Developers (Anti-Money Laundering and Terrorism Financing) Bill

2.37 pm

The Minister for National Development (Mr Lawrence Wong): Mr Deputy Speaker, Sir, I beg to move, “That the Bill be now read a second time”.

Money laundering and terrorism financing activities are trans-boundary in nature. Illicit funds are the lifeline for international crime and terrorism which impact all countries.

Today, the Housing Developers (Control and Licensing) Act and the Sale of Commercial Properties Act regulate the sale of housing and commercial properties before completion by developers. Both Acts are administered by the Controller of Housing. Real estate is a category of the non-financial sector that may encounter persons engaging in money laundering and terrorism financing activities.

So, this Bill amends both Acts to firstly, put in place new requirements for developers to facilitate the detection of money laundering and terrorism financing and secondly, bar persons from being involved in developer activities if they have been convicted for money laundering and terrorism financing offences. This is among the series of amendments that Members of this House have made this and the last four years, to bring Singapore’s anti-money laundering and terrorism financing regime in line with the international standards set out by the Financial Action Task Force (FATF).

FATF, an inter-governmental body, was established in 1989 to set out national and international standards, and promote the effective implementation of measures to combat money laundering and terrorism financing. The FATF Recommendations form part of the broader international financial sector standards and are recognised, and used by the IMF and the World Bank when they conduct assessments of a country’s financial sector. The FATF Recommendations include measures to be taken under each country's criminal justice and regulatory systems, preventive measures for financial institutions and certain other businesses and professions, and measures to facilitate international cooperation.

Singapore joined FATF in 1992, and since then we have put in place a very strong legal and regulatory framework to detect, deter, and take action against money laundering and terrorism financing. This is further complemented by the effective monitoring of implemented initiatives and decisive law enforcement actions. As a responsible member of the international community, Singapore has committed to periodic peer assessments to ensure compliance with the FATF Recommendations, including through changes to legislation.

So, this Bill continues this ongoing effort and will help to strengthen our levers against money laundering and terrorism financing in the real estate sector in line with FATF’s direction to strengthen the supervision of non-financial sectors.

And let me now go through the key provisions of the Bill.

First, clauses 5 and 10 of the Bill introduce new requirements for developers to facilitate the detection of money laundering and terrorism financing activities. In particular, developers will need to carry out customer due diligence checks on purchasers, keep proper records relating to these checks, and report any suspicious transactions to the Suspicious Transaction Reporting Officers.

Developers will need to implement programmes to train their employees, and develop internal policies and controls to manage and mitigate money laundering and terrorism financing risks. Developers should also not open or maintain any account for, or hold and receive monies from, an anonymous source or a buyer with an obviously fictitious name. The Bill adopts a risk based approach to anti-money laundering and terrorism financing compliance. Principal obligations are set out, but businesses will have the flexibility to develop procedures according to the different risks they identify using their own programmes.

Today, persons who are looking to develop a housing project are required to obtain a housing developer’s licence, and clause 4 of the Bill proposes amendments to give the Controller of Housing power under section 7(1) of the Housing Developers (Control and Licensing) Act, to bar a person who has been convicted of money laundering and terrorism financing offences in Singapore, or has as a substantial shareholder, or a holder of a responsible position, like partner or director, a person who has been convicted from being licensed housing developers. This will add to the powers the Controller of Housing already has today to refuse, revoke, or suspend a housing developer’s licence, for cases such as when the housing developer has been convicted of an offence involving fraud or dishonesty, or when it is carrying on its business in a manner that is detrimental to the interests of its purchasers or to the public.

In addition, amendments in clauses 8 and 10 will disqualify persons convicted of money laundering or terrorism financing offences, from holding responsible positions in developers.

Lastly, the Controller of Housing will also be given commensurate enforcement powers to ensure compliance with the new provisions. Under the amendments in clauses 6 and 11 of the Bill, these include powers to require developers to produce relevant information, retain documents and make copies, and disclose information for purposes of investigation and any subsequent criminal proceedings.

The penalty for not complying with the above provisions will be a fine not exceeding $100,000. This is in line with penalties introduced in more recent Acts like the Pawnbrokers Act.

