Money laundering is a global issue that infiltrates various industries, including the real estate market. With the recent billion-dollar money laundering case involving a total of 105 properties, there has been an increasing concern about the role of property agents in facilitating money laundering through real estate transactions.
In this article, we will share about what real estate money laundering entails and how property agents can play a vital role in combating this illicit activity.
What Is Real Estate Money Laundering?
Money laundering is the process of making illegally obtained money appear legitimate by passing it through a complex sequence of banking transfers or commercial transactions. The primary goal of money laundering is to obscure the source of the funds, making it difficult for authorities to trace and seize the illicitly gained wealth.
In the context of real estate, money laundering typically involves purchasing properties using the proceeds of criminal activities such as drug trafficking, corruption, or tax evasion. The purchased properties are then sold or rented, generating clean money while concealing the illegal origins of the funds.
The Role of Property Agents in Combatting Money Laundering
Agents like yourself are the intermediaries between buyers and sellers in real estate transactions, hence your involvement in money laundering often occurs unwittingly as criminals seek to exploit the real estate market’s opacity and complexity.
Here are some crucial steps you can take in preventing and detecting money laundering in the real estate sector:
Do Not Facilitate Anonymous Transactions
You may encounter clients who wish to remain anonymous during transactions. This anonymity can raise suspicions, as it may be an attempt to conceal the true owner’s identity, a common money laundering tactic.
As the coordinator of a real estate transaction, you should identify your clients and verify their identity, source of funds, and their intentions for the property. Failing to verify a client’s background can inadvertently enable money laundering.
Practise Customer Due Diligence
Under the Prevention of Money Laundering and Financing of Terrorism Regulations (PMLFT), all property agents are responsible for conducting customer due diligence (CDD) on their clients to ensure they are not involved in illicit activities.
You will need to keep a record of your CDD measures including any document or information obtained during the process for a minimum of 5 years.
You may refer to the illustrated chart below on how to conduct CDD for different types of entities:
Lodge Suspicious Transaction Reports (STRs)
If you come across transactions that seem suspicious, report them to the Suspicious Transaction Reporting Office (STRO) of the Commercial Affairs Department (CAD), Singapore Police Force. Early detection is essential in combating money laundering.
CEA Penalties for Non-Compliance
As part of the regular compliance initiative, CEA inspects yourself and your real estate agencies to check if you have complied with the PMLFT Regulations. Those who fail to comply with the Estate Agents Act (EAA), and its subsidiary legislation could be subjected to disciplinary action by CEA:
– Imposition of financial penalties (up to $200,000 per case for agency, and up to $100,000 per case for agent).
– Revocation or suspension of the CEA licence and real estate agency registration.
– CEA may also impose financial penalties of up to $5,000 on the errant agency or agents under the EAA.
CEA had also developed a list of suspicious indicators aimed at assisting you and your agencies in detecting and circumventing money laundering activities. This information is circulated as part of CEA’s Guide on PMLFT Regulations and remains a relevant guide on your duties to prevent such activities.
Real estate money laundering is a serious global concern, and you can inadvertently become an unwitting accomplice if you fail to exercise due diligence and vigilance.
By understanding the intricacies of money laundering, staying informed about regulations, and taking proactive measures to combat it, you can play a vital part in protecting the integrity of the real estate market and contribute to a safer financial environment for all.
We hope you find the above information useful, and we will continue to share more content that can help you succeed in the real estate business.
At PropertyGuru, we will see you home 😊