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Registered Filing Agent (RFA) Policy Creation Review and Audit (ACRA IPPC)

Introduction

If you have been working as a Corporate Service Provider (CSP) for some time, you must be familiar with the IPPC, short for Internal Policies Procedures and Controls. Accounting and Corporate Regulatory Authority (ACRA) introduced the requirement to have the IPPC documents for every Registered Filing Agent (RFA) in 2015. These changes were introduced as a part of measures taken after Singapore’s National Risk Assessment Study.

As per these regulations, you are required to follow the policy (Which you have to create first) while conducting your day-to-day business. These business activities include customer acquisition, evaluation, risk identification, and proper documentation. The typical contents of this policy are:-

  • Introduction
  • Policy statement
  • Management oversight
  • Risk assessment
  • Customer due diligence (“CDD”)
  • Enhanced customer due diligence
  • Record keeping
  • On-going monitoring
  • Reporting a suspicious transaction
  • Audit and compliance
  • The hiring of new staff and training

And it also includes some guidance about the following forms;

  • Customer due diligence form
  • Customer acceptance form

The policy needs to be reviewed at a specific interval. Many CSPs prefer to engage an external service provider to audit their policy. In this regard, we offer the following services.

ACRA IPPC Policy preparation for new CSPs

If you are starting your business as a corporate services provider, you need to prepare an IPPC or get it prepared from an external service provider. ACRA provides guidelines regarding the elements of the policy document. However, you need to create a policy to suit your customer profile. Writing the policy on your own can be a complex task for you. Moreover, if you are just starting the business, you are likely to not have enough experience with the various complexities of a corporate secretary business.

In this case, you can avail our services. We can write the policy that suits your specific business scenario, targeted market segment and cater to the type of customers you serve. The service also includes training your key staff to understand and execute the policy elements.

ACRA IPPC Policy Audit for Existing CSPs

ACRA requires the policy to be periodically reviewed either by an in-house expert or by a third-party service provider. Most CSPs typically do not have the staff qualified enough to review their policy. Another reason is that it is not a good move cost-wise to hire a full-time staff just for audit purposes. Therefore, most of these CSPs prefer to engage the services of an external firm to review their policy. That’s where we come into the picture. We keep abreast of all the recent legislation, guidance, and requirements.

In this service, we will review your existing policy to identify its weaknesses. Once the weaknesses are identified, we assist you with effective ways to mitigate them. We will also help you with adopting the right measures to improve your policy’s strength.

Audit of customer Onboarding Process / Audit of Customer files

Having a policy is not sufficient unless you practice it properly. It is vital that you follow this policy in your day to day operations.

In this service, we will conduct an audit of randomly selected customers you serve. We will check if all the policy elements were followed properly or not. In our years of experience, we have noticed that, on an average, at least one component of the policy is missing, violated, or not followed in 30% of the cases. Hence, it is an important check that must be done.

This service is bundled with the previous service of IPPC Policy Review. We do not offer it as an independent service.

With the proper IPPC in place and implemented in your onboarding process, you are good to go. But there is

ONE IMPORTANT POINT TO NOTE

Nominee Director prosecutions have gone up considerably in recent times.

ACRA IPPC Policy Does not Provide anything for a Nominee Director

ACRA IPPC is a generic policy for all customers in your practice. However, you will notice that ACRA has not mentioned any procedures (in its recommended policy guidelines) for customers who avail your Nominee Director services. It is a clear indication that Singapore government authorities do not formally recognise the concept of the Nominee Director, despite it being practised here on a large scale.

As a result, the Nominee Director is a special case that needs special attention.

Providing a nominee Director is a risky service. The Nominee Director is legally seen as the local director of the client’s company. If the customer’s company violates any law, your Nominee Director is answerable first. He or she will be called to CAD for questioning.

Nominee Director service is a specific arrangement for foreigners intending to register a company in Singapore. As per section 145 of the Companies Act, every Singapore company must have at least one director who is ordinarily resident in Singapore. As foreigners are not Singapore residents, CSPs offer them a nominee director. A nominee director is a local resident who acts as the local director in the client’s company. Nominee director service allows foreigners to register a Singapore company without recruiting a local director.

Nominee director services are considered lucrative because you can then push the customer to avail all services from your company. Typically the Nominee Director services are charged at 1500-4000 SGD per year and may also involve a deposit. And to be frank, the Nominee Director is not liable to perform any director’s duties other than signing the AGM statements in practice.

Today, there are well known CSPs who have built a portfolio of 1000+ customers that need Nominee Director services. These CSPs have made a fortune with Nominee Director fees only.