Mr Deputy Speaker, Sir, this Bill is important as it allows Singapore to more effectively combat money laundering and terrorism financing. It ensures our compliance with the FATF Recommendations and signals our commitment to be a responsible member of the international community. Failure of businesses to meet international standards puts at risk our international business relationships, as well as the reputation of individual companies and the Singapore financial market in general.

We have consulted the Real Estate Developers Association (REDAS), the Law Society of Singapore and members of the public in general. They appreciate the reputational risks of non-compliance with international standards and are supportive of the proposed anti-money laundering and terrorism financing requirements. The industry has shared concerns on the additional compliance burden that may be generated and how they can effectively carry out their new duties. We understand these concerns, and in drafting the Bill, we have sought to strike a balance between the additional regulatory burden imposed on the industry as well as the need to meet international standards and the FATF Recommendations. In addition, the legislative backing will make clear what is necessary and help to ensure more effective enforcement and efficient compliance to these requirements. With that, Mr Deputy Speaker, Sir, I beg to move.

Question proposed.

2.43 pm

Ms Foo Mee Har (West Coast): Mr Deputy Speaker, as an international financial centre and trading hub, the fight to combat financial crime is a continuing priority. I am encouraged to see the Whole-of-Government (WOG) effort on anti-money laundering and countering the financing of terrorism, AML/CFT in short. Financial institutions have poured substantial resources and investments, including the better use of technology, into improving effectiveness of AML/CFT measures.

Last year’s setting up of ACIP by MAS and CAD, a platform that combines law enforcement and regulatory insight with industry's ground knowledge of business and clients has helped expand our understanding of emerging risks and typologies. Many sectors have put in place the necessary laws to comply with AML/CFT requirements, including lawyers, pawnbrokers and moneylenders.

Parliament had passed the Serious Crimes and Counter-Terrorism (Miscellaneous Amendments) Bill yesterday to provide for tougher penalties on corporations and professional services providers, as well as money mules for overseas organised syndicates. Therefore, the introduction of the Developers Anti-Money Laundering and Terrorism Financing Bill is timely.

The use of real estate to launder illicit funds is an established method of money laundering, the world over. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate. We have seen reports where millions of dollars' worth of property have been subject to criminal investigation, when they are suspected to be the proceeds of illicit funds, yet these reported cases are likely to represent only the tip of the iceberg. It is, therefore, critical that we put safeguards in place in the real estate sector to stop it from being a channel for such activities. My comments on this Bill will focus on effective implementation.

The proposed Bill puts in place requirements for developers to carry out customer due diligence, keep proper records and report suspicious transactions. Whilst I strongly subscribe to taking an "eco-system" approach to AML/CFT effort as we are only as strong as our weakest link, I share the industry’s concerns on the practical limitations on some of the requirements. Developers are unsure how they can conclusively check and verify a purchaser’s profile, as well as establish purpose of purchase and source of funds, in the course of a sale and purchase transaction.

As current rules on Option to Purchase and Sale and Purchase Agreement only allow cheque, cashier’s order or telegraphic transfer, funds flowing into the property sector would have already gone through AML/CFT checks by financial institutions before developers receive them. The option to purchase is not transferable nor assignable, and cash payment is not allowed without the explicit approval of the Controller of Housing.

I would like to ask the Minister whether developers, as "secondary" recipients of such funds, can rely on the customer due diligence already carried out by financial institutions. Also, whether a risk-based approach can be adopted where the levels of checks expected of developers vary according to whether the purchasers are local residents or foreigners, with enhanced checks prescribed for those from high-risk countries? And whether the checks required of other parties in the eco-system, such as lawyers and real estate agents, can be coordinated so as to reduce duplication and ensure all efforts complement each another.

Whilst the intent of the Bill to stop financial crime in the real estate sector is laudable, we need to ensure that implementation of regulatory measures is not so onerous as to cause the increased cost of compliance to be passed to consumers.

To check for suspicious persons and entities, developers need to screen their prospective purchasers against multiple lists provided by relevant authorities, including the United Nation's Sanctions lists. To assist developers, can the Ministry co-ordinate and compile a single comprehensive list online to ensure thorough screening against the most updated information?

