Second Minister For Finance And National Development’s Ministerial Statement On Singapore’s Anti-Money Laundering Regime, At Parliament On 3 October 2023

1. Mr Speaker, Sir.

2. My colleagues, Minister Josephine Teo and Minister of State Alvin Tan, have spoken about the case, our overall AML regime and the measures we have in place, including in the financial sector. I will elaborate on two further areas – the real estate sector and companies. The regimes in these areas closely align with our whole-of-government three-pronged strategy, outlined by Minister Teo earlier.

3. My statement will be in three parts. 

a. First, our restrictions on the foreign ownership of landed residential properties and our controls against money-laundering in the real estate sector.
 
b. Second, our regulatory and enforcement measures to deter the misuse of companies.

c. Third, how we will further strengthen our system, incorporating the lessons that we have learnt.

AML CONTROLS IN REAL ESTATE SECTOR

A. CASE BACKGROUND

4. Let me first set the context by providing an update on the properties involved in the case:

a. To date, 94 residential properties have been issued with prohibition orders. Of these, 60 are completed resale units, and 34 were uncompleted units sold directly by developers. 

b. 8 of these properties were landed residential properties at Sentosa Cove.

c. In addition, 53 commercial properties and 5 industrial properties have been issued with prohibition orders. 

B. REGULATIONS ON LANDED RESIDENTIAL PROPERTY OWNERSHIP

5. With this in mind, let me explain the framework governing purchases of residential property in Singapore by foreigners.
 
6. First and foremost, foreign ownership of landed residential properties is restricted under the Residential Property Act (RPA). 

a. Landed residential properties in Singapore remain primarily the preserve of Singapore Citizens. Foreigners are not allowed to buy or own landed residential properties without approval.

b. If approval is given, approved foreign purchasers are only allowed to own one landed residential property in Singapore, for their own occupation.

7. Ms He Ting Ru asked about the grant of approvals. There are two categories of landed residential property in respect of which approvals can be granted: landed residential properties on mainland Singapore, and landed residential property developed with a view to allowing foreign ownership. The latter is a very small category, i.e. the landed residential properties developed in Sentosa Cove. 
 
8. The Government takes a very strict approach when granting approvals for foreigners to own landed residential properties in Singapore mainland. Under this regime:

a. Applicants must be a Singapore Permanent Resident (PR) for at least 5 years and must have made exceptional economic contribution to Singapore. This is assessed considering factors like income tax contributions to Singapore.

b. We also consider whether applicants have a strong Singapore nexus. For example, PRs with children who have served National Service and who have demonstrated strong commitment to Singapore. 

c. These factors point towards an applicant’s connection to Singapore, and their long-term commitment and contribution to Singapore.

9. The number of approvals granted to foreigners to acquire landed residential properties in Singapore mainland under the RPA, remains low. 

a. In 2020, 2021 and 2022, 24, 51 and 34 approvals were granted in each year respectively to PRs to own landed residential property on Singapore mainland. 

b. This should be seen in contrast with our total landed housing stock of more than 73,000 properties, and average annual transaction volume of more than 2,700 landed properties on Singapore mainland over the same period. 

10. For the second category of landed residential property, which are those in Sentosa Cove, some of the restrictions are lifted to allow foreigners to buy them. 

a. Sentosa Cove was developed as a unique world-class integrated waterfront development, aimed at international clientele.
 
b. Hence, foreigners who are non-PRs may acquire landed residential properties in Sentosa Cove, and approvals are generally granted. 

11. Mr Neil Parekh asked about the applications and approval numbers for Sentosa Cove. 

a. In the past three years, SLA had received a total of 88 applications from foreigners to purchase landed properties in Sentosa Cove. All, but two, have been approved. 

12. Since we set aside landed residential properties primarily for Singaporeans, we do not restrict foreign ownership for non-landed residential properties in Singapore. That said, we impose a higher Additional Buyer’s Stamp Duty on any residential property purchase by a foreigner. In April 2023, this was raised from 30% to 60%, as part of pre-emptive measures to dampen local and foreign investment and prioritise Singaporean owner-occupation. Today, the proportion of foreign property purchases is low, at about 2%.
 
13. To reiterate, the 8 landed residential properties issued with the prohibition of disposal orders are all at Sentosa Cove, where some RPA restrictions are lifted. None are landed residential properties on the mainland, where the approval criteria are much stricter. The rest are non-landed units, which can be purchased by foreigners. Hence, the requirements of the Residential Property Act had been met.
 
