Corporate Governance Standards for Family Offices that Seek Tax Incentives
Ministry of FinanceSpeakers
Summary
This question concerns the corporate governance standards and fraud prevention requirements for Single Family Offices (SFOs) seeking tax incentives, as raised by Assoc Prof Jamus Jerome Lim. Assoc Prof Lim inquired about mandatory risk assessments, third-party audits, and whistleblower protections, alongside the level of compliance supervision these entities undergo. Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong responded that SFOs manage private family wealth rather than third-party funds, leaving internal governance and controls to the families. He stated that imposing additional regulations beyond general corporate standards would increase compliance costs and undermine Singapore’s competitiveness as a financial centre. The Minister emphasized that the regulatory focus remains on money laundering risks, with legal recourse available through the existing regime for cases of fund misappropriation.
Transcript
40 Assoc Prof Jamus Jerome Lim asked the Prime Minister and Minister for Finance (a) what specific standards of corporate governance are imposed on Family Offices (FOs) seeking tax incentives under the fund tax incentive schemes for FOs; (b) whether MAS requires such entities to implement robust fraud prevention mechanisms, third-party audits, and whistleblower protections; (c) what percentage of these FOs have been subjected to intensive supervision or compliance review in the past three years; and (d) why are these FOs not required to undertake mandatory risk assessments for fraud vulnerabilities.
Mr Gan Kim Yong (for the Prime Minister): Single Family Offices (SFO) manage only the family's own private wealth and do not handle third-party funds. It is for the family to establish the governance and controls needed and to hire the right people to manage their private wealth vehicle. They do not need to be regulated nor be subject to specific corporate governance standards beyond those which apply to all corporate entities, whether they receive tax incentives or otherwise. This approach is consistent with major financial centres worldwide. Our approach towards SFOs is focused on addressing money laundering risks. Imposing unnecessary regulations will increase compliance costs and undermine Singapore's position as a business and financial centre.
On the recent case of alleged misappropriation of funds by former employees of a Chinese family office, misappropriation of funds is a risk faced by all businesses and not unique to SFOs. All businesses should institute appropriate controls to guard against such risks. Where misappropriation of funds occur, Singapore's legal regime allows for recourse against such misconduct.