Under the new regulation, developers are required to appoint a compliance officer, as guided by the MAS notice. The industry is concerned about the availability of talent to fulfil such a role, as well as its related costs. Whilst I agree there is room to heighten awareness as well as institute measures to check for suspicious property transactions, this burden should not rest only on the shoulders of a compliance officer but those also of the senior management, and indeed throughout the organisation. Developers should institute a corporate culture that has zero tolerance for money laundering and terrorist financing, and have that communicated rigorously to all staff. Lessons learnt from experiences of financial institutions should be shared widely so developers can shorten their learning curve in implementing AML/CFT measures.

Mr Deputy Speaker, real estate-related money laundering cases often involve sophisticated methods being deployed, making detection a challenge. I would like to ask the Minister how we can mitigate the risk brought on by the use of front companies, shell companies, and trust and company structures established domestically and offshore to purchase property. Such structures help distance the criminal from ownership, with control vested in the hands of third parties to avoid obvious links to true ownership.

According to an article by Financial Times on "How laundered money shapes London’s property market", about 100,000 properties in England and Wales are owned by overseas companies, with many of the properties having been bought by anonymous shell companies based in offshore tax havens.

We are also subject to the risk of property values being manipulated by criminals buying or selling real estate at prices above or below market value, and collude with others in the eco-system to "clean" the money. One example is when properties are deliberately under-valued and illicit funds are used to pay the difference between the contract price and the properties’ true value. Processes should be in place to question such unusual property price transactions.

My final point is to ask, once again, that genuine buyers of Singapore homes be protected from any increased cost of compliance by developers, which the introduction of this Bill may inadvertently cause. We can do that by adopting a calibrated risk-based approach.

Mr Deputy Speaker, I support the Bill.

2.52 pm

Mr Gan Thiam Poh (Ang Mo Kio): Thank you, Mr Deputy Speaker. Sir, I support the introduction of the Bill to address some potential loopholes in our legislative framework governing real estate transactions which may be exploited for money laundering and financing terrorism.

As a member state of the Financial Action Task Force (FATF), we should support and cooperate with its various recommendations.

Notwithstanding, I have some concerns and would like to seek clarifications.

Firstly, how many member states of this FATF have implemented similar recommendations so far, especially nations with financial centres? Is there a level playing field for all states, especially financial centres?

The Bill requires developers to perform customer due diligence (CDD), maintain records and report on suspicious transactions, amongst other measures. How will the Ministry ensure consistency in the way different developers perform such checks and how can it ensure compliance from all developers so that these measures will not end up as a matter of formality? How will the Ministry qualify "best efforts" and the definition of "negligence"?

In addition, are the measures a continued responsibility or only applicable at the point of the contract, that means, is the developer required to conduct regular checks, periodical checks, before obtaining the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC)?

At which point in time does the duty and responsibility of the developer end? This is pertinent as the buyer could be a group of investors, fund, trust, public or private company with a variable capital structure and have more than a shareholder or company registered. The shareholders and investors of these entities could change after the Sale and Purchase (S&P).

The Bill does not cover properties purchased in the resale market or developments exempted by the Housing Developers Act. How will the Ministry prevent money laundering through this avenue?

Finally, I have a couple of questions regarding the powers granted to the Controller of Housing (COH) to refuse, suspend and revoke a Housing Developers Licence given to applicant(s) who has been convicted of any offences relating to money laundering and/or terrorism financing, as well as for an applicant which is a company if it has a substantial shareholder or person of responsibility which/who has been convicted of such offences. Will these regulations apply to a person who has previously been convicted for a similar offence beyond our jurisdiction? Will these legislation only apply to new developers or also target newly appointed directors or new shareholders of existing developers?

2.55 pm

Er Dr Lee Bee Wah (Nee Soon): Mr Deputy Speaker, Sir, the threat of terrorism is increasing on a global scale. The terror threat that Singapore faces is at the highest in years. To keep terrorism at bay, we need a multi-pronged approach. Apart from shoring up our border security and strengthening social resilience among our citizens, it is important to prohibit any channels of funding terrorism acts. In doing so, we can help to prevent and deter terrorism activities to a significant extent.

As a member of the Financial Action Task Force (FATF), it is our obligation to comply with standards set out by the Task Force. This is for our benefit and safety as well. Money laundering is the oxygen that gives life to terrorism activities. It is also used by other criminals to support their activities.

Certainly, this is one of the areas that we have to regulate closely. Nevertheless, I wonder if we are overreacting and being too heavy-handed in the proposed regulations and duties for developers. Let me declare my interest on the board of the public-listed company Tee Land and Koh Brothers.

