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The Purpose of KYC and CDD Requirements in Singapore Company Registration

The Purpose of KYC and CDD Requirements in Singapore Company Registration

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What is the KYC in Singapore Company Incorporation

Business owners who are processing the registration of their companies in Singapore have probably heard about KYC or CDD. Accounting and Corporate Regulatory Authority (ACRA)—Singapore’s government organization that oversees business formation, registration, and other related aspects— introduced KYC and CDD concepts in formal manner in 2015.

Prior to the introduction of these KYC and CDD rules in 2015, there were no clear, standard guidelines when it comes to company registration in Singapore. Many corporate secretarial providers (CSP) used to implement their own rules and regulations during such process, which were inadequate. Hence, KYC and CDD were implemented to standardize policies affecting company registration in Singapore.

The Purpose of KYC and CDD in Singapore Company Registration: What Are KYC and CDD?

KYC stands for the Know Your Client procedure, while CDD stands for the Customer Due Diligence procedure. These two terms are used interchangeably and actually refers to the same thing. These requirements have five principles or steps.

Identify the Person

As a business owner trying to register a company in Singapore, you will be asked to provide personal information (name, identity number like a national registration number or passport number, and address). These personal information will be identified first by asking you questions or by giving you a form. You must then fill out the form by providing necessary details about you, your business partners involved in this company and about your proposed company.

There are actually more personal information about you that must be identified, including your date of birth, country of nationality, and current address, among others.


Singapore company KYC CDD - Verify identity

Verify the Person’s Identity

Once your personal information have been identified, verifying your identity will come next. Verification is performed through government-issued documents like a passport or a Singapore NRIC. If required, copies of proof of address or a recent mobile bill will be asked from you. All these records we are required to keep in our system.


Singapore company KYC CDD - Inquires

Inquire

Through the KYC or CDD form, you can explain your goals of setting up your proposed company, your proposed company’s services and/or products, your proposed company’s capital investment, and your proposed company’s expected turnover in the first or second year.


Singapore company KYC CDD - Perform Background Checks

Perform Background Checks

Then, your personal and professional background will be investigated to confirm if there are any negative reports about you. Typically this is done using a background check software like WorldCheck oe DJI- Ingenique.


Singapore company KYC CDD - Decide

Decide

Based on all your provided information, your chosen CSP has to decide whether to register your company or not or whether to ask you for more information. Different CSPs follow their own policies when deciding to serve a specific customer or not.

The Purpose of KYC and CDD in Singapore Company Registration: Required Documents to Identify a Business Owner and Verify His or Her Identity

Singapore company KYC CDD - Required documents

The KYC and CDD rules apply to both Singapore residents and foreigners who plan to register their companies in Singapore. To proceed with the company registration process, business owners are required to submit certain documents for identity identification and verification purposes.

For Singapore citizens and permanent residents, the NRIC would be enough as it already displays all important information about a person.

For Employment Pass (EP) or work permit holders, an EP or work permit copy and proof of address in the form of a recent utility or mobile bill will be required.

For foreigners, a passport copy, proof of address issued within the last three months, and a second identity document like a driving license or the national registration card must be presented.

In addition, business owners of all types must fill out the KYC or CDD form.

The Purpose of KYC in Singapore Company Registration: The Three Elements of the KYC or CDD Form

Singapore company KYC CDD - details of proposed company

The Details About the Proposed Company

You will be asked to discuss necessary details about your proposed company. These details must include your proposed company’s activities, paid-up capital, as well as expected annual revenue, turnover, and number of transactions for the first three years.


Singapore company KYC CDD - Detail of proposed and shareholders company

The Details About the Proposed Company’s Director(s) and Shareholder(s)

This element refers to identity document information, which must include information about your proposed company’s director(s) and shareholder(s). These information are the date and place of birth, nationality, contact numbers, email address, and so on.


Singapore company KYC CDD - Politically exposed person

A Declaration About a Politically Exposed Person

This declaration states whether a business owner has a previous or current political exposure, or if he or she is a close associate of any local or international political figures.

Depending on their policies and practices, CSPs may ask further details about your political exposure.

The Purpose of KYC in Singapore Company Registration: What Happens After Submitting the Documents?

Most CSPs will perform background checks about you. They will typically search you on Google to see if there are any negative information or news about you. Other CSPs will use a background check software for this process. Two of the most popular background check software are Dow Jones RiskCenter and World-Check.

Singapore company KYC CDD - Check the background

How Does a Background Check Work?

Most CSPs will type your name on the background check software. If you have any sanctions, for example, a sanction leased by the UN, US, or just a local one, then you will be immediately flagged.


Singapore company KYC CDD - Possible outcome

The Three Possible Outcomes

There are three possible outcomes after you submit the required documents for company registration in Singapore.

  • Everything will turn out fine and you can proceed with the company registration process.
  • You may be asked by your CSP to provide additional information.
  • Your CSP may deem you as not suitable for running a company in Singapore and reject their services to you.

Factors Being Considered When Registering a Company in Singapore

Singapore company KYC CDD - Factors
  • The home country of the business owner
    • Some countries are included in the Financial Action Task Force (FATF) grey list. FATF is the leading international agency that systematizes international criteria for protection against money laundering and terrorist funding. If your country belongs to the FATF grey list, then you may be asked to present more information about your proposed company. These information may be about your company’s purpose and details, just to name a few.
  • Provided details in the KYC or CDD form
  • Scanned copies of passport and proof of address
    • If the provided details are incomplete or if you have tried to hide some information, then you may find it hard to register your company in Singapore.
  • Negative news about you based on Google search or on the background check software
  • Involvement in a high-risk industry
    • Each CSP has its own definition of what constitutes a high-risk industry. One example of a high-risk industry – that deals with precious stones like diamonds and precious metals like silver and gold.
  • Unusual business models
    • Business models that are deemed as unusual are those that do not manifest commercial sense. If your company has such a business models then the CSP will definitely like to know more about the model.

The Purpose of KYC in Singapore Company Registration: Capping It Off

Singapore company KYC CDD - Capping

The KYC and CDD requirements are, in fact, quite similar to that of the bank account application. Based on this comparison, the KYC or CDD procedures are logical enough to be required from business owners processing the registration of their companies in Singapore.

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