In past, not many cases of Nominee Director Prosecution

Before 2018, there were minimal cases where a Nominee Director was prosecuted in Singapore courts. If the client’s company engages in any fraudulent activities or a crime, the CSP and the Nominee Director would normally go to the Commercial Affairs Department (CAD) and give their statement. And that was the end of a nominee director’s liabilities. No action was taken against Nominee Directors if they were not actively involved in the criminal activities.

There has been a change in recent years in relation to the Nominee Director’s prosecution

The situation is not the same anymore. Nowadays, the AGC (Attorney General Chambers) will prosecute the local director if a foreigner-promoted Singapore company is found involved in any crime or a legal violation. The prosecution will be under section 157(1) of the Companies Act. This section states that a director must act honestly at all times and use reasonable diligence in the discharge of the duties of their office.

Since the company is engaged in law violations or a crime, it is an indication that the local director failed to keep proper oversight on the company’s operations.

In addition to this, the director of the CSP itself may be charged under penal code section 109 for abetment (Abetting Nominee Director to not keep proper oversight on company operations).

Here is one example from the Singapore Police Force website. Read the last Para carefully.

change in recent years in relation to nominee Directors prosecution

What does this all mean to CSPs?

If you have understood everything mentioned so far, then below is the summary of what it means for you.

I am just a Nominee Director

was a valid defence in the past. However, it is no more valid. AGC will prosecute the resident director now if the company violates any law.

Prosecutions are coming from all government Departments

We see prosecutions happening from all authorities (Prosecution means charging for offence and getting punishment in the court). For example, if a company imports food products without proper permit – then SFA (Singapore Food Agency) will file the charge. If the company fails to have a proper recruitment license, but still carries recruiting business in Singapore, then Ministry of manpower will file the case. If there are financial frauds then CAD (Commercial Affairs Department) will file the charges.

You must make sure that you are not abetting the lack of oversight

As a CSP, you must ensure that you give enough freedom to nominees to keep oversight on the companies under their management. You must not restrict their activities in any way to make sure you do not become part of the abetment charge. If your documentation and legal contracts have restrictive clauses, you must review them carefully and take proper action.

Prosecution of Nominee Director is painful (Even if you use an external person as Nominee Director)

If you are a small CSP and act as a Nominee Director yourself, you will be disqualified to act as a director after the court trial. In this scenario, you will have to resign from all the companies where you act as a Nominee Director and find a new person to take that role. Since you are disqualified from acting as a director, you cannot legally act as a director for your own CSP Company also during the disqualification period.

If you use third parties or your employees as Nominee Directors, you will need to change records of all companies where this person appears as a director after the prosecution. Besides, you may also need to bear the legal cost of the trial.

Ideally, your policy should take care of both the above aspects. However, ACRA in its guidelines discusses only identification, identity verification and client risk segmentation. The ACRA guidelines don’t discuss Nominee Director services, Risks, maintaining Onsight, and managing the risk of nominee Director services. It doesn’t provide any guidelines on how to manage risks arising as a result of providing Nominee Director services

But the 2nd part here is equally or more important.

So, what services do we offer for ACRA IPPC?

For New CSP Businesses

N1 : Core IPPC Creation + Training

This includes creating IPPC as per ACRA guidelines for your business and customising it according to your customer profile. This is the legal minimum you must do as per ACRA requirements. Training to your key staff (upto 3) at the end of the assignment will also be provided.

The typical Contents of the policy are ;

  • Introduction
  • Policy statement
  • Management oversight
  • Risk assessment
  • Customer due diligence (“CDD”)
  • Enhanced customer due diligence
  • Record keeping
  • On-going monitoring
  • Reporting a suspicious transaction
  • Audit and compliance
  • The hiring of new staff and training

And it also includes the following forms;

  • Customer due diligence form
  • Customer acceptance form

N2 : Core IPPC + Controls and Procedures for Nominee Director Segment+ Training

This service includes everything in Part N1 above, plus we will create procedures for your operations specific to the customer segment utilising Nominee Director services.

The additional things it will include are;

  • Additional procedures for mitigating risks of Nominee Director arrangements
  • Update on latest requirements of Law enforcement agencies in this matter
  • A Nominee Director Indemnity Agreement
  • A Power of Attorney
  • Agreement with Nominee Director
  • Training and advisory

N3 : CSP Business Consultancy

Are you planning to start your CSP business in Singapore? Or do you have one and want to grow your existing business? You can engage our expert for a business advisory.

We will cover all practical aspects of CSP business, like ;

  • How to get customers
  • Marketing strategies
  • Which software’s you can use
  • Which additional services you may need
  • Recruiting people
  • Inside news from the CSP industry
  • Almost anything and everything related to the Corporate Secretarial industry

For Existing CSP Businesses

E1 : Core IPPC Audit + Training

This includes an Audit of your IPPC and recommendations for improvement. Periodic review of the policy is the legal requirement you must do as per ACRA guidelines. Training to your key staff at the end of the assignment will also be provided.