I note that under the proposed amendments, developers must implement programmes and measures to prevent money laundering and terrorism financing (ML/TF). They must carry out customer due diligence measures, and they are also required to report suspicious transactions.

According to feedback from the Real Estate Developers’ Association of Singapore (REDAS), there are practical limitations on how developers can conclusively check or verify a purchaser’s profile and transactional patterns during a sale and purchase transaction.

It would be difficult for developers to ascertain the true source of a purchaser’s funds, the motives behind the purchase and his relationship or association with a "Politically Exposed Person", as such issues are generally deemed highly personal and private.

Moreover, while developers can screen clients or prospective clients against publicly available lists of individuals and entities known or suspected to be related to a terrorist or a terrorist organisation, such providers cannot be held responsible for the validity and accuracy of such information. I note with concern that documents and information from due diligence checks must also be retained for a specific time and in a specific form. May I ask what is this specific period? Storing and ensuring the security of such data can amount to a costly amount over a long period of time, which leads to increased business costs.

How will these programmes be evaluated for their effectiveness? Considering that these are laymen who lack adequate resources and expertise when it comes to dealing ML/TF activities, I would not be surprised if some of them slip up and allow ML/TF activities to occur under their very noses without their realising.

Furthermore, developers would usually engage third parties like solicitors and licensed estate agents to assist them in the sale of properties. Would the new regulations mean that these third parties also have to comply with the requirements on due diligence measures? Who will be held responsible when the measures are found to be inadequate? The Board of Directors, or the management?

If the Government wishes for the developers to take on a heavier responsibility, then it must furnish them with the relevant resources and work closely with them to help them come up with the right programmes and execution. Additionally, the Government must not only help with the initial stage, but also with the implementation throughout.

Should there be a weak link somewhere down the line, this can result in serious repercussions and even compromise our national safety. This is not something we should impose on the average citizen.

I urge the Government to reconsider the necessity of the various regulations and their deadlines. If we look at the existing policies, the risk of transactions being abused for money laundering and terrorism funding activities is frankly not very high. Hence, I do not see the point of burdening the developers with additional requirements, that may or may not serve the purpose of mitigating ML/TF. The existing standard OTP or Option to Purchase, and Sales and Purchase Agreements provide for payment by cheque, cashier’s order or telegraphic transfer for residential properties and the former two payment methods for non-residential properties.

Such funds would necessarily have gone through a financial institution. Inherent in this payment is that the funds would have gone through Prevention of Money Laundering/Countering the Financing of Terrorism (PML/CFT) by the respective financial institutions before developers receive them. Should developers wish to provide for an alternative mode of payment such as cash, they would be required to seek the Controller of Housing’s (COH) prior approval. Developers are “secondary” recipients of funds and the ML/FT risks faced by developers are lower.

The new regulations stipulate a time-frame of 12 months to allow developers to perform Customer Due Diligence measures on its existing customers based on its own assessment of materiality and risk and other considerations.

Considering that the ML/FT risks faced by a developer is lower as explained earlier, I think the Minister should consider revising the 12-month time-frame and allow developers some flexibility.

Developers are also required to appoint a compliance officer as stated in the MAS Notice. In fact, the senior management will evaluate decisions to establish business relationships where there are ML/TF suspicions. What requirements would this compliance officer have to fulfil? Can he or she be appointed from the team that conducts these decision evaluations? Otherwise, this is once again an additional long-term expense for the developers.

Moving on to other areas of concern, I note that the developer will not be able to issue the OTP while still being obliged to make a Suspicious Transaction Report (STR).

By declining to issue the OTP, this could alert the “customer” that their transactions have raised suspicions. If they are indeed involved in ML/TF activities, they may then redirect the funds and it would be difficult to apprehend them. If this turns out to be a mistake, the customer would have missed out on the purchase opportunity. This would not only deprive the development of a legitimate sale but may also incur unhappiness from customers and even lawsuits.

I note that the COH only regulates the sale of uncompleted projects. What is the reason that sale of completed projects is not required to be regulated? In fact, with regard to ML/TF, there are many more players along the value chain. Are we expecting more amendments to come up? Why do not we amend all relevant Acts at one go.