14. To answer the question by Mr Saktiandi Supaat on the impact on the market, while it is difficult to pinpoint the exact effect of the transactions involved in the case on the property market, the impact on property prices is likely to have been minimal. They make up an insignificant share of residential, commercial and industrial transactions.

C. ANTI-MONEY LAUNDERING STRATEGY FOR REAL ESTATE SECTOR

15. Members have asked about anti-money laundering safeguards in the real estate sector. Mr Yip Hon Weng, Mr Gerald Giam, and Ms Hany Soh asked about Customer Due Diligence (CDD) checks that property agents need to perform and the measures in place to train them. 
 
16. These are valid questions as money laundering is often carried out through asset acquisition, and real estate is a valuable and attractive asset class. We know that there are higher risks of money laundering in the real estate sector.  

17. And so, we have been working over the years to address this. We have put in place a risk management framework guided by the recommendations made by the Financial Action Task Force (FATF). Our framework leverages key sectoral players as Designated Non-Financial Businesses and Professions (DNFBPs), with the obligation to look out for red flags and report suspicious transactions to the Police. This complements other DNFBP professionals involved in real estate transactions. The obligations apply to landed and non-landed residential properties as well as commercial and industrial properties.

Prevention and Detection

18. In the real estate sector, our gatekeepers are (a) property agents, (b) property agencies and (c) developers. They are the first line of defence as they are the ones who generally come into contact with parties undertaking real estate transactions. They therefore play an important role in the Prevention and Detection of money-laundering activities in property transactions, the first two prongs of our AML strategy.
 
19. We have progressively strengthened our regime, including enacting various legislation on the AML requirements of our gatekeepers:

a. While there had been practice guidelines in place prior, in 2021, we legislated the prescribed duties of property agents with the introduction of the Estate Agents (Prevention of Money Laundering and Financing of Terrorism) Regulations.

b. In 2023, we introduced changes to the Housing Developers (Control & Licensing) Act (HDCLA) and the Sale of Commercial Properties Act (SCPA) to also extend AML requirements on developers of residential, commercial and industrial properties.

20. As gatekeepers, each property agent, agency and developer has a duty to perform CDD on their clients or customers. This includes verifying the identity of the client, or the beneficial owner, screening these parties and assessing their level of risk (e.g., identifying foreign politically exposed persons (PEPs), persons from countries/ jurisdictions identified by FATF as higher risk), and maintaining records of the relevant documents. 

21. Let me give some examples:

a. If the customer purports to act on behalf of another party, the gatekeepers must request the relevant documents authorising such representation.

b. For entities who intend to purchase, the gatekeepers must also check on the nature of its business, ownership and control structure, and place of incorporation.

c. For purchasers from countries where there is a higher risk of money laundering, they are further required to verify their income and source of their wealth and funds.

22. The degree of checks required is commensurate with the assessed level of risk, e.g., enhanced CDD is required for higher-risk transactions. This includes verifying the income level, source of wealth or funds of the purchaser.

23. Given the nature of property development, developers are also required to periodically review the information about purchasers that had been furnished, to ensure that it remains accurate and updated, until the completion of the property. 

24. Internally, property agencies and developers are also required to implement policies, procedures and controls such as internal audits, to prevent money laundering activities.
 
25. Finally, as part of the Detection prong of our AML strategy, every property agent, agency, and developer is required to file a Suspicious Transaction Report (STR) through their respective agencies if in the course of their business or profession, they know or have reasonable grounds to suspect that any property may be connected to criminal conduct. Failure to do so may result in regulatory action.

26. Relatedly, Assoc Prof Jamus Lim asked about guidelines on cash payments. For uncompleted property sales, developers are not allowed to accept payment in cash. In general, quantitative thresholds may not be useful as there are many indicators that could point to money laundering activities and any line drawn would be arbitrary. Each case should be considered holistically. This is why we look to industry practitioners, who know how the market works and are in contact with the buyers and sellers, to make a judgment based on their experience, while we provide guidance on what they should look out for.  

Enforcement
 
27. Under the third prong of our AML strategy – Enforcement – our sectoral regulators play an important role in ensuring that gatekeepers carry out their responsibilities properly. 

28. In the real estate sector, CEA is the regulator which oversees the property agents and agencies, while the URA regulates the developers.

