Licensed Trust Companies (“LTCs”)

The Singapore trust services industry has seen a strong growth in recent years, as a by-product of increasing wealth management and private banking activities. This has prompted the need to ensure high standards of probity, professionalism and business conduct by trust service providers to strengthen Singapore’s status as an international financial centre. The Trust Companies Act (“TCA”) seeks to achieve this by ensuring that only fit and proper persons are permitted to operate in the trust services industry and that trust service providers observe stringent anti-money laundering requirements.

The Uses of Trusts & Private Trust Companies (“PTCs”)

Most settlors (the originators of the trusts assets) establish their trust(s) by use of a professional trustee. This way they can ensure that their assets can be professionally managed as per their instructions, even upon their passing.

PTCs are entities that are purposed to act as trustee in relation to a specific trust or group of trusts, and most of the time will be pre-imposed with the condition of not being able to solicit business from the general public. PTCs are useful in various circumstances, such as being used as trustees for private family trusts or commercial trusts, or even to hold SPVs in financial or real estate investment structures.

Practical Applicability

Effectively, trusts and PTCs are used as a method for settlors or UBOs to ensure control over their assets injected into these structures, and at least up until recent years, was used as a means to protect the identities of the UBOs at the top of a structure, as most trustees would end up being the controller of these trusts – and therefore it is imperative to conduct stringent AML/CFT checks when onboarding such parties. The implementation of new regulations in recent times, such as the Foreign Account Tax Compliance Act (“FATCA”), Automatic Exchange of Information (“AEOI”) & even Common Reporting Standards (“CRS”) have empowered authorities and certain service providers to query beyond the trust structures to the extent of identifying the UBOs of said structures.

Why do LTCs need Compliance & Risk Management?

However, as highlighted, much can be done to provide the relevant checks and balances in order to ensure that the wealth and assets of the individuals or companies hiding behind these trusts are legitimately sourced. Adequate risk parameters should be set up to capture the various types of sources of income used to fund these structures. It is for this reason that the Monetary Authority of Singapore has put in place measures in the form of laws, notices and guidelines to assist LTCs with their Compliance and Risk Management frameworks. These measures predefine certain standards required of LTCs when onboarding their clientele, and to ensure that ongoing monitoring and execution of transactions on behalf of these trusts, as trustees, are carried out with great scrutiny and will not harm the financial industry in Singapore that has been so painstakingly built over the last 3 to 4 decades.

The traditional days of supervision and support has begun to dwindle away, replaced by a more stringent, law enforcement, policing mentality within both the public and private sector financial institutions. We here at Argus are primed to handle your compliance, risk management and corporate governance needs. Whether you may need input on how to put in place policies or procedures to manage your risks, or if you need us to run a mock audit on your trust portfolio to ascertain whether this is up to the regulatory standards required of your business, we can easily help you out.

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Online Training
Anti-Money Laundering and Countering the Financing of Terrorism
Friday, 29 October 2021
02:30 – 04:00 SGT

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