Sir, I appreciate the need to enhance management of ML/TF risks. Even more, we should not leave it to the developers to be responsible for ML/TF risk management. Certainly, everybody has a role to play to combat terrorism. If the Government wishes to have the developers’ full cooperation, then it would be prudent to engage the right people with the relevant know-how to work closely with them, and more importantly, to provide them with the necessary resources to do so, so that it will not end up as just another paper exercise and form signing.

(In Mandarin) [Please refer to Vernacular Speech.]: Obviously, it is very important to deter moneylaundering and terrorism financing. However, the Bill puts too much onus on developers. I am afraid that it might increase the cost and even result in negligence. According to the Bill, the developers must check whether the client has a suspicious background and, if found to be so, they cannot sell the property to this buyer. Do developers have sufficient training to do background check? If they use lawyers or agents to sell their properties, are these people required to do background checks on their clients too? Are they capable of doing it?

In fact, banks and other financial institutions have protocols to do background checks on their customers. Is it not better to ask them to do the checks?

When a transaction is delayed, innocent customers may lose the opportunity to purchase, and those who are of truly questionable character may smell a rat and, therefore, decide to transfer their funds to somewhere else.

I think banks and the Police are most capable of deterring money laundering and terrorism financing. We may achieve the opposite effect if we demand too much from the developers.

(In English): Sir, I support the Bill.

3.07 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, I stand in support of this Bill. Real estate is a popular outlet for illicit funds. Money launderers and terrorism financiers often invest in real estate for the same reasons other people do: the prices are stable, the values generally appreciate over time and you can live in it or rent it out.

This Bill sends a clear message to Singapore’s housing developers: you must not be involved with these criminals. They cannot be your customers, your shareholders, or your officers. You must take concrete steps to guard against their involvement, and you must report any suspicions you have.

Sir, I stand in support of this and I will raise three points for clarifications.

My first point is about implementation. In an interview conducted by The Business Times this February, a housing developer commented that conducting customer due diligence might be, I quote, “quite tricky”, for big projects on launch days. It is hard to conduct due diligence when there are so many buyers and so much urgency for everyone involved.

The developer said, “The process in the showflat does not quite work that way.”

Can the Ministry share how developers can best cope with the demands of the new law while not compromising their business operations? Will the Ministry provide guidelines on how housing developers can adapt to this new law?

My second point is about specificity. It seems to me that this Bill leaves quite a bit room for housing developers to make their own judgement calls. The word “appropriate” appears 12 times in what is a fairly short bill: appropriate steps, appropriate mechanisms, appropriate arrangements, appropriate measures. The word “adequate” appears seven times: adequate safeguards, adequate programmes, and adequate procedures.

Sometimes these broad guidelines are translated into specific measures. For instance, the Bill states that developers must appoint a compliance officer at the management level. This is clear and unequivocal. It is useful to companies trying to do the right thing by the law. However, more often, the guidelines are left broad. In Section 5C, developers are told they must take appropriate steps to identify, assess and understand the risks in relation to its purchasers.

Would it be enough to run the purchasers’ names through regulatory searches and sanctions lists? Or is there a need to commission an investigative firm to dig, expensively, into the background and history of the purchaser?

Numerous other parts of the Bill are written with some ambiguity. At one point, developers are told not to deal with purchasers that have “an obviously fictitious name.” What is an obviously fictitious name?

Sir, I understand that not everything can or should be codified as specific instructions within the law. But we cannot ask them to significantly increase their costs of doing business while remaining ambiguous about what we want from them. The law should allow a developer, acting in good faith, to confidently say, “I do not need to be fearful of a $100,000 fine.”

Further to my earlier suggestion to provide housing developers with guidelines, these guidelines could also shed light on what concrete steps developers are required to take to be in compliance with these new requirements.

Sir, the intent of these amendments is good but I hope this does not just become another “tick in the box” exercise. We must remember that we are asking developers who are there to make a profit to do their due diligence which might end up with them making less profits. We are asking them to check on their own clients who are paying them and at times paying them a lot of money. Again, we need to be more specific otherwise, these amendments will be futile.

Lastly on this point, can Minister clarify if the person who is liable for prosecution for failure to do due diligence is actually the person on the ground doing the due diligence? My concern here is that if a property agent who is doing the checks and we are going after the director who has never really met the customer, is this going to be effective? The person who is doing the checks know that he or she is not going to be prosecuted and the director who might receive hundreds of these reports from hundreds of property agents will never be able to properly do the due diligence.