29. CEA has made considerable effort to help property agents and agencies carry out their responsibilities:

a. First, to educate the industry, CEA has issued a guide to property agents and agencies on compliance with anti-money laundering regulations. It provides details on the checks to be conducted and the measures that need to be put in place, including checklists to guide agents and agencies in fulfilling their CDD obligations. 

b. Second, CEA provides a list of common suspicious indicators to aid agents and agencies in identifying suspicious transactions. These include: 

i. Buying multiple properties within a short time; 

ii. Purchasing properties without inspecting them; and, 

iii. Entering into transactions at a value much higher or lower than market value.

c. Third, CEA regularly shares latest developments, and responses to common queries by property agents and agencies relating to their anti-money laundering duties. 

i. CEA is also developing a one-stop resource webpage, to make it easier for the industry to retrieve information on anti-money laundering requirements.

d. Fourth, property agents who require additional training on their anti-money laundering duties may take up the Continuing Professional Development (CPD) course provided by CEA’s course providers.

30. Like CEA, URA regularly conducts briefings, and has been issuing circulars to guide developers in their duties, even before the legislation had been passed earlier this year.
 
31. As part of ensuring compliance, CEA and URA conduct AML-related inspections regularly. Property agents, agencies, and developers that are identified to be of higher risk are prioritised for inspections and subject to more regular inspections.

a. For example, those who deal more in private housing, especially higher-end projects, could be considered higher risk.

32. CEA and URA also conduct ad hoc inspections based on feedback from law enforcement agencies on possible infringements by property agents, agencies, and developers.

Other Checks and Balances in the Real Estate Sector

33. We would also like to point out that besides the developers, property agencies and agents, professionals such as conveyancing lawyers, accountants and financial institutions (FIs), who similarly have anti-money laundering obligations, are also involved in nearly all property transactions. 
 
34. As highlighted by Minister Josephine:

a. Lawyers and accountants also have strict Know Your Client (KYC) and anti-money laundering obligations. Conveyancing lawyers and the relevant accountants are required to perform CDD when preparing for or carrying out any acquisition, divestment or any other dealing of any interest in real estate.  

b. These professionals are also required to file a STR with the STRO, if in the course of their business or profession, these professionals know or have reasonable grounds to suspect that any property may be connected to criminal conduct.

35. Apart from these legal obligations, lawyers and accountants who are mindful of their professional reputations and risk exposure would and should decline to act for the potential client in the suspicious transactions.
 
36. Assoc Prof Jamus Lim asked whether there are differences between financial institutions and property agents in implementing AML measures. In general, while the underlying principles are the same, the AML measures required must be tailored to address risks unique to the sector and the party involved.

37. Principally, as my colleagues have emphasised, our regime is a comprehensive one. Any person who knows or has reasonable grounds to suspect that any property represents the proceeds of or is connected with criminal conduct, is required to file a STR to the Police.

a. To answer Mr Murali Pillai’s question, this includes landlords, if they have reasonable grounds to suspect their tenants.

b. Failure to file such STRs as soon as reasonably practicable is an offence.

D. SUMMARY OF STRATEGY FOR REAL ESTATE SECTOR

38. In sum, in the real estate sector, there are several layers of defence, to mitigate risks of money-laundering and protect the system from abuse. The gatekeepers cover different areas, but play complementary roles in strengthening Prevention and Detection in our regime.

39. As such, the vast majority of purchase and sale transactions are subject to CDD checks, in some form and at various stages. In fact, most of them are subject to more than one layer of checks.
 
40. If any of the gatekeepers fall short of their duties or do not carry out their obligations, they will be subject to penalties. Enforcement is taken by CEA and URA, our sectoral regulators who also work hard to guide our gatekeepers in their responsibilities.

41. Investigations are ongoing into the property agencies and agents who had facilitated transactions for the properties involved in the money laundering probe. We will fully investigate the incident and if any breaches are found, take the necessary regulatory action. 

AML CONTROLS FOR COMPANIES

42. Next, let me address Members’ questions on the Government’s efforts to detect illicit activities conducted by or through companies incorporated in Singapore.

43. Our regulatory regime seeks to balance between maintaining the ease of doing business, which has been the hallmark of Singapore as a business and financial hub, and ensuring strong corporate governance to uphold investors’ confidence. 

44. Today, ACRA has in place various measures to deter the misuse of companies for money-laundering. In response to Members’ questions, let me first describe the baseline framework that ACRA has in place, before I explain the additional measures that are in place for intermediaries such as Registered Filing Agents, which similarly follow the spirit of Prevention, Detection and Enforcement. 

A. BASELINE FRAMEWORK

Prevention – Incorporation checks

45. When a company is incorporated, ACRA screens all the officers and shareholders in its registers against lists of known adverse information.  As and when there are changes to the directorships, companies will need to update ACRA accordingly, and the new additions will be screened.
 
