Second Reading Speech by Senior Minister of State for Law, Indranee Rajah SC, on the Trustees (Amendment) Bill

10 Mar 2017 Posted in Parliamentary speeches and responses

Madam Speaker,

1. I beg to move, ‘That the Bill be now read a Second time’.

1. Introduction

2. Singapore is one of the leading financial centres in the world. We have earned a reputation for being a clean and trusted international financial centre.

3. We have anchored our financial sector on three pillars:
   1. First, building a strong legal and regulatory framework.
   2. Second, implementing a robust regime of supervision to monitor compliance by all regulated sectors.
   3. Third, by staying committed to cross-border cooperation in the global combat against trans-national financial crime.

4. We will continue to ensure that our legal and regulatory framework is responsive to the evolving threat of cross-border financial crime, such as money laundering, terrorism financing and tax evasion.

5. Financial crime has become increasingly sophisticated. Company and trust structures are sometimes used to facilitate movement of funds for money-laundering, terrorism financing and tax evasion purposes.

6. There has been increased efforts globally to enhance the transparency of trusts and company structures. This will facilitate the more efficient tracing of assets, which in turn will assist the investigation and prosecution of financial crime.

7. As a responsible member of the international community, Singapore has done and will continue to do its part to combat financial crime.

8. In this regard, Singapore is a member of the Financial Action Task Force (“FATF”), an inter-governmental body which sets standards and promotes implementation of anti-money laundering and terrorism financing measures.

9. Singapore is also a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes (or “GF”), a multi-lateral body which promotes and implements international standards on tax transparency.

10. As a member of FATF and GF, Singapore has regard to the standards promulgated by these international bodies, and participates in the peer assessment exercises conducted by these bodies on its members.

11. In September 2016, the National Steering Committee for Combatting Money Laundering and Terrorism Financing announced that Singapore will follow-up on certain areas of improvement recommended by the FATF assessors. This included:
    1. enhancing the transparency on beneficial ownership of companies, limited liability partnerships and trusts; and
    2. ensuring that such information is more readily accessible to law enforcement agencies.

12. To this end, the Bill introduces a framework for the Minister for Law to prescribe the necessary regulations, so as to give effect to the FATF recommendations and GF requirements concerning beneficial ownership and identity information and/or the keeping of accounting records in relation to trusts.

13. Similar amendments were introduced in respect of the companies and limited liability partnerships by way of the Companies (Amendment) Bill and the Limited Liability Partnerships (Amendment) Bill which were passed in this House earlier today.

2. Existing legal regime

14. Before I take the House through the main features of the Bill, let me first outline the existing legal regime concerning trusts and trustees.
    1. Trusts are essentially relationships or vehicles in which property is vested in a person known as the trustee.
    2. The trustee is obliged to hold and manage such property for the benefit of other persons known as the beneficiaries.
    3. Trusts can be created by the act of an individual declaring his intention to create a trust. For example, an individual may create a trust and appoint a trustee to manage the assets of his estate. Such trusts are broadly termed as “express trusts”.
    4. Trusts can also arise by operation of law. These include resulting trusts and constructive trusts, which are deemed at law to be constituted when certain legal conditions are fulfilled.

15. Trustees are obliged to discharge certain duties. These duties may be prescribed by common law, i.e., law developed based on decisions by judges in individual cases.

16. These include the duties:
    1. to be familiar with the terms of the trust;
    2. to be familiar with the state of the trust property and safeguard the trust assets; and
    3. to furnish the accounts of the trust for inspection on request.

17. Trustees’ duties may also be prescribed by statute or any other regulation.
    1. For example, section 3A of the Trustees Act imposes a statutory duty on trustees to exercise reasonable care and skill in the discharge of their powers of investment and any duty in relation to the investment of trust funds.

3. Bill’s features

18. The Bill introduces a new Part VII to the Trustees Act, which will apply to an express trust that is:
    1. governed by Singapore law;
    2. administered in Singapore; or
    3. in respect of which any of the trustees is resident in Singapore.

19. In respect of the express trusts covered by the Bill, the Bill empowers the Minister to, amongst others, impose the following duties on the trustees:
    1. First, the Minister may require the trustee to obtain, maintain, and keep up-to-date information relating to and records of the trust. These include:
       1. the identity and particulars of the parties relevant to the trust, which include the settlors, trustees, beneficiaries, and those who effectively control these parties;
       2. the identity and particulars of an agent of, or a service provider to, the trust; and
       3. accounting records relating to the trusts and information on the assets of the trust.
    2. Second, in prescribed transactions, the Minister may require the trustee to disclose, to the other party in the transaction, that the trustee is acting for the trust.

20. This ensures that accurate information of a trust is readily available to the relevant law enforcement agencies when they require it through the exercise of their investigative powers.

21. Some of these duties already exist under the common law
    1. For example, in discharging the obligation to understand the terms of the trust, a trustee must necessarily obtain information on the identities of the beneficiaries or class of beneficiaries of a trust.
    2. In addition, a trustee is also obliged to keep and furnish accounts of the trust on request, and to be familiar with and preserve trust property.

22. The proposed amendments will reinforce the pre-existing duties of trustees under common law. They will also give more clarity to trustees on the expected standards that they should meet.

23. From a law enforcement perspective, the proposed amendments ensure that information relevant to a trust is ready and available. This enables authorities to more quickly obtain information of a trust that is under investigation.

24. Such greater transparency minimises the abuse of trust structures to conceal assets for money laundering, terrorism financing and tax evasion purposes.

25. To discourage the breach of regulations, the proposed amendments empower the Minister to prescribe breaches of the regulations as offences punishable by way of a fine.

26. Having regard to the comparative severity of the existing sanctions under the Trustees Act in respect of other offences, the maximum fine for such breaches is $1,000, which is a proportionate sanction for the purposes of Part VII.

27. Finally, the Bill empowers the Minister to exempt certain express trusts or classes of express trusts from the proposed Part VII of the Trustees Act. An exemption may be granted having regard to various factors, such as:
    1. whether the trustee is already subject to pre-existing laws which prescribe similar or analogous standards as those found under Part VII; or
    2. whether the activities of a trust are already subject to regulatory oversight or supervision.
       1. For example, trust companies are already presently subject to the regulatory oversight by the Monetary Authority of Singapore (“MAS”).
       2. Additionally, under the regulatory notices issued by MAS, regulated trust companies are already required, when acting as trustees, to discharge duties which are similar to those envisaged under Part VII. Breach of such regulatory notices may render trust companies liable for an offence punishable by way of a fine not exceeding $1 million.

4. Conclusion

28. To sum up, the amendments contemplated are part of a concerted effort to ensure that legal entities such as companies and limited liability partnerships, as well as legal arrangements such as trusts, do not readily lend themselves to financial crime.

29. We will continue to monitor domestic and international developments in combatting trans-national financial crime, to ensure that any vulnerabilities to our legal and regulatory framework are accurately identified and swiftly addressed.

30. Madam Speaker, I beg to move.

Last updated on 10 Mar 2017