My third point is about other things we can do. The Government can do more to combat the flow of illicit funds. The unexplained wealth order is one idea that has gained traction in recent years. What is the Government’s stance on the unexplained wealth order and will the Government consider implementing it in the law?

The idea is as follows. The authorities can apply to the courts to issue an unexplained wealth order. The order would compel an individual suspected of criminal activity to explain how they obtained their assets. The order would allow the authorities to freeze and recover assets if the individuals cannot explain, one, why they own assets worth more than their income and, two, how they have acquired the assets legally.

Several parts of Australia have implemented and actively used this law against those suspected of criminal activity. The UK introduced the Unexplained Wealth Orders under its Criminal Finance Bill this year and its High Court issued in September the first such order, compelling a jailed Central Asian banker and his wife to explain how they were able to afford an extravagant lifestyle that included ownership of a London mansion and a golf course. Earlier this month, Malaysia announced that they were also looking into its implementation.

Transparency International has identified 4.4 billion pounds worth of London properties that it says were paid for by illicit funds, and argues that an unexplained wealth order is a crucial tool for governments to combat the use of such dirty money.

This Bill we are reading today tackles the supply side of this problem by regulating our housing developers. An unexplained wealth order would complement this law by tackling the demand side of the problem.

Would the Ministry consider adopting unexplained wealth legislation to bolster our AML/CFT regime?

Sir, in conclusion, Singapore must show the world that it acts against dirty money. This Bill goes some way towards achieving that. But let us clarify what it means for local businesses and see how much more we can do.

Sir, notwithstanding my clarifications, I stand in support of the Bill.

Mr Depty Speaker: Minister Lawrence Wong.

3.13 pm

Mr Lawrence Wong: Mr Deputy Speaker, I thank the Members of the House who have risen in support of the Bill, as well as the Members who have shared their comments and feedback. I will now address some of the points raised in the course of this debate.

I believe Members who have spoken generally agree that as a responsible member of the international community, there is a need for Singapore to do our part to strengthen our levers to effectively detect, deter and prevent money laundering and terrorism financing.

However, several Members including Er Dr Lee Bee Wah and Ms Foo Mee Har asked why there was a need to impose these requirements on developers, in particular, since the funds they receive would eventually have to pass through financial institutions, and banks who already have to carry out checks anyway.

Er Dr Lee is right in that in general most money laundering and terrorism financing activities are concentrated in the financial sectors. But as Ms Foo Mee Har and Mr Louis Ng said, real estate is also an established method of money laundering worldwide. And so such activities can occur in real estate and real estate can be exposed to questionable practices, and be used as a vehicle for money laundering and terrorism financing activities.

For the real estate sector, in particular, besides your bankers and lawyers, developers are a key party that deals with property buyers. So, they do play an important role in the detection and prevention of such activities. And this is why we are introducing these requirements by amending the two Acts that regulate developers to better facilitate our anti-money laundering and counter-terrorism financing activities.

And this is also the reason why this Bill does not cover transactions involving completed properties because the Bill pertains to the two Acts that regulate the sale of uncompleted housing and commercial properties by developers. These are the sale of properties typically sold off-plan and they are exposed to more risks. And our main objective of the Bill is to get developers who are involved in the sale of such uncompleted properties involved in our anti-money laundering and counter-terrorism financing efforts and to bring them up to the same level as the other players that are involved in real estate transactions, namely the bankers and the lawyers.

For the sale of completed properties, these typically do not involve developers directly and so we rely on the other players in the real estate chain, such as bankers and lawyers who already have similarly robust obligations under the respective legislation to conduct customer due diligence checks and to report suspicious transactions. So, this is really about levelling up and making sure that we cover comprehensively the same requirements, not just on bankers, not just on lawyers, but also now, on real estate developers. And that is why the Bill covers the two Acts that regulate the sale of uncompleted properties.

For real estate agents, in particular, CEA already has guidelines to require estate agents to perform due diligence checks for suspicious transactions. These are guidelines by the regulator. However, we do intend to make amendments next year to the Estate Agents Act so as to impose similar anti-money laundering and counter-terrorism financing requirements for estate agents.

