Singapore revokes tax incentives for two family offices with links to Cambodia's Prince Group

SINGAPORE: Two single family offices (SFOs) that received tax incentives in Singapore have been identified as having links to Cambodia’s Prince Holding Group and its founder Chen Zhi, National Development Minister Chee Hong Tat disclosed in parliament on Wednesday (Nov 5).

The Monetary Authority of Singapore (MAS) has revoked the incentives for both entities, said Mr Chee, who is also deputy chairman of MAS. He declined to provide further details, citing ongoing investigations into Chen and his associates.

Chen, 38, was recently charged in the United States for allegedly orchestrating a massive cryptocurrency scam that involved forced labour camps in Cambodia. Three Singaporeans and 17 Singapore-registered entities have been sanctioned for their alleged connections to the criminal enterprise.

A Bloomberg report said Chen had set up a family office, DW Capital Holdings, in Singapore in 2018, which claimed to manage more than S$60 million (US$45.9 million) of assets.

Mr Chee said that Singapore police investigations into Chen and his associates predated his US indictment. On Oct 30, enforcement operations resulted in the seizure of six properties and various financial assets worth over S$150 million, with prohibition of disposal orders issued against them.

The minister was responding to parliamentary questions from MP Kenneth Tiong (WP-Aljunied) on whether individuals sanctioned by the US for alleged transnational criminal activities or convicted in Singapore’s largest money laundering case had operated tax-exempt family offices locally.

Mr Tiong also asked about due diligence checks done by MAS before granting tax incentives, and what systemic reforms have been implemented to prevent criminal networks from exploiting Singapore's family office regime.

In his response to Mr Tiong and questions filed by other MPs, Mr Chee said that 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 also elaborated on existing measures in place, and reiterated the need for Singapore to “remain open to bona fide family office and genuine investors” to keep growing its financial services industry and create good jobs.

For example, as part of the tax incentive application process, individuals and entities are screened against databases to check that there are no reports of their involvement in illegal activities.

The SFO is also required to open and maintain an account with a MAS-licensed bank and be subject to due diligence and ongoing monitoring checks.

Based on data over the past three years, about 3 per cent out of 1,300 applications for tax incentive schemes were rejected, Mr Chee said. Some applicants also withdrew after being asked questions and requirements clarified at the pre-application stage.

Mr Chee stressed the need for a “sensible and calibrated approach” and “refrain from a knee-jerk overreaction when cases happen from time to time”.

“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 a high volume of daily transactions,” the minister said, adding that combating financial crime requires a global effort as illicit fund flows are often cross-border in nature.

Already, many industry stakeholders consider Singapore to have more stringent due diligence standards for high net worth clients, Mr Chee 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 said.

“This is not the outcome we want for Singapore.”

Using a Chinese proverb, he added: "When we open the windows, some flies may also enter. 

"The solution is not to shut our windows and block out sunlight and fresh air. What matters is that we act swiftly to deal with the flies that enter, while also letting in sunlight and fresh air.”

“STUPID QUESTION”

The parliamentary discussion took a contentious turn when Mr Tiong rose to ask supplementary questions, including whether the MAS conducted any mid-term reviews of DW Capital Holdings between 2018 and the US action this year.

He also asked if the government would mandate enhanced due diligence on existing client relationships across all regulated financial sectors.

Mr Chee countered by asking whether the Workers’ Party’s (WP) position was to adopt a zero-risk approach, or if Mr Tiong agreed that Singapore should maintain a risk-proportionate approach with high standards.

Mr Tiong responded by criticising what he described as a “pattern of ministers and political officeholders asking ... rhetorical questions, which have no meaning”. 

When Speaker of Parliament Seah Kian Peng interrupted to ask the opposition MP to respond to Mr Chee, Mr Tiong replied: “The answer is no, and I don’t think it is the minister’s point of view that you should in fact have a zero-risk approach because it’s impossible. So he’s asking a stupid question.”

Mr Chee asked Mr Tiong to withdraw the comment and apologise, saying it was “not quite appropriate for Mr Tiong to use the word stupid”.

While Mr Tiong withdrew his comment, he maintained that the question was "not meaningful", prompting Mr Chee to say that he was “disappointed” by the WP MP's conduct.

Mr Seah also expressed his disappointment with the exchange and reminded members of the House that it was “out of order to use offensive and insulting language about Members of Parliament”.

“I consider what you had said just now to be quite insulting and is beneath the dignity of this House to use such language,” said Mr Seah. 

“We want to maintain dignity and decorum in this house, and the use of such language about a fellow Member of Parliament is not par for the course,” he added.

Mr Tiong subsequently apologised to Mr Chee, who accepted the apology and said: “I hope that we can, in future, have such discussions in a civilised and polite manner (and) respectful manner.”