Property developers face new anti-money laundering, terrorism financing rules

As part of the new regulations, property developers will now be required carry out customer checks and report suspicious transactions.

SINGAPORE: The Government has put in place new anti-money laundering and terrorism financing requirements for property developers that will require them to perform due diligence checks on their buyers and flag suspicious activity.
The new rules come after Parliament passed the Developers (Anti-Money Laundering and Terrorism Financing) Bill on Tuesday (Nov 20).
The Bill amends both the Housing Developers (Control and Licensing) Act and the Sale of Commercial Properties Act, which regulate the sale of residential and commercial properties before they are completed by developers.
In his opening statement on Tuesday, Minister of National Development Lawrence Wong said that developers will now be required to carry out customer due diligence checks on buyers, keep proper records relating to these checks, and report any suspicious transactions to the Suspicious Transaction Reporting Officers.
Mr Wong, who is also Second Minister for Finance, added that developers will also have to implement programmes to train their employees, and develop internal policies as well as controls to manage and mitigate money laundering and terrorism financing risks.
“The Bill adopts a risk-based approach to anti-money laundering and terrorism financing compliance,” he added. “Principal obligations are set out, but businesses will have the flexibility to develop procedures according to the different risks they identify using their own programmes.”
Additionally, individuals who have been convicted of money laundering and terrorism financing offences will be barred from being developers.
Developers will also be required - in the event of investigations and any subsequent criminal proceedings - to comply by producing relevant information, retaining documents and making copies, and disclosing information.
These changes will bring Singapore’s anti-money laundering and terrorism financing regime in line with the international standards set out by the Financial Action Task Force (FATF), said Mr Wong.
An inter-government body, the FATF was established in 1989 to set national and international standards, and promote the effective implementation of measures to combat money laundering and terrorism financing.
“This Bill is important as it allows Singapore to more effectively combat money laundering and terrorism financing,” said Mr Wong.
“It ensures our compliance with the FATF Recommendations and signals our commitment to be a responsible member of the international community.
“Failure of businesses to meet international standards puts at risk our international business relationships, as well as the reputation of individual companies and the Singapore financial market in general," he added.
Those convicted of not complying with the new provisions may be fined up to S$100,000.
Speaking in support of the Bill, Member of Parliament (MP) for Nee Soon GRC Louis Ng lauded the intent of the amendments but also pointed out that the new requirements for developers needed to be more specific.
“It seems to me that this Bill leaves quite a big room for housing developers to make their own judgment calls,” he said, citing how words with broad interpretations such as “appropriate” and “adequate” appeared multiple times in the Bill.
He added that some other parts of the Bill were written with "some ambiguity".
“At one point, developers are told not to deal with purchasers that have 'an obviously fictitious name'. 'What is an obviously fictitious name?'” asked Mr Ng.
In response, Mr Wong said that the phrasing was “deliberately done” to give businesses the flexibility to develop procedures according their own considerations, including business size and customer profile.
Mr Ng also expressed hope that this was not just another “tick in the box exercise”.
“We must remember that we are asking developers who are there to make a profit to do their due diligence which might end up with them making less profits. We are asking them to check on their own clients who are paying them and at times paying them a lot of money,” said Mr Ng.
Lee Bee Wah speaks in Parliament
MP Lee Bee Wah speaks in Parliament on 20 Nov 2018. 
Nee Soon GRC MP Dr Lee Bee Wah also stressed that the government needs to engage the "right people with the relevant know-how" and work closely with them to ensure the new legislation will not end up “just another paper exercise and form signing”.
In response, Mr Wong stressed that the Urban Redevelopment Authority (URA) will help developers “level up” through their industry outreach and provide all the necessary guidance in the initial implementation stage.  
“Subsequently, URA will provide ongoing support to improve the industry’s understanding of what constitutes risky transactions, as well as their risk mitigation capabilities that are needed, in order to foster a good understanding of the new requirements,” Mr Wong added.
“We would like to strike a balance between complying with the requirements recommended by the FATF and ensuring that the burden on developers is not excessive,” he added.
Answering a question from MP Gan Thiam Poh, who had asked when the duty and responsibility of the developer ends, Mr Wong stressed that developers would not be required to monitor their buyers “perpetually”.
“The rules will make clear that the requirements on developers will only apply until the project is completed, which is also the point at which the developer is no longer regulated under the two Acts,” he added.
Meanwhile, Dr Lee also warned against “overreacting and being too heavy-handed” in the proposed regulations and duties for developers.
“If we look at the existing policies, the risk of transactions being abused for money-laundering and terrorism funding activities is frankly not very high,’ she said. “Hence, I do not see the point of burdening the developers with additional requirements, that may or may not serve the purpose of mitigating (money laundering or terrorism financing)."
She added that the sales transactions already including documents and payments that have to be handled by financial institutions.
“Developers are secondary recipients of funds and the (money laundering/financing terrorism) risks faced by developers are lower,” she added.
While Mr Wong agreed that most money laundering and terrorism financing activities are generally concentrated in the financial sectors, he added that real estate is also an "established method of money-laundering worldwide".
“For the real estate sector in particular, beside your bankers and lawyers, developers are a key party that deal with property buyers,” he added.
“So they do play an important role in the detection and prevention of such activities and that’s why we are introducing these requirements by amending the two acts that regulate developers to better facilitate our anti-money laundering and counter-terrorism financing activities.”



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