks are done, the SFO must establish relations with a bank that does KYC checks in accordance with MAS rules on it,” notes Magnus. Lawyers believe this class exemption offers better clarity to SFOs looking to set up in Singapore as to their regulatory status. “While there are additional conditions to be met (including to have a relationship with a local bank), these obligations are not too onerous and are well-balanced,” adds Magnus. 3In what way is Singapore’s SFO landscape going to evolve? The new SFO framework represents a significant step forward in Singapore’s wealth management regulatory landscape. By providing clear guidelines while maintaining flexibility, it addresses the unique needs of family offices while ensuring appropriate oversight. This framework positions Singapore to further strengthen its role as a leading international wealth management hub, providing both the regulatory clarity and operational flexibility needed by modern family offices. Given greater clarity within the SFO regulatory landscape, Magnus anticipates that Singapore will remain a conductive and attractive jurisdiction for SFOs to set up in. The Briefs EXPLAINER
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