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The global queue to set up a family office in Singapore has stretched to as long as 18 months, with a backlog of wealthy investors encountering stricter new regulations in the Asian financial hub.
Family offices, demand for which boomed during the pandemic and which have come to symbolise Singapore’s ambitions as an investment destination, have come under additional scrutiny in the wake of the city-state’s biggest money laundering probe.
The number of Singapore-registered family offices, which manage tens of billions of dollars of private wealth, has leapt from just 50 in 2018 to 1,100 at the end of 2022, according to the Monetary Authority of Singapore.
But lawyers and advisers involved in setting up family offices said the pace of new registrations has slowed, with demand now falling as processing times stretch from less than six months to in some cases as long as 18 months.
The extended wait time, the people said, was the result of a backlog of existing applications and greater scrutiny under new, stricter criteria from Singaporean authorities. The long wait time is deterring some potential clients.
“Family offices remain popular, but we are seeing a slowdown,” said Kia Meng Loh, co-head of private wealth and family office practices at Dentons Rodyk. He said the number of inquiries from wealthy families and individuals had declined from two to three a week to “two to three per month”.
The delays varied, however, with some clients who applied last year still waiting for approval, while others who applied in January this year receiving the green light as soon as August, he added.
That disparity points to growing regulatory concern that the vehicles could be used by criminal enterprises, lawyers in the city-state said. Private banking clients have also faced longer wait times to open accounts due to tighter due diligence, the Financial Times previously reported.
Singapore was rocked by the revelation in August of a S$2.8bn (US$2bn) money-laundering scandal, as police seized assets including luxury properties, cars, designer handbags, gold bars, cash and cryptocurrency in raids across the city-state. Ten individuals, all of whom originated in mainland China, have been arrested and charged.
Investigators are examining whether part of those funds found their way into family offices and whether they benefited from tax incentives for the vehicles.
“If you are from certain jurisdictions, I was told recently to expect a waiting period of 18 months. But it can be less than that,” said one Singapore-based lawyer who asked not to be named. “I think everyone now is being more cautious after the money laundering investigation.”
Singapore’s government has encouraged the opening of family offices as it seeks a competitive edge over Hong Kong, seeking wealthy investors from around the world. The city-state’s financial regulator calculated that family offices held about S$90bn in assets at the end of 2021.
“The family office regime is very important for Singapore as a finance and asset management hub, and the government has put a lot of work into expanding and finessing it,” said Sudip Baniya, business development director for private wealth at IQ-EQ.
Baniya confirmed the slowdown in family office registrations this year, mostly from the greater China region, but said it was “not a drastic decline”. While some cases had been waiting for 18 months, more often it was closer to 12 months, depending on the complexity of the application, he said.
The MAS began to impose additional restrictions on family offices in July, including setting a minimum fund size of S$20mn. At least S$200,000 must be invested annually in local businesses such as start-ups or the stock market.
It also required family offices to hire two investment professionals, at least one of whom comes from outside the client family, and has proposed additional measures such as hiring an MAS-regulated financial institution to check for money laundering.
“MAS continues to receive a high volume of applications for tax incentives by Single Family Offices (SFOs). They are generally processed in 9-12 months upon submission of complete information and supporting documents that are in good order but may take longer depending on the complexity and merits of each case,” MAS said.
“The screening process by MAS has also lengthened in view of the more stringent criteria for tax incentives announced in 2022 and 2023 and greater scrutiny following the money laundering arrests in August 2023,” it added.
Ryan Lin, a director at Bayfront Law, added he had seen a 20 to 30 per cent slowdown in deal flow from clients. “Most [family offices] are putting cash in money market funds and fixed deposits to wait for opportunities,” he said.
Loh of Dentons Rodyk said under the new criteria, more family offices were pursuing deals in areas such as private equity and there might be a “natural culling” of the number of family offices in the coming months.
“Some wealthy individuals may decide putting money in a high-interest private bank account is better than spending $200,000 each year,” he said.