Singapore Now Requires Developers to Comply with New AML/TF Regulations

The Singaporean government will implement a new anti-money laundering and anti-terrorism financing measure on June 28.

On 28 June, Singapore will implement new requirements for developers in anti-money laundering and terrorism financing. For a good reason, several anti-money laundering and anti-terrorism financing measures will be introduced by the Singapore government on the 28th of June this year.

The developer was fined in 2016 for failing to report suspicious property transactions related to a $23.8 million bungalow in Sentosa Cove and a new condominium unit. In both companies, agents dealt with illegally active individuals.

Singapore is determined to tighten regulations to prevent such incidents from occurring again and maintain international standards. “Given the vibrancy of the real estate market in Singapore, the importance of having effective laws and regulations in place to safeguard against any ML or TF activities is well-recognized,” said Dentons Rodyk senior partner Pat Lynn Leong.

Under the new measure, developers are required to assess risks, take due diligence measures with customers, report suspicious transactions, and keep records for the period of five years following the transaction. According to Leong, developers must consider “the profile of their purchasers and the countries which they are from or in.”

Moreover, Gazalle Mok, a partner at Rajah & Tann, emphasised that developers should implement internal measures and programs and conduct internal audits to ensure that their policies, procedures, and controls are being tested and monitored.

According to Leong, developers must fill out checklists and forms in the “Guidelines for Developers on Anti-Money Laundering and Counter-Terrorism Financing,” released last March.

The CDD process is divided into three levels: standard, simplified, and enhanced. Depending on the purchaser’s profile, Mok stated that the level of CDD will vary.

“The forms require the filling in of certain information such as the purchaser’s particulars or the particulars of the individual who is acting on behalf of the purchaser,” Leong said. “As for the checklist, developers may opt to use their own to conduct the CDD but must ensure that the prescribed requirements are complied with.”

“Developers should note that CDD must be performed even for existing purchasers with whom the transaction was entered into before implementing the new Anti-Money Laundering and Terrorism Financing (AMLTF) requirements,” Leong underscored. “Developers should also be aware that where CDD measures fail to be satisfactorily performed or completed, they must not grant an OTP, accept any money (including booking fee), or enter into a Sale and Purchase Agreement (SPA) with the purchaser,” she added.

The UN Act or Terrorism (Suppression of Financing) Act (TSFA) prohibits developers from issuing options to purchasers, collecting money, or concluding sales agreements with terrorists. “Developers must not open or maintain any account for, or hold and receive monies from an anonymous source or a purchaser with an fictitious name,” Leong said.

She explained that the developer’s responsible for terminating the transaction once the OTP has been granted to the purchaser. As a final note, Leong asserted that developers must keep records of all documents, including OTPs and SPAs, for five years and provide them to the Controller of Housing upon request.

A heftier fine is also associated with Singapore’s more stringent measures. Developers who fail to adhere to any of the new requirements will be held accountable by Mok. The individual may be convicted of an “offence and be liable on conviction to a fine not exceeding $100,000.” “However, most individual liability for money-laundering-related transactions continues to be governed by the Corruption Drug Trafficking and Other Serious Offences (Confiscation of Benefits) Act (CDSA),” Naidu said. “Individuals who knowingly, or with reason to believe, facilitate such transactions may be liable to prosecution for offences which would likely carry an imprisonment term.  Persons convicted of ML or TF offences can also be disqualified from holding key appointments in developers,” Naidu added.

In Singapore, housing developments cannot be undertaken without a licence. “Any developer who does so without the licence will be liable on conviction to a fine not exceeding $100,000 and imprisonment for a term not exceeding 5 years,” said Leong. “In addition, any person, such as the director,  who has been convicted whether before, on or after the date of commencement of the Act of any ML or TF offence must also not hold or continue to hold a responsible position in a licensed housing developer. Should this be contravened, the developer will be liable on conviction to a fine not exceeding $100,000,” the expert added.

The new requirements will likely result in higher compliance costs for developers since they will be required to comply. “This will hit smaller developers especially hard as they lack the economies of scale and dedicated compliance personnel and programmes,” said Mok. 

“Further, given the involvement of the many stakeholders – lenders, developers, property consultants and other professionals working with the developers, some time will be required for the adjustment to these new requirements,” she said. Developing companies should train their employees and agents in ML and TF risks to ensure they can meet the requirements established by the new bill, Naidu said.

He said developers must ensure that their people are “equipped to ask the correct questions of property purchasers, and are aware of circumstances when they may need to enquire further when ‘red-flags’ are presented.”

“Property developers play an integral front-line function because they deal directly with prospective purchasers and are best placed to monitor for suspicious transactions and illegitimate sources of funding. As such, regulators rely heavily on developers to keep the property market in Singapore free from funds derived from illicit activities,” Mok said.

Last but not least, Leong stated that the new requirements “will help enhance the transparency of the real estate market in Singapore, serving to benefit both purchasers and developers.”

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