Variable Capital Companies (VCCs) have become Singapore’s preferred fund structure since their announcement in 2018, offering previously unparalleled flexibility for asset managers seeking efficient regional operations. Of course, with such considerable investments at play, this innovation brings strict anti-money laundering (AML) and countering the financing of terrorism (CTF) obligations that can expose even the most experienced fund managers.
In some cases, penalties reach S$1 million per offence under the Financial Services and Markets Act 2022. Recent regulatory developments make this compliance knowledge more pressing than ever. The Monetary Authority of Singapore (MAS) revised its Guidelines to Notice VCC-N01 on 30 June 2025, updating supervisory expectations following extensive industry surveys that revealed significant compliance gaps across the VCC sector.
These changes affect every VCC operating in Singapore, from small private equity funds to large institutional investment vehicles. We view the current stakes as high, as VCC compliance differs quite substantially from traditional fund structures. Unlike other investment vehicles, VCCs must appoint Eligible Financial Institutions (EFIs) to conduct AML/CFT checks, treat their own members as customers, and maintain specific beneficial ownership registers.
Fund managers who misunderstand these requirements face operational disruptions, regulatory penalties, and potential loss of their Singapore licences.
This article provides fund managers, compliance officers, and board directors with actionable guidance on current VCC AML/CFT requirements. You will learn which specific obligations apply to your structure, how recent regulatory updates affect your operations, and practical steps to build compliant frameworks that protect your fund and investors.
Understanding Singapore VCCs and AML/CFT Context
VCCs allow multiple collective investment schemes to operate under a single umbrella entity while maintaining comprehensive ring-fencing between sub-funds. This flexibility has attracted private equity funds, hedge funds, and real estate investment vehicles seeking streamlined operations across multiple markets. In total, approximately 1,200 VCCs have been created in Singapore since the vehicle’s launch in 2020.
The structure creates unique regulatory considerations around investor identification and money flow tracking. Since VCC members are also treated as customers under Notice VCC-N01, fund managers face extra obligations that don’t exist in traditional corporate structures. This member-customer relationship means every subscription, redemption, and distribution requires AML/CFT scrutiny.
Singapore’s position as a highly transparent and regulated regional financial hub intensifies these compliance requirements. The jurisdiction’s international reputation depends on maintaining clean financial flows, making regulatory authorities vigilant about fund structures that could facilitate illicit activity. Our experience shows that international investors expect Singapore-domiciled funds to demonstrate gold-standard compliance practices.
Getting this wrong carries consequences beyond immediate penalties. Non-compliant VCCs risk losing their operational licences, while fund managers may face personal liability and reputational damage that affects future fundraising activities.
Current Regulatory Framework – Recent Updates
MAS released updated Guidelines to Notice VCC-N01 on 30 June 2025, marking the first major revision since December 2020. Fund managers now work with fresh supervisory expectations shaped by the regulatory experience of five years of real-world VCC operations.
Notice VCC-N01 sets the binding legal framework. Every VCC must comply with its requirements – regardless of size or design. Creative structural arrangements or offshore incorporation will no longer help you avoid these obligations.
The story behind these updates matters. MAS ran industry-wide surveys and engaged directly with EFIs throughout 2022, which found some alarming issues related to non-compliance. For example, evidence was found that VCCs were skipping EFI appointments despite legal mandates, while others appointed EFIs but failed to oversee their work properly.
The June 2025 revision specifically clarifies board responsibilities for EFI oversight, strengthens requirements for beneficial ownership registers, and provides detailed guidance on enhanced due diligence procedures for politically exposed persons. Most importantly, it emphasises that VCC boards cannot delegate ultimate responsibility for compliance, even when EFIs handle day-to-day operations. As mentioned earlier, penalties for non-compliance are severe, with penalties of up to S$1 million per offence.
Core MAS AML/CFT Guidelines for VCCs in Singapore
VCC-Specific Requirements
VCCs operate under three unique compliance obligations that set them apart from other fund structures. First, every VCC must appoint an EFI regulated by MAS to conduct AML/CFT checks and measures. This is in no way optional – VCCs cannot perform these functions internally, regardless of their size or internal compliance capabilities.
Second, VCC members are classified as customers. This creates a direct regulatory relationship between the VCC and its investors that doesn’t exist in traditional corporate structures. Every subscription, redemption, and ongoing investment requires full customer due diligence procedures.
Third, VCCs must maintain detailed registers of their beneficial owners and nominee directors. These registers go beyond standard corporate records, requiring identification of individuals who ultimately control the VCC or act under another person’s direction.
Standard AML/CFT Obligations
Beyond these unique requirements, VCCs follow the same AML/CFT framework as other financial institutions. They must conduct comprehensive money laundering and terrorism financing risk assessments, documenting their exposure across customer types, geographic regions, and business activities.
Customer Due Diligence procedures apply to every member relationship. This includes identity verification using reliable sources, understanding the purpose of business relationships, and identifying beneficial owners behind corporate investors. Enhanced Due Diligence becomes mandatory for higher-risk customers, including politically exposed persons and investors from high-risk jurisdictions.
