Data gaps, privacy needs of the rich make anti-money laundering checks tough, say agencies

Real estate agencies and professionals say they face challenges in preventing and combating money laundering, as an inter-ministerial committee set up to strengthen Singapore’s anti-money laundering regime seeks their feedback. 

Their comments follow remarks by Second Minister for Finance and National Development Indranee Rajah, who said at a Huttons awards event last week that she recently spoke with real estate agencies and professionals on how to strengthen Singapore’s system. 

“You have given me valuable feedback on some gaps that need to be closed. We are also looking into how you can do better due diligence checks and file Suspicious Transaction Reports more easily. We are also looking into training real estate professionals on how to carry out this gatekeeper role better,” said the minister, who chairs the inter-ministerial committee to strengthen measures against money laundering. 

James Lim, an agent who handles luxury condominium deals, told BT that some potential buyers might lie about their source of funds or provide fake documents which escape being red-flagged in portals for AML checks. 

He said: “If they give us a passport or name and these are not detected in the system, how are we going to know they are fake?”

In the S$3 billion money laundering bust that hit the headlines in 2023, the gang managed to buy real estate, luxury cars, timepieces and art without detection by property agents and developers, dealers, financial institutions and law firms – parties which had to perform AML and counterterrorism financing checks, said Adam Wang, president of the Singapore Estate Agents Association (SEAA).

He said: “Though real estate salespersons are taught to look out for clear indicators like clients transacting in huge amounts of cash or purchasing multiple properties in a short span of time, they may not possess the expertise to understand when money launderers structure the property purchases through proxies and offshore registered entities.”

Huttons Asia chief executive Mark Yip said: “Sometimes, customer due diligence checks on these proxies or company directors may not turn up anything. There may be a complex web of shareholdings... There may be gaps in the data.” 

Eugene Lim, ERA’s key executive officer (KEO), said: “Current databases only provide a name, with no photographs and other information.  Whenever there is a name match when we do AML checks, we need to take time to figure out whether that is really the person.”

Alan Cheong, Savills’ executive director for research and consultancy, said: “In some countries, what is by legislation a crime may not be deemed one in practice if such practices are pervasive. Another issue is the home country is uncooperative or tardy in updating the list of their criminals on international databases.” 

And when the client has an overseas company registered in territories such as the British Virgin Islands, it would be almost impossible for agents to conduct checks, since they do not have reliable sources of information on overseas companies, said PropNex KEO Lim Yong Hock.

And then there are privacy concerns. High-net-worth individuals may also not feel comfortable disclosing personal details to agents. 

“Even if you ask these customers for their source of funds, they may only say that they are businessmen or that they work in the IT industry. But it’s not easy to find out what they are really doing,” said PropNex’s Lim. 

Brandon Cheong, a senior marketing director with ERA, said: “High-net-worth individuals and foreign investors, in particular, may value their privacy and view extensive background checks as invasive. Maintaining a balance between compliance and client confidentiality could become a delicate task, impacting agents’ ability to build trust and long-term relationships with their clients.” 

This is especially if the agent is serving a client for the first time; it can be very difficult to acquire sufficient personal and financial information, said ERA’s Lim. 

“If you ask or probe too much, some of them get offended, and the agent runs the risk of losing the client.”

Resources may also be limited at smaller agencies, which may not be able to subscribe to systems such as World Check. Such systems scan databases to identify individuals on sanctioned lists, or who are involved in outstanding lawsuits against companies and their directors, said Cheong from Savills. 

“Not all estate agencies are able to allocate resources and manpower in ensuring real estate salespersons comply with the AML checks diligently, let alone audit such checks periodically,” SEAA’s Wang said. 

The inter-ministerial committee will continue engaging more sectors and stakeholders to strengthen Singapore’s AML regime. It aims to share its findings by this year.

Source: Business Times © SPH Media Limited. Permission required for reproduction

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