Requirements for real estate agents, lawyers to be clarified under new anti-money laundering measures

SINGAPORE: When real estate agents are at work, some of the clients they interact with may be representing other people.

Clients may be acting on behalf of the beneficial owner – the person who ultimately enjoys the benefits of owning the property, even if it is in another name.

The government will soon make it clear that real estate agents need to identify and take “reasonable measures” to verify the identities of the individuals that their clients may be acting for.

This requirement will also apply to estate agencies, developers, lawyers and law practice entities when conducting customer due diligence and monitoring existing clients.

Clarifying the requirements for the real estate and legal sectors was one of the recommendations from the inter-ministerial committee that reviewed Singapore’s anti-money laundering regime, which released its report on Friday (Oct 4).

When a client is not the ultimate beneficial owner of a transaction or asset, there is a risk of abuse, the report said. Identifying and verifying the identities of the ultimate beneficial owners of businesses is already required.

The report made 12 new recommendations focusing on preventing and detecting money laundering, as well as effectively enforcing money laundering laws. They include building data-sharing channels across government agencies to pick up suspicious activity.

The inter-ministerial committee, which was set up in late 2023, drew lessons from the billion-dollar money laundering case.

Ms Indranee Rajah, Second Minister for Finance, said the recommendations were carefully calibrated to improve Singapore’s defences while keeping its economy open and minimising their impact on legitimate businesses.

“As you will appreciate, this is a fine balancing act, because for every step and every measure, there are trade-offs,” she said.

“The system cannot be too lax, but at the same time, it cannot be too stringent, because we do not want to stifle genuine, law-abiding businesses. It has to be just right and allow Singapore to be a free and open economy while at the same time being inhospitable to illicit funds.”

The clarifications for the real estate and legal sectors are expected to be rolled out over the next few months, said Ms Indranee, who is also Minister in the Prime Minister’s Office.

She noted that the legal sector is familiar with anti-money laundering requirements.

“The key thing for the legal sector is looking into the issue of beneficial ownership – to provide some guidance on how they are to approach this,” she said, adding that this would likely be done through the Legal Profession Act regulations and the Law Society.

More needs to be done, however, to help those in the real estate sector understand the nature of their obligations, and to help them carry out their responsibilities.

“Imagine you’re a real estate person, and you’re trying to get your sale done. It’s very hard to look your client in the eye and say: ‘Tell me where your money came from,’” said Ms Indranee. 

Agents need to be able to do so in a way that makes it clear that the question is part of the system – that it is a professional approach and not a personal question.

HIGH-VALUE GOODS AT RISK?

Banks, casinos, real estate agents and precious stones and precious metals dealers have been identified as “regulated gatekeepers” who can help with detecting money laundering activities. 

But what about other, unregulated sectors that may be used by criminals?

The inter-ministerial committee recommended that more education be carried out in non-regulated sectors including by engaging dealers of high-value goods.

“We will be engaging the car dealers next week,” said Ms Sun Xueling, Minister of State for Home Affairs. 

She said the Ministry of Home Affairs watches out for trends across the world to see if criminals are using other high-value items such as art pieces or collectibles to launder money.

“Then we will pay attention to these sectors and outreach to the dealers in these sectors, to let them know that this is a risk that they should be watching out for.”

She added that the obligation to file a suspicious transaction report applies to everyone.

“That is why we are going out to outreach and educate those unregulated sectors,” she said. 

Ms Indranee said it is difficult to determine what goods will be used, but they are usually high-value items that are expected to become more valuable.

Property and cars are obvious ones, but it is unlikely that anyone would have been suspicious of Bearbrick toys five years ago, she said.

She also responded to a question on whether Singapore’s penalties for money launderers are too light.

She highlighted that the sentences given to the individuals convicted in the billion-dollar money laundering case were based on the amounts of money involved in the charges that they pleaded guilty to – which made up only a fraction of the S$3 billion of assets linked with the case.

Ms Indranee also said it was important that the state was able to seize the illegal funds involved.

“If you think about it, what is one of the most painful things for any money launderer or the syndicate? It is the fact that you cannot have access to your ill-gotten gains,” she said.

Mr Alvin Tan, Minister of State for Trade and Industry and board member of the Monetary Authority of Singapore, said Singapore dealt with the billion-dollar money laundering case decisively. 

“Our actions will no doubt deter bad actors, but … make no mistake that bad actors will want to try, and they will want to try to circumnavigate whatever plans, whatever measures that we have in place,” he said. 

The inter-ministerial committee’s goal is to refine an already strong system and ensure that it remains relevant as threats grow more sophisticated, he added. 

“It will help us to maintain this hard-earned trust in Singapore so that … legitimate businesses will want to continue to invest,” he said.