Introduction
Just four months after the Government's introduction of increased stamp duties on the purchase of residential properties from 6 July 2018, Parliament has on 20 November 2018 passed the Developers (Anti-Money Laundering and Terrorism Financing) Bill (the AML Bill).
Real estate has been flagged out as one of the target non-financial sectors that may encounter money laundering and terrorism financing activities.
Objectives of the AML Bill
The AML Bill amends both the Housing Developers (Control and Licensing) Act (HD(CL)A) and the Sale of Commercial Properties Act (SCPA) by putting in place new requirements on developers to firstly further enhance effective monitoring of money laundering and terrorism financing and secondly, to bar persons convicted for money laundering and terrorism financing offences from being involved in property development activities.
It is part of Singapore's efforts to maintain its strong legal and regulatory framework, to detect and deter money laundering and terrorism financing and to align its anti-money laundering and terrorism financing regime with the international standards set out by the Financial Action Task Force (FATF).
Key responsibilities and duties of developers introduced by the AML Bill
Licensed housing developers under the HD(CL)A and developers under the SCPA are required to comply with the following, failing which they will be guilty of an offence and liable on conviction to fines or other punishment prescribed under the AML Bill to facilitate the detection of money laundering and terrorism financing activities.
Prohibition against anonymous accounts
Developers must not open or maintain any account for, or hold and receive moneys from an anonymous source or a purchaser with an obviously fictitious name.
Customer due diligence measures, additional measures and measures relating to targeted financial sanctions
Developers must perform prescribed customer due diligence measures including those as may be prescribed in subsidiary legislation to be issued under the HD(CL)A and SCPA, prescribed measures relating to targeted financial sanctions against terrorism and any prescribed additional measures which are necessary or expedient to give effect to any relevant FATF recommendation.
Record keeping
A developer must keep all documents and information (including any analysis performed) obtained by the developer as a result of performing the abovementioned customer due diligence measures. Different period may be prescribed for different documents and information. A developer must keep the documents and information required in such form as may be prescribed and such records must be made available to the Controller of Housing (Controller) or an inspector and such other authorities.
Suspicious transaction reporting
Where a developer knows or has reasonable grounds to suspect any matter mentioned in Section 39(1) of the Corruption Drug Trafficking and other Serious Crimes (Confiscation of Benefits) Act (i.e. any property in whole, or in part, directly or indirectly, represents the proceeds of, was used in connection with, or is intended to be used in connection with any act which may constitute drug dealing or criminal conduct), the developer must file a suspicious transaction report with a Suspicious Transaction Reporting Officer.
Programmes and Measures to Prevent Money Laundering and Terrorism Financing
A developer must also implement adequate programmes and measures to prevent money laundering and terrorism financing. This includes (but is not limited to) taking steps to identify, assess and understand the money laundering and terrorism financing risks in relation to:
- purchasers;
- (where the purchasers are foreigners) the countries/jurisdictions which these purchasers are from;
- (where the developer has operations outside Singapore) the countries/jurisdictions in which the developer operates; and
- services, transactions and delivery channels,
and to document these risk assessments, keep these risk assessments up to date and put in place mechanisms to provide these risk assessments to Controller, as well as to take appropriate steps to mitigate risks where necessary. To this end, developers will need to develop and implement internal policies, procedures and controls to manage and effectively mitigate the money laundering and terrorism financing risks (e.g. compliance management arrangements, appointment of a compliance officer at the management level, screening procedures when hiring employees) and have an ongoing programme to train employees on these internal policies, procedures and controls.
More stringent set of laws to apply
Where the developer has any branches or subsidiaries, the developer must implement a group-level programme to prevent money laundering and terrorism financing, and such programme must apply to all the developer's branches and subsidiaries, whether in Singapore or elsewhere. Where these branches or subsidiaries are located outside Singapore, the developer's management must apply the more stringent set of laws (Singapore or the relevant jurisdiction), and if it is not possible to apply the more stringent set of laws, the same must be reported to Controller and Controller's directions must be complied with.
Expansion of definition of 'purchaser'
The AML Bill introduces a new definition of 'purchaser' which is very wide. It refers to a person to whom the developer grants an Option to Purchase or who agrees to purchase a unit from the developer, and includes a prospective purchaser.
Prohibition of persons convicted of money laundering and terrorism financing offences from being developers
HD(CL)A
In respect of licensed housing developers under the HD(CL)A,
- Controller may refuse a housing developer's licence where:
- (where the applicant is an individual) the applicant is a person who has been convicted of a money laundering or terrorism financing offence (hereafter referred to an a AML/CTF Offender);
- (where the applicant is a company):
- the applicant-company is an AML/CTF Offender; or
- an individual who is an AML/CTF Offender holds/is intended to hold the position of a director, manager, secretary, partner or other analogous position in the applicant; or
- the applicant-company has, as a substantial shareholder, a person described in 1(a), 1(b)(i) or 1(b)(ii) above.
- Controller may revoke or suspend a housing developer's
licence where:
- the licensed housing developer is a AML/CTF Offender; or
- the licensed housing developer has, as a substantial shareholder, a person described in 1(a), 1(b)(i) or 1(b)(ii) above.
- Any persons who are AML/CTF Offenders must not hold or continue to hold the positions of a director, manager, secretary, partner or other analogous position, and such persons (or companies where such persons hold the positions of a director, manager, secretary, partner or other analogous position) are also disqualified from being/becoming a substantial shareholder of a licensed housing developer.
SCPA
In respect of developers under the SCPA, an AML/CTF Offender is similarly disqualified for being a substantial shareholder or to hold a responsible position for a developer (i.e. director, manager, secretary, partner or other analogous position).
Impact on developers
While the real estate industry recognises the reputational risks of non-compliance with international standards on anti-money laundering and terrorism financing, there are also concerns pertaining to the onerous compliance burden being imposed on developers, particularly amongst the smaller players and in the light of an already challenging market faced by developers.
Government has taken what it believes to be a 'calibrated, risk-based approach'. During the round-up speech by Minister of National Development, Mr Lawrence Wong on the AML Bill on 20 November 2018, Mr Wong stated that "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." The language in the AML Bill has been deliberately kept broad 'so that businesses then have flexibility to develop procedures according to their business size, customer profile and nationality, and different levels of money laundering and terrorism financing risks which they identify using their own AML/CTF programmes'. Whilst the intention behind such an approach is understandable at this stage, this may by itself create uncertainty and result in driving up costs of compliance which, or at least some of which, would inevitably be filtered to purchasers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