I understand and I hear the feedback from Members who have spoken and all of you have highlighted and asked if the proposed legislation will be overly onerous on developers, and whether it will impact their business operations. We share the concerns and that is why, in drafting the provisions and in implementing these requirements, we have been careful to implement a calibrated risk-based approach.

So, in tabling this Bill, 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. And that is why, as I mentioned earlier, the Bill adopts a risk-based approach under which the broad principal obligations are set out. Perhaps, that is why Mr Louis Ng noted that these are these terminologies, which are set out in broad language. But it is deliberately done, so that then businesses have the 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 can identify using their own AML/CTF programmes.

Er Dr Lee, for example, talked about the 12-month deadline when due diligence checks are to be conducted. These are not hard-coded in the Bill. These are more detailed regulations that would be set out in subsidiary legislation and we have not decided on them yet. So, we will take the time to engage the industry and review these specific requirements before we set them out in subsidiary legislation.

That say, I would like to highlight that developers today already collect most of the "Know Your Customer" (KYC) information that we have in mind for the rules. Developers today already do so. Any developer that accepts a transaction without doing basic KYC checks I think will be problematic, even today. So, I would expect developers today to already collect most of the KYC information that we have in mind for the rules, such as identity documentation so that incremental compliance costs should not be excessive and should not adversely affect purchasers, especially genuine purchasers.

Er Dr Lee also asked how long developers would have to keep records of their diligence checks. The prescribed period will be set out in the rules and will be at least five years after the completion of the transaction. And this is consistent with what is prescribed in the FATF recommendations and also in other sectors’ legislations, such as for financial institutions and for pawnbrokers.

Some Members asked about the extent of the developer's responsibilities in adhering to the requirements of the new Bill. I think, specifically, Mr Gan Thiam Poh asked about the point at which the developer's duty to monitor their buyers ends, given that the profile of buyers can change after the signing of the sale and purchase agreement.

Under the new section 12B of the Housing Developers (Control and Licensing) Act and the new section 5A(2) of the Sale of Commercial Properties Act, a developer is required to perform such customer due diligence measures as may be prescribed, at such times as may be prescribed. So, the provisions are broad. But I want to assure Members that we will not be requiring developers to monitor their buyers perpetually. Instead, the rules will make it clear that the requirements on developers will only apply until the project is completed, which is also the point at which the developer is no longer regulated under the two Acts. Developers should ensure that the information obtained with respect to the purchasers and its beneficial owners are kept updated. At any point during the monitoring, if the developer comes to know about property which represents proceeds of, or is used or intended to be used in connection with, any act which may constitute drug dealing or criminal conduct, the developer will then have to report such suspicious activity to a Suspicious Transaction Reporting Officer. But the point is that the rules will not be imposed on the developer perpetually.

Ms Foo Mee Har also asked if developers could rely on third parties, such as estate agents, lawyers or banks, to conduct the necessary checks on their behalf. The answer is yes. Developers will have the flexibility to determine how best to do their checks, including through third parties. As mentioned, the Bill does adopt a risk-based approach to compliance and we will not rule out the use of such third parties. But ultimately, the developer bears full responsibility for adhering to the requirements under his new Bill. So, the developer should ensure that the third party it hires has the appropriate capabilities and the resources to comply with these measures, and are able to provide the relevant information to the developers without delay, upon request, should they decide to use a third party.

Er Dr Lee and Mr Louis Ng asked who specifically would be held responsible if the due diligence measures were found to be inadequate, or not complied with. And Ms Foo also spoke about the need for the burden of compliance to fall on senior management and throughout the organisation for accountability.

Indeed, the developer will be primarily responsible for failing to perform any due diligence measures as required by law. However, where the offence was committed with the consent or connivance of an officer of the company, or the commission of the offence was attributable to the officer's negligence, then that officer may also be held liable for the offence. So, it will really depend on a case-by-case basis, depending on the circumstance. That officer could be any director, member of the management team, CEO, manager, secretary or other persons acting in such capacity in the developer company. And this is also the position taken today under section 27 of the Housing and Developers (Control and Licensing) Act and section 9 of the Sale of Commercial Properties Act.

Er Dr Lee also asked about the role of the compliance officer that developers must appoint. This compliance officer can be any appointee at the management level, and will be responsible for reviewing the developer's anti-money laundering and terrorism financing policies. So, it need not result in additional expense but the developer must designate a compliance officer and appoint with clear responsibilities for this officer.

