Regulatory Compliance for Fund Management Companies

Fund Management Companies (“FMCs”) in Singapore are regulated by the Monetary Authority of Singapore (“MAS”) and governed by the Securities and Futures Act 2001. To conduct regulated activities, FMCs are required to obtain a license from the MAS.

This includes Capital Markets Services (CMS) License as a Licensed Fund Management Company (LFMC) or as a Venture Capital Fund Manager (“VCFM”) regime.

An ongoing challenge of compliance

The financial services sector is facing increased economic pressure, leading to a greater demand for stringent compliance and robust risk management. The result is a tighter control and a larger appetite for transparency – globally and domestically. Many FMCs have had to bear higher compliance costs while managing the need for compliance knowledge resources. Keeping abreast with the dynamic compliance landscape can prove to be a challenging task.

As a global financial hub experiencing increasing volumes of transactions, Singapore’s regulators continue to drive vigilance against money laundering and terrorist financing activities. Any breach in compliance may result in regulatory fines, adverse reputation risk, growth, and sustainability of these institutions and the industry as a whole.

In 2020 alone, MAS imposed significant penalties on entities that failed to comply with AML/CFT regulations. An investor was fined S$200,000 for not disclosing shareholding interests, while a financial institution received a S$400,000 penalty for inadequate oversight over its AML/CFT framework.

More recently, MAS issued composition penalties totalling S$27.45 million to nine financial institutions, including Citibank, UBS, Julius Baer, Credit Suisse, UOB, UOB Kay Hian, Blue Ocean Invest, LGT Bank, and Trident Trust, in connection with Singapore’s record-breaking S$3 billion (≈US$2.2 billion) money laundering case uncovered in August 2023. The case involved 10 foreign nationals who laundered illicit assets through bank accounts, real estate, luxury goods, crypto, and other channels.

MAS identified serious lapses such as failure to investigate flagged suspicious transactions, poor customer risk assessments, and deficiencies in source-of-wealth verification. The enforcement action marks the conclusion of MAS's regulatory response to the case and underscores the urgent need for stronger AML/CFT implementation.

These lapses do not only lead to fines and penalties. Reputational risks, such as loss in investor confidence will also occur and those will be harder to recover from. Such occurrences are preventable by building a risk-aware culture, a responsive first and second line of defence which are control-compliant. FMCs can continue and grow their status as part of a premier financial centre.

Forvis Mazars regulatory compliance framework

Building a resilient compliance framework

A resilient framework is fundamentally built on three key pillars: clear policies and procedures, a robust AML/CFT program and prompt regulatory reporting. Our regulatory compliance consulting team can help you establish this foundation.

1. Developing your core policies and procedures

Compliance policy and procedure documents are the foundation of any compliance programme. Establishing and drafting these documents is a crucial step to any financial institution including FMCs. It enables the organisation to effectively set up and design the compliance framework, therefore defining the controls conducted by the compliance function and driving consistency across your processes.

Our team has the relevant expertise to develop well-designed and comprehensive policies to protect your business from increasingly rigorous legal and regulatory constraints, while reinforcing a culture of compliance and ongoing monitoring.

We can help you develop or improve policies and procedures for the following:

• Compliance manuals: Regulatory requirements, assignment of responsibilities, remuneration policy, monitoring policy, conflict of interest policy, account dealing policy, investment suitability policy and more.
• Standard Operating Procedures ("SOP") facilitate FMCs to embed sound internal controls in daily operational tasks, which improves overall compliance environment and enhance level of scrutiny during day-to-day operation.
• Compliance monitoring plans including compliance organisation, ethics, integrity of the customer relationship and financial security.
• Operational / Business Manuals: Operational procedures related to your day-to-day business conduct such as on-boarding procedure, client’s account management procedure, account closing procedure, transactions monitoring procedure and more.

2. Mastering your AML/CFT framework

A reputation for integrity is one of the most valuable assets of a financial organisation. The integrity of the fund management company depends primarily on the perception that it functions within a framework of high legal, professional and ethical standards. If funds from criminal activities can be easily processed through a particular institution, this will affect its reputation and in some cases, result in prosecution and the loss of licence to undertake financial business. Our goal is to assist you in building and improving an efficient financial security framework while preserving your reputation for integrity.

Our dedicated team can help you develop or improve your AML/CFT framework:

• AML/CFT policies and procedures: AML risk assessment methodology, customer due diligence procedure, on-going monitoring of the business relationship, asset freezing and sanctions policy and more.
• AML/CFT Programme Management: We assist with the ongoing maintenance and enhancement of your Anti-Money Laundering and Countering the Financing of Terrorism framework. This includes reviewing Customer Due Diligence (CDD) procedures, transaction monitoring alerts and filing Suspicious Transaction Reports (STRs) where necessary.
• Training: Our experts can design a tailor-made AML training highlighting your relevant red flags.

3. Ensure Accurate Regulatory Reporting

Forvis Mazars can assist you in the ongoing review of the quarterly forms (Form 1 and Form 2) to ensure that the basis of preparation and computation is consistent with the relevant MAS Notice.