The areas that will be reviewed are ;

  • Introduction
  • Policy statement
  • Management oversight
  • Risk assessment
  • Customer due diligence (“CDD”)
  • Enhanced customer due diligence
  • Record keeping
  • On-going monitoring
  • Reporting a suspicious transaction
  • Audit and compliance
  • The hiring of new staff and training

And it also includes the following forms;

  • Customer due diligence form
  • Customer acceptance form

E2 : Core IPPC Audit+ Controls and Procedures for Nominee Director Segment Review+ Training

This service includes everything in Part N1 above, plus we will review your operations specific to the customer segment utilising Nominee Director services.

The additional things it will include are;

  • Review of additional procedures for mitigating risks of Nominee Director arrangements
  • Update on latest requirements of Law enforcement agencies in this matter
  • Review of Nominee Director Indemnity Agreement
  • Review of Power of Attorney
  • Review of Agreement with Nominee Director
  • Training and advisory to key staff

E3 : Onboarding Audit of Existing Customer Files (Min 15)

Here, we will randomly select some of your customers and check their files for adherence to the policy. Is your staff following the policy?

However, note two things about it ;

  • This service is not offered as a standalone service. It must be combined with either E1 or E2 above.
  • The audit is of only the onboarding process and not of other common secretarial aspects

E4 : CSP Business Consultancy

Do you want to grow your existing business? You can engage our expert for a business advisory.

We will cover all practical aspects of CSP business, like;

  • How to get customers
  • Marketing strategies
  • Which software’s you can use
  • Which additional services you may need
  • Recruiting people
  • Inside news from the CSP industry
  • Almost anything and everything related to the Corporate Secretarial industry

Time Based Contract Work

L1 : Customised Time Based Contract

If you have compleix piece of work, then this package may be relevant to you. We notice sometimes large CSPs often has more complexities like;

  • Multiple categories of customers
  • Multiple companies in the group
  • Large customers
  • Need for more undefined work for whatsoever reason

So we cover all the above services in a simple time and material contract. But there will be a minimum number of days committed to it.

However, all the above services are only offered in connection with Singapore registered entities falling within ACRA regulations. It does not cover entities in other jurisdictions like BVI, Funds, Trusts, or other uncommon structures).

Corporate secretarial services is a large sector. Many players work in it. However, the profile of customers changes significantly within these players. For example, the profile of customers acquired by a large law firm by partnering with international law firms will differ greatly from the customers acquired by a small chartered accountant who partners with Chartered accountants internationally.

And the profile of customers acquired by CSP who solely advertises on Google will be entirely different from the above two.

Our Expert for ACRA Compliance Assignments

vaibhav joshi

Mr Vaibhav Joshi is an expert for ACRA related Compliance assignments

Education and Background

Vaibhav is a Chartered Accountant by education and has worked in the accounting, regulatory and paralegal fields for the last 20 years. He was a founder of Transcend Consulting Pte Ltd, a Corporate secretarial Firm in Singapore and later sold it to In.Corp Pte Ltd, the largest corporate secretarial group in Singapore with over 40 acquisitions done so far, including Rikvin, APB Consultants and so on.

Specific Background in ACRA Compliance

After the sale of Transcend Consulting Pte Ltd to In.Corp Group, Vaibhav headed the compliance operations of the In.Corp group for some time. He was instrumental in finalising compliance policies for the group overall and also for the subsidiary companies. He has also been part of closed group consultation on ACRA compliance matters with various government authorities.

Additionally, he has also been involved in discussions and talks at various CSPs in Singapore on Compliance and money laundering matters.

No Conflict of interest

While he primarily focuses today on compliance matters, he still has a small CSP practice by the name Epica Consulting Pte Ltd (epica.asia). This is mainly to cater to some of his past customers, which he inherited after the sale of his business. Here he serves only existing customers but doesn’t take any new customers. He doesn’t intend to grow the Epica CSP business in the future as the focus is more on Compliance Services. Since he does not look for new customers actively, there is no conflict of interest in engaging our services.

Extreme Confidentiality

We maintain extreme confidentiality about matters relating to our customers. No piece of data you share with us will go out of our premises. In fact, we don’t even disclose our current customers are to potential customers.

You need to make sure that the person who works on assignments for ACRA Compliance and Audit has the right background and knowledge. Some other companies that offer these services do template-based work. Their staff often has only education in compliance but no real-time experience in the CSP business.

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