Ms Foo asked how developers can mitigate the risk brought on by the use of shell companies and other corporate entities to purchase property. Indeed, the Government is aware of such concerns and we have made legislative amendments to address this issue. For example, the Companies Act was amended last year to make the ownership and control of business entities more transparent, and thereby reduce opportunities for the misuse of corporate entities for illicit purposes. The FATF recommendations also include requirements for regulated entities to obtain information of beneficial ownership. So, in elaborating and crafting the rules, we will make clear the duties of developers in this particular requirement of checking for beneficial ownership as well.

Some Members expressed concern that developers would fail to effectively comply with the new rules due to a lack of understanding of how to implement them, or merely go through the motions. And, indeed, we do not want this to be a paper exercise or a tick-in-the-box exercise, as some of the Members have mentioned just now. So, we will be adopting a two-pronged approach to address this.

First, we want to help developers level up. So, URA will engage the developers. They will do industry outreach and provide all the necessary guidance to developers in the initial implementation stage. Subsequently, URA will provide ongoing support to improve the industry's understanding of what constitutes risky transactions, as well as their risk mitigation capabilities that are needed, in order to foster a good understanding of the new requirements.

Then, when the industry's capabilities are levelled up, when everything is in motion, the Controller of Housing under URA will carry out regular audit checks to ensure that indeed, developers are implementing their measures properly. And if developers are found to not have adhered to the requirements, there will be penalties, not only potential fines, but in more serious cases, they could also be disqualified from obtaining licences in the future.

Let me now move on to some transboundary issues which Members have raised.

Mr Gan asked whether other countries have implemented similar regulations, how many, and if there was a level playing field.

Indeed, the whole point of developing international standards under FATF is to ensure that there is a comprehensive global system to fight against money laundering and terrorism financing. And, to date, about 190 jurisdictions have committed to the FATF Recommendations. The specific provisions may differ from country to country because even the regulation of the sale of properties varies from country to country. Some countries even prohibit sale of properties off-plan. And so, specific provisions may vary but 190 jurisdictions have committed to the FATF recommendations precisely because this is an important international issue and it can make progress through a global effort.

Mr Gan also asked if we can deny or revoke a housing developers licence to persons or entities that have been convicted of money laundering or terrorism financing offences in other jurisdictions.

We will mainly rely on local convictions as a basis to refuse, suspend or revoke a Housing Developer's Licence. But the Controller may refuse to grant a Licence to a person or entity with an overseas conviction, or revoke the licence if it has been earlier granted, if the overseas conviction, together with other circumstances, indicates that it is carrying on its business in Singapore in a manner that is detrimental to the interests of purchasers or to the public. So, we have the ability to do so, to revoke, or suspend or refuse a Licence if the convictions are happening elsewhere.

Finally, Mr Louis Ng suggested for the Government to consider adopting unexplained wealth legislation to bolster our AML/CTF regime. This is, in fact, a point raised by Mr Murali Pillai yesterday during the debate on the Serious Crimes and Counter Terrorism (Miscellaneous Amendments) Bill.

So, it is, in fact, not quite so relevant to this Bill, because as mentioned by Minister Josephine Teo yesterday, the Government will certainly monitor overseas developments in the area of anti-corruption measures to see if these can be adapted here on another occasion. Unexplained wealth order legislation has been introduced overseas as an investigation tool to enable enforcement agencies to investigate the source of money. But it is a tool which can and should be capable of being directed at anyone, and not just developers. So, it is really a separate matter outside of the scope of this Bill.

Mr Deputy Speaker, Sir, I believe I have addressed the points raised by Members. This Bill is just one of the many changes we are making to our laws to help Singapore be a responsible member of the international community, and to uphold our reputation as a conducive and reputable place to do business.

Failure to impose these anti-money laundering and terrorism financing requirements across our entire real estate value chain, comes at a reputational cost to Singapore. And I believe that legislative backing will be necessary to ensure effective enforcement and compliance to these requirements. Mr Deputy Speaker, Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Lawrence Wong].

Bill considered in Committee; reported without amendment; read a Third time and passed.

Mr Deputy Speaker : Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 3.55 pm.

Sitting accordingly suspended

at 3.31 pm until 3.55 pm.

Sitting resumed at 3.55 pm

[Deputy Speaker (Mr Lim Biow Chuan) in the Chair]