The strategic advantage of outsourced services 

We help our clients to objectively analyse whether they are meeting specified guidelines, industry requirements and regulations to mitigate ongoing risk. Our dedicated regulatory compliance services team can assist you in the following:

Gaining insight through comprehensive periodic internal audits 

Our team provides specialised assistance in optimising or externalising your Internal Audit function. Whether you are considering outsourcing the entire function, a co-sourcing arrangement or require assistance for ad-hoc assignments, our seasoned experts offer a tailored and scalable approach. Our comprehensive internal audit engagements include:

• Holistic Enterprise-Wide Risk Assessment (EWRA) Integration: We conduct a thorough "stress-test" of your internal controls across financial, operational, compliance, and IT domains. This includes evaluating the robustness of your EWRA methodology and its alignment with MAS expectations, providing actionable recommendations to strengthen your risk posture.
• Assessment of your internal control framework: We perform a meticulous assessment of the adequacy, robustness, and operational effectiveness of your existing internal control framework. This directly contributes to superior compliance risk mitigation and operational resilience by improving your controls for preventing, detecting, and correcting non-compliance with MAS regulations and industry best practices.
•  IT General Controls (ITGC) and application control reviews: We evaluate the effectiveness of ITGCs that support your business operations and financial reporting, including access controls, change management, and disaster recovery. We also assess the integrity and reliability of key application controls within your systems to ensure data accuracy and security.
• Targeted thematic reviews: Our experts conduct focused reviews on specific, high-risk areas identified by your firm or the regulator. This could include an in-depth review of your client onboarding process, trade surveillance systems or specific product lines to ensure adherence to a particular MAS Notice or guideline.
• Operational and process efficiency audits: Beyond compliance, we assess your key business processes to identify inefficiencies, control weaknesses and opportunities for automation and process enhancement. This helps improve your overall operational effectiveness and resource management.
• Regulatory remediation and follow-up: Following a regulatory inspection or internal audit, we can assist in developing and implementing a robust remediation plan. We also provide independent follow-up reviews to verify that all control gaps have been effectively addressed and embedded within your operations.

Compliance advisory, monitoring and support

Our dedicated team offers a quality and cost-effective alternative to building an in-house compliance function. We provide comprehensive, ongoing compliance support to help you objectively analyse and ensure your business meets specified guidelines, industry requirements, and MAS regulations to mitigate risk effectively. 

Regulatory change management: We proactively monitor the evolving regulatory landscape, including new notices, circulars and guidelines from the MAS. Our team provides timely updates and analysis on how these changes impact your firm's obligations, helping you implement necessary adjustments before they become a compliance issue.

• Periodic compliance health checks: We conduct regular, targeted reviews of your firm’s operations to assess adherence to your internal policies and regulatory requirements. These periodic health checks identify potential control gaps and process weaknesses, allowing for swift corrective action.
• Compliance policy and procedures review: We regularly review and update your firm’s compliance manuals and Standard Operating Procedures (SOPs) to ensure they remain current and aligned with the latest regulatory standards and your business practices.
• Regulatory reporting assistance: Our team provides support in preparing and submitting accurate and timely regulatory reports to the MAS such as Forms 1 and 2, ensuring consistency in computation and basis of preparation with relevant notices.
• Compliance training and awareness: We help foster a strong compliance culture by developing and delivering customised training sessions for your staff on key regulatory topics, red flags and your firm's specific compliance policies. This ensures your team is well-equipped to manage risks in their daily activities.

Proactive risk management & regulatory remediation

We offer comprehensive services to help you stay ahead of potential disruptions and effectively address compliance deficiencies. Our approach is twofold: we help you proactively manage risks and provide expert support for remediation efforts.

• Proactive risk assessment: We assist you in identifying and assessing key risks that could disrupt your business operations. Our experts help you develop and implement a robust framework to address ongoing changes in the regulatory and business environment, ensuring your firm is always prepared.
•  Regulatory inspection readiness: We prepare your firm for regulatory inspections by conducting mock audits and readiness assessments. This includes reviewing documentation, control effectiveness and staff preparedness to ensure you can confidently demonstrate compliance to the regulator.
•  Deficiency remediation: Should compliance gaps be identified during a regulatory inspection or internal audit, our experts provide hands-on support to address and remediate them. We work with you to develop a relevant, actionable plan and oversee its effective implementation to ensure all deficiencies are resolved to regulatory satisfaction.
•  Post-remediation review: After remediation efforts are complete, we conduct an independent follow-up review to verify that all control weaknesses have been permanently fixed and are operating effectively. This provides an additional layer of assurance to both your firm and the regulator.
•  Crisis management support: In the event of a significant compliance breach or regulatory action, our team provides strategic advice and support to manage the crisis. This includes helping you navigate regulatory communications, manage reputational risk and implement immediate corrective actions.

Leveraging global expertise for cross-border compliance

Forvis Mazars is a global leader in audit & assurance, tax, advisory and consulting services. We put a strong focus on developing our sectoral expertise through our international sector communities. These bring together our experts from all corners of the globe with a shared deep knowledge of specific sectors.

Do reach out to us for a confidential discussion and a complimentary high-level review of your Compliance Framework and AML/CFT controls to provide you with insights on potential gaps.

Do you have any questions? 

Source:

1. Investor Fined $200,000 by MAS in First Civil Penalty for not disclosing shareholding interest, The Straits Times. 

2. MAS Imposes Composition Penalty of $400,000 on TMF Trustees Singapore Limited for AML/CFT Failures, The Monetary Authority of Singapore.

3. $3b money laundering case: 9 financial institutions handed $27.45m in MAS penalties over breaches, The Straits Times.