Singapore’s Appeal to Criminals
Singapore is a key financial hub both regionally and internationally, making it an attractive gateway for laundering money. The ability to legitimise criminal proceeds through the city-state’s advanced banking and financial infrastructure, as well as the availability of channels to access global markets, means that Singapore must do what it can to manage its geographical and financial appeal to criminals.
JTJB Partner Ting Chi Yen notes: “Singapore is a member of the international Financial Action Task Force (FATF), which develops and implements international standards to combat money laundering and terrorism financing, and has implemented FATF recommendations into local laws and regulations in every applicable sector (eg. banking, legal etc). It also recognises that crime is ever-changing, requiring continuous monitoring and enforcement action.”
To maintain its reputation as a stable global financial centre, Singapore and its laws and regulations must continue to evolve in a transparent way which is easily understood and applied by stakeholders.
Recent Money Laundering Probe
In October 2023, Singapore launched one of its biggest money laundering probes ever, involving 10 foreign nationals and over US$2.04 billion in assets. As a result, parliamentary statements have been delivered by over 20 Members of Parliament (MPs) on how Singapore’s regulations can better prevent overseas criminals from laundering their money in the city-state.
Anti-money laundering (AML) measures in the real estate sector are mainly promulgated in two ways:
- Statutory restrictions on foreign ownership of certain types of high-value properties; and
- Compliance and monitoring, as well as reporting requirements on the part of “gatekeepers” in the real estate sector.
Ting explains: “Singapore restricts foreign ownership of landed residential property without the prior approval of the authorities, which essentially cuts out by default a large slice of high-value properties (e.g. GCBs, residential land etc.) from being owned by foreign purchasers. Only Singapore citizens may freely purchase landed residential property. Foreign purchasers must satisfy certain stringent criteria (e.g. they must be PRs for at least five years, must show social and economic ‘roots’ and commitment/ contributions to Singapore, etc) before being allowed to buy landed residential property, and even then, such purchases are subject to restrictive conditions.”
In addition, all foreign purchasers of residential property (whether landed or not) are subject to a high Additional Buyers’ Stamp Duty (ABSD) of 60% of the value of the property (a development we explored in our article earlier in the year). While ABSD is primarily designed to discourage foreign ownership of residential property in general, it may also help to deter foreign criminals who are looking to use real estate transactions as a means of laundering money.
The Role of ‘Gatekeepers’ in the Sector
‘Gatekeepers’ in a real estate transaction are primarily property agents / agencies, developers and real estate lawyers, each of which are involved at different stages of the acquisition process. Under their respective regulatory guidelines, they are required to conduct Customer Due Diligence (CDD) on clients to establish key information, including:
- The identity of the client or ultimate beneficial owner (if athird party, nominee or trustee arrangement is involved);
- Screening of the client;
- Assessing the level of client risk (e.g. Politically Exposed Persons (PEPs) / ‘blacklist’ / high risk jurisdictions) and whether enhanced CDD is required as a result;
- Establishing the source of the client’s funds involved in the transaction, and
- Maintaining and retaining proper and complete records of transaction documents.
“Gatekeepers are also expected to monitor ‘red-flags’ or indicators that are suspicious or incongruous with the circumstances in order to identify suspicious transactions. For example, an inability to explain source of funds, the inability or refusal to provide KYC documentation, conducting multiple property transactions or ‘flipping’ multiple properties in a short period of time, may in certain circumstances be indicative of suspicious activity which may need to be reported to the proper authorities.” Ting adds.
Gatekeepers have an important duty of disclosure and are required by law to file Suspicious Transaction Reports (STR) under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 (CDSA) if any suspicious activity is detected so that appropriate investigation and enforcement action can be taken by the authorities.
Regulations Imposed on the Sector and Potential Liability
Property Agents / Developers
Property agents / agencies and developers should comply with the requirements set out in their respective governing statutory regulations, e.g. under the Estate Agents (Prevention of Money Laundering and Financing of Terrorism) Regulations (PMLFT Regulations), the Housing Developers (Control & Licensing) Act and the Sale of Commercial Properties Act. They should also be aware of and comply with the relevant notices and guidelines issued by their respective governing bodies, e.g. the Council for Estate Agencies (CEA), which provide additional clarification and guidance.
Agents are not directly liable if their clients are suspected or even guilty of money laundering following investigations, but they may be in breach of their legal obligations and subject to penalties if they fail to comply with the necessary CDD and AML measures.
Ting shares: “In a recent October 2023 case, two property agents were found guilty by the disciplinary committee of the CEA for failing to comply with the CDD / AML requirements under the Estate Agents Act and the PMLFT Regulations and were subject to financial penalties and suspension of their estate agent practice licenses. It is not inconceivable that a more egregious breach on the part of agents and/or agencies may attract more severe penalties (including jail time) under the applicable law.”
Lawyers
Lawyers are required under the applicable Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules and the Practice Directions issued by the Law Society of Singapore to establish AML and Countering Terrorism Financing (CTF) measures and “know your client” (KYC) requirements when taking on new clients.
Certain industry sectors – including the real estate industry – have been identified by the Law Society as attracting significant AML/CTF risks and, as a result, the Law Society Practice Directions set out appropriate steps for lawyers to take. These include the development of internal policies, procedures and controls to manage and screen clients, and the creation of screening checklists for CDD against high-risk clients. Enhanced CDD is also prescribed for certain high-risk jurisdictions or parties (eg. PEPs etc.)
Looking Ahead – are Existing AML Checks Sufficient?
The creativity of criminals coupled with the impact of technology on transactions means that the AML landscape is ever-changing and evolving, and the legal and regulatory system must similarly react and adapt accordingly.
“Criminals will always be one step ahead in finding new and innovative ways to avoid being caught and to leverage on the anonymity of the digital grey-space. Continual updates and changes to existing AML checks as well as training of AML practitioners to recognise new criminal activities and to implement sound and updated AML practices is essential to safeguard against future money laundering risks”, Ting remarks.
Although Singapore is praised for being a jurisdiction founded on strict legal compliance, transparency and a strong regulatory environment, the recent US$1 billion Chinese money laundering probe – with its complex web of transactions and entities involved – demonstrates that criminals are still capable of exploiting the system and operating within even one of the most well-developed and policed international financial hubs, highlighting the need for continued vigilance.
For more information, please contact:
 | Mabel TanSenior Partner JTJB Singapore Office |  | Ting Chi YenPartner JTJB Singapore Office |
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 | Joseph TanConsultant JTJB Singapore Office |  | Tio Siaw MinAssociate JTJB Singapore Office |
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