Requirements for real estate agents and lawyers need to be clarified as part of new anti-money laundering measures

SINGAPORE: When real estate agents work, some of the clients they interact with may represent other people.

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

The government will soon clarify that real estate agents must identify and take “appropriate measures” to verify the identities of people their clients may be acting on behalf of.

This requirement also applies to real estate agencies, developers, lawyers and law firms when conducting due diligence on clients and monitoring existing clients.

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

If a customer is not the ultimate beneficial owner of a transaction or asset, there is a risk of abuse, the report said. Identification and verification of the identity of the ultimate beneficial owners of companies is already required.

The report included twelve new recommendations that focus on preventing and detecting money laundering and effectively enforcing money laundering laws. This includes establishing data sharing channels between government agencies to detect suspicious activity.

The interministerial committee set up at the end of 2023 drew lessons from the billion-dollar money laundering case.

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

“As you will understand, this is a delicate 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 not too strict, because we don’t want to stifle genuine, law-abiding businesses.” It must be just right and allow Singapore to be a free and open economy while being inhospitable to illicit money to be.”

The clarifications for the real estate and legal sectors are likely to be implemented in the next few months, said Ms Indranee, who is also a minister in the Prime Minister’s Office.

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

“It is vital for the legal sector to address the issue of beneficial ownership – to provide guidance on how to deal with it,” she said, adding that this would likely be done through the Legal Profession Act, regulations and the Act would happen to society.

However, more needs to be done to help real estate industry players understand the nature of their obligations and help them discharge their responsibilities.

“Imagine you are a real estate professional trying to close your sale. It’s very hard to look your customer in the eyes and say, ‘Tell me where your money comes from,'” Ms. Indranee said.

Agents need to be able to do this 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 gem and precious metal dealers have been identified as “regulated gatekeepers” who can help detect money laundering activities.

But what about other, unregulated sectors that could be exploited by criminals?

The inter-ministerial committee recommended more education in unregulated sectors, including by involving traders in high-value goods.

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

She said the Home Office is paying attention to trends around the world to see if criminals are using other high-value items, such as artwork or collectibles, to launder money.

“We will then pay attention to those sectors and contact traders in those sectors to let them know that this is a risk that they should be wary of.”

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

“That’s why we’re going to reach out and educate these unregulated sectors,” she said.

Ms Indranee said it was difficult to determine which goods were used, but they were typically high-value items that were expected to increase in value.

Property and cars are obvious topics, but it’s unlikely anyone would have been suspicious of Bearbrick toys five years ago, she said.

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