Two SFO funds linked to Chen Zhi’s group were granted tax incentives: Chee Hong Tat
MAS takes ‘risk-proportionate approach’ to maintain Singapore’s status as a trusted financial centre, he says
[SINGAPORE] Thus far, two single-family office (SFO) funds that received tax incentives have been found to be linked to Cambodian national Chen Zhi’s group, said Minister for National Development and deputy chairman of the Monetary Authority of Singapore (MAS) Chee Hong Tat on Wednesday (Nov 5).
“MAS has ceased the tax incentives. As investigations are ongoing, I seek members’ understanding that I am not able to comment further on the details at this stage,” said Chee, in reply to a parliamentary question.
Workers’ Party Member of Parliament (MP) Kenneth Tiong had asked if any individuals sanctioned by the US for alleged transnational criminal activities or convicted in Singapore’s largest money laundering case – referring to the S$3 billion case in 2023 – had operated tax-exempt family offices locally.
In his reply, Chee mentioned only Chen, saying that MAS had “thus far” identified two SFO funds linked to the sanctioned individuals.
On Oct 14, US Treasury sanctions were announced against Chen, his conglomerate Prince Holding Group, and Chen’s associates. They had allegedly engaged in large-scale illicit activities such as “pig butchering” cryptocurrency scams, wire fraud and money laundering.
Chee noted that money laundering investigations by Singapore’s police against Chen and related associates are ongoing.
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“Small proportion”
In 2018, Chen set up a family office, DW Capital Holdings, in Singapore. It claimed to manage more than S$60 million of assets, and also claimed to receive a 13U (previously known as 13X) tax incentive from the MAS, according to a report by Bloomberg.
In his reply in Parliament, Chee highlighted existing measures and stressed the need for a calibrated approach.
SFOs linked to individuals convicted of money laundering offences represent a “very small proportion” of the overall sector, at less than 1 per cent, he noted.
“We have to remain open to bona fide family offices and genuine investors, to continue growing our financial services industry and creating good jobs for our people.”
WP MP He Ting Ru had also filed a written question on how many entities have applied for tax incentives under section 13U of the Income Tax Act, and how many were granted this.
Chee said that based on available data over the past three years, about 3 per cent out of 1,300 applications for tax incentive schemes for funds under sections 13O and 13U of the Act were rejected.
Some potential applicants withdrew their interest to apply when questions were posed and requirements clarified at the pre-application stage, he added.
He noted that as part of the application process, individuals and entities are screened against databases to check that there are no reports on their involvement in illegal activities.
The SFO fund is also required to open and maintain an account with an MAS-licensed bank and be subject to due diligence and ongoing monitoring checks.
Tiong later asked if the government will mandate enhanced due diligence on existing client relationships across all regulated financial sectors, and whether there will be a rescreening of existing tax incentive holders and not just new applicants.
Chee did not answer directly, but said that MAS will continue to review its rules and procedures.
WP MP Sylvia Lim also asked if plans to shorten the registration process for family offices, from 12 months to three months, would mean less time for banks to do due diligence.
Chee replied that the move aims to simplify requirements but does not change anti-money laundering checks that are in place.
“Calibrated approach”
Chee stressed the need for a “sensible and calibrated approach”, saying: “We should refrain from a knee-jerk overreaction when cases happen from time to time.”
He added: “Similar to all major international financial centres, it is not possible to have zero incidents given the complex nature of the financial services industry and the high volume of daily transactions.”
Many industry stakeholders consider Singapore to have more stringent due-diligence standards for high-net-worth clients, compared with other financial centres, he said.
“If we were to tighten further to the point where the processes become overly cumbersome, it will affect our competitiveness, deter legitimate investors and put many local jobs at risk,” he noted. “This is not the outcome we want for Singapore.”
Chee said that MAS will continue to take a “risk-proportionate” approach to maintain the Republic’s status as a trusted financial centre.
In a police raid on Oct 30, assets – including six properties and cash estimated to be worth more than S$150 million – linked to Prince Holding Group were seized.
Other assets – including a yacht, 11 cars and multiple bottles of liquor – were subjected to prohibition of disposal orders.
On the same day, MAS said that it is working closely with the police to follow up on the case, and that it would conduct supervisory reviews with the financial institutions involved.
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