Beneficial Owners: Decoding the Structure by Legal Professionals!

The AML laws in Singapore mandate that regulated entities identify the beneficial owners and verify their identities when establishing a business relationship with a legal person or legal arrangement. Understanding the beneficial owners is one of the crucial elements of the Customer Due Diligence process.

Singapore’s Legal Profession (Prevention of ML and TF) Rules 2015 defines “beneficial owner” as the natural person-

1. who ultimately owns the legal entity or has the controlling ownership interest, or
2. when no individual has any controlling ownership interest or when there is doubt about the same, the person who exercises ultimate effective control over the entity through other means, whether directly or indirectly, or
3. on whose behalf the legal entity is conducting the transaction with the regulated entity or the legal entity’s senior management.

However, the rules specify specific scenarios where the requirement of identifying the beneficial owners is relaxed. In the case of the following customers, the regulated entity need not identify each beneficial owner unless any red flag or suspicious activities are observed:

• a Ministry or department of the Singapore Government or a statutory board
• a Ministry or department of the foreign government
• an entity listed on the Singapore Exchange or its subsidiary (of which the listed entity is holding 50% or more shares)
• an entity listed on a stock exchange outside Singapore (which is subject to adequate regulatory disclosure requirements)
• a financial institution subject to AML/CFT Compliance and supervised by the Monetary Authority of Singapore or the investment vehicle where the financial institutions are serving as managers
• a foreign-based financial institution that is subject to AML/CFT compliance requirements and supervision following FATF Recommendations around combating financial crimes or the investment vehicle where the financial institutions are serving as managers
• certain specific Singapore-based universities (such as Nanyang Technological University, National University of Singapore, Singapore Institute of Technology, etc.)
• Government schools
• the Council of Law Society of Singapore

Here is an infographic highlighting the natural persons who can be classified as the “beneficial owner” and the exceptions around beneficial owner identification for the legal professionals in Singapore, subject to Legal Profession (Prevention of ML and TF) Rules 2015.

AML Singapore can help you manage your AML compliance, including the customer onboarding process and managed CDD services, to ensure you stay safe against ML/FT threats while trusting us with your AML compliance function.