Ongoing monitoring requires VCCs to keep customer information current and scrutinise transactions throughout relationships. Any suspicious activity must be reported promptly to Singapore’s Suspicious Transaction Reporting Office. Record-keeping obligations also mandate retention of all AML/CFT documentation for a minimum five-year period following the termination of a customer relationship.
VCC Board Responsibilities and Governance
VCC boards carry ultimate responsibility for AML/CFT compliance, a principle the June 2025 guidelines reinforce with emphasis. Directors cannot delegate this accountability to their appointed EFI or fund manager, regardless of service agreements or operational arrangements.
Boards must approve their VCC’s money laundering and terrorism financing risk assessments annually. These assessments form the foundation for all AML/CFT policies and procedures, requiring director-level understanding of the fund’s risk profile across investor types, geographic exposure, and investment strategies.
The appointment of an AML/CFT compliance officer represents another non-delegable board responsibility. This individual carries day-to-day compliance oversight and reports directly to the board on regulatory matters. Boards may appoint EFI staff to this role, but the appointment decision and ongoing oversight remain with VCC directors.
Compliance Gaps and Practical Solutions
Documentation and Record-Keeping Failures
The September 2022 MAS circular highlighted widespread documentation failures across VCC operations. Many funds appear to lack proper audit trails linking customer risk assessments to actual due diligence procedures performed. When regulators requested evidence of compliance decisions, VCCs often could not produce coherent files showing how they reached specific conclusions about customer risk levels.
Transaction monitoring records show similar weaknesses. VCCs frequently failed to document why certain unusual transactions were deemed acceptable after review. Without a clear rationale for monitoring decisions, funds could also not demonstrate to regulators that their AML/CFT controls were operating properly.
Our recommendation for fixing documentation gaps starts with standardised templates that capture all required information whilst avoiding regulatory blind spots. We work with VCCs to build audit trails that tell complete compliance stories, making regulatory examinations smoother for fund managers.
Cross-Border Compliance Complications
VCCs with international investors face multiple compliance obligations that many funds handle poorly. Different jurisdictions have varying requirements for beneficial ownership identification, leading to conflicts between Singapore’s VCC rules and investors’ home country regulations. Some funds incorrectly assume that compliance with their EFI’s procedures automatically satisfies all cross-border obligations.
Sanctions screening across multiple jurisdictions brings operational difficulties. VCCs often rely on single-jurisdiction screening databases that miss sanctioned entities from other relevant markets where their investors operate.
Through our work with international fund structures, we’ve developed multi-jurisdiction compliance frameworks that reconcile Singapore requirements with investors’ home country obligations. Our sanctions screening covers all relevant jurisdictions for your investor base, reducing the risk of regulatory conflicts.
Resource Allocation Challenges
We’ve observed some smaller VCC managers struggle with compliance resource allocation. The cost of AML/CFT systems often seems disproportionate to fund size, leading managers to adopt inadequate manual processes. While this is understandable, many emerging managers underestimate ongoing compliance costs when structuring their funds, putting operational pressures on AML/CFT effectiveness over time.
InCorp’s scalable compliance solutions allow smaller funds to access institutional-grade AML/CFT capabilities without the overhead of full internal teams. We help emerging managers budget accurately for compliance costs from fund inception, preventing operational pressures that compromise regulatory effectiveness later.
Where to Next With InCorp
VCC AML/CFT compliance has evolved from basic regulatory checkbox exercises into sophisticated risk management frameworks that protect both funds and their investors. The June 2025 guidelines revision signals MAS’s continued and predictable focus on raising industry standards, making professional compliance support more valuable than ever.
Fund managers face a choice: invest significant internal resources to master these requirements, or partner with specialists who live and breathe VCC compliance daily. The regulatory complexity, cross-border obligations, and documentation demands we have outlined require dedicated expertise that most fund managers cannot develop cost-effectively in-house.
Ready to strengthen your VCC’s compliance framework? Contact InCorp today to discuss how our fund services, with their AML/CFT expertise, can protect your fund whilst reducing your compliance burden.
FAQs about MAS AML/CFT Guidelines
What are the unique AML/CFT requirements for VCCs in Singapore?
- VCCs must appoint an Eligible Financial Institution (EFI) regulated by MAS to conduct AML/CFT checks, treat their members as customers requiring full due diligence, and maintain detailed beneficial ownership registers. These requirements don't exist for other corporate structures.
When were the MAS VCC-N01 guidelines last updated?
- MAS revised the Guidelines to Notice VCC-N01 on 30 June 2025, replacing the previous version from December 2020. This revision reflects five years of real-world VCC operations and addresses compliance gaps identified through industry surveys.
What penalties apply to VCC AML/CFT non-compliance in Singapore?
- Under the Financial Services and Markets Act 2022, VCC AML/CFT violations can result in fines up to S$1 million per offence. Both VCCs and their fund managers face liability.
Let us know how we can help your VCC stay compliant!
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