DISCLAIMER: This post was last modified on 1 August 2024. Some information in this article may not be updated.

Money Laundering in Family Offices 

In a time of economic unrest and political risks, battling financial crimes has become a critical issue for institutions globally. Hence, it is crucial to have rigorous KYC/AML policies in growing industries such as family office. This is to protect economies and people from illicit activities caused by criminal networks. 

Family offices have grown significantly in the past decade, making the industry a target of money laundering schemes. In Singapore, six family offices have recently been involved in a money laundering case. They forfeited around $944 million worth of assets to the state while authorities seized $3 billion in cash and assets. The case further highlights the importance of compliance with AML and KYC laws, especially since Singapore is a leading family office hub in Asia.  

With the rise of criminals targeting family offices, industry players should pay attention to compliance solutions. In this article, we discuss the challenges and how to stay compliant with AML/KYC in the context of family offices. 

Remaining compliant: the challenges for family offices

Adhering to KYC/AML compliance will protect the people and economy, avoid regulatory risks and fortify family offices’ reputation in the industry. Still, there are challenges that family offices may face.  

Ownership 

In family offices, UBO verification may be a complex process, as the identities may often be hidden within complex corporate structures. On top of that, UBO definition varies per jurisdiction, making global compliance even more difficult.  

Another challenge would be the burdensome process of UBO information reporting, as it would require rigorous identification and verification, requiring extensive documentation for directors, shareholders, corporate accounts and records, as well as ongoing administrative responsibilities.  

Privacy 

From submitting identification documents to updating public registries to sanctions watch and ongoing monitoring, the regulatory requirements raise concerns over privacy for obliged entities such as family offices.  

It is a delicate responsibility for family offices to balance compliance and client data protection. Additionally, with the increasing scrutiny of financial watchdogs over private wealth, family offices managing family wealth must ensure robust KYC/AML programs are in place to handle sensitive data with utmost confidentiality, whilst remaining compliant.  

Wealth Transfer 

International compliance regulations have intensified, demanding even more transparency from the wealthy in reporting their assets and wealth. Such requirement extends to the heirs, who may also undergo SOW verification processes, review of financial statements and establish the legitimacy of their business transactions to ensure they are not involved in illicit financial activities.  

The complexity of compliance for family offices is further complicated for institutions or families with heirs in different countries, due to varying KYC/AML regulations per jurisdiction.   

How can family offices comply with KYC/AML rules 

Risk-Based Approach 

AML/KYC compliance should begin before proceeding with a business relationship. Family offices should place strategic AML screening programs and risk assessments for clients to identify if they are low, medium or high risk. Risk mitigation includes applying enhanced due diligence after verifying the SOW, PEPs and UBOs.   

Family offices can mitigate the risks of money laundering by conducting thorough screening to assess any potential red flags in the family’s transactions, wealth and business dealings.

Maximising Technology

Establishing AML programs that use technology for client identification and verification, data collection, risk assessment and transaction monitoring can help streamline KYC/AML compliance. Automation also guarantees data privacy and keeps reporting and financial transactions up to date. Maximising technology provides robust and efficient solutions to KYC/AML compliance for family offices. 

Collaboration 

Structuring AML/KYC programs that fit the needs of a family office requires collaboration with the family’s legal advisors, tax planners and wealth managers to align compliance efforts. KYC/AML compliance also requires obliged entities to stay educated and updated about KYC/AML rules and regulations. These practices foster a culture of compliance which can help streamline operations, increase profit and improve reputation within the industry. 

Compliance with Bolder Group 

Family offices have varying financial and lifestyle goals. Attaining these goals requires robust systems to ensure they are not affected by regulatory risks and compliance challenges.  
 
Bolder Group understands that compliance needs may vary on a case-by-case basis. We help several industries to remain compliant with strict KYC/AML policies including family offices.  
 
Our AML and KYC screening programs provide tailor-fit solutions for all kinds of family offices. Bolder’s team of experts across major jurisdictions allows us to create sustainable solutions aligned with your compliance needs. Contact our team to learn more about our solutions. 

Disclaimer: Bolder Group does not provide financial, tax or legal advice and the information contained herein is meant for general information purposes only. We strongly recommend that before acting on any of the information contained herein, readers should consult with their professional advisers. The Bolder Group accepts no liability for any errors or omissions in the information, or the consequences resulting from any action taken by a reader based on the information provided herein.

Bolder Group refers to the global network of independent subsidiaries of Bolder Group Holding BV. Bolder Group Holding BV provides no client services. Such services are provided solely by the independent companies within the Bolder Group which are each legally distinct and separate entities and have no authority (actual, apparent, implied or otherwise) to obligate or bind Bolder Group Holding BV in any manner whatsoever. The operations of the Bolder Group are conducted independently and have no affiliation with third party financial, tax or legal advisory firms or corporations.