46. In addition, all companies are required to have at least one director resident in Singapore, to ensure that we will be able to hold someone accountable for any breaches committed by the company in Singapore. This goes beyond the requirements of many other jurisdictions. Non-resident foreigners looking to set up companies in Singapore will therefore need to either appoint a resident business partner as a director, or appoint a nominee director to act on their behalf. I will elaborate on this later.

Detection – Post-incorporation monitoring

47. Post-incorporation, ACRA monitors companies and takes proactive enforcement measures to guard against their potential misuse. 

a. Mr Saktiandi Supaat asked about the prevalence of non-trading or inactive companies and how ACRA addresses the issue. 

b. Let me first clarify that just because a company is non-trading or inactive,  does not necessarily mean that they are being misused for money laundering purposes. There are various reasons why an owner may choose to keep his company despite not actively operating it, for example, due to other business priorities, illness or other challenges. 

Enforcement – Striking off

48. A clear sign of inactivity is when a company fails to file its annual returns. As companies could be inactive due to legitimate reasons, ACRA does not take action immediately. Instead, ACRA continues to track such companies, and if they remain inactive after a period or are flagged via intelligence provided by other agencies, ACRA will proceed to strike them off. About 17,000 such companies have been struck off over the last 5 years. 

a. Thus far, the companies associated with this case have largely been filing annual returns with ACRA and have thus remained on the register.

b. I shouldclarify, however, that not all companies that are being misused for money laundering are inactive or dormant firms. Criminals often use front companies with a portfolio of businesses, comprising a mix of legitimate and illicit activities. This makes it challenging for regulators to identify the true nature of companies, unless active investigations of the company’s activities are undertaken.

49. The checks that I have mentioned apply to all companies in Singapore. Let me now touch on aspects of ACRA’s regulatory regime, that seek to mitigate specific areas of higher risk, as part of our overall prevention efforts.

B. ADDITIONAL REQUIREMENTS ON FOREIGN-OWNED FIRMS

50. The first relates to the role that Registered Filing Agents or RFAs play in mitigating the risks posed by foreign-owned companies. 

51. As a business hub, we attract many foreign companies to Singapore. By and large, they are bona fide, and we welcome them because they contribute to our economy and provide good jobs for our locals. However, we recognise that there could be some bad actors, who may take advantage of Singapore’s pro-business environment and open financial markets to conduct illicit activities. 

52. Prevention. As part of our prevention efforts, we therefore impose additional requirements on foreign-owned or foreign-controlled companies. Non-residents who are looking to set up companies in Singapore must engage ACRA-authorised corporate service providers, also known as Registered Filing Agents or RFAs, to incorporate a company. RFAs provide another layer of scrutiny, which is particularly useful for foreign-owned or controlled companies, in addition to ACRA’s pre-incorporation checks. The RFAs are legally required to:

a. One, conduct customer due diligence, by identifying and verifying the identities of the customer and the beneficial owners of the intended incorporated company. 

b. Two, conduct enhanced customer due diligence to compensate for the higher risk if the customer is not physically present, such as ensuring that the customer’s identity is established by additional documents or information, and 

c. Three, inquire into the purpose and the legitimacy of the use of a company structure. 

53. Detection. If the RFA fails to complete the due diligence measures, it must not proceed with the intended incorporation transaction and should file a Suspicious Transaction Report (STR). RFAs should also file STRs if they encounter any suspicious transactions in the course of their work. This helps to alert authorities of risks surrounding specific companies.  

54. Enforcement. RFAs play an important role as gatekeepers in reducing the likelihood of a Singapore entity being incorporated and subsequently misused for money laundering. They are subject to supervision by ACRA for compliance with Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT obligations). 

55. ACRA takes enforcement actions on RFAs and Registered Qualified Individuals (RQIs) found to have breached any requirement. Between 2021 and 2023, ACRA imposed 24 sanctions against RFAs and RQIs, including 15 cases where the RFA's or RQI's registration was cancelled or suspended. ACRA is investigating the role played by the RFAs and RQIs involved in this case, and will take enforcement action if necessary. 

56. ACRA has planned additional measures such as enhancing the penalties on errant service providers, to strengthen the effectiveness of our anti-money laundering regime. The proposals had undergone public consultation earlier, and we are looking to table them in Parliament in early 2024. 

C. NUMBER OF DIRECTORSHIPS AND UPCOMING CHANGES

57. The second area relates to directorships. Because of Singapore’s requirement for companies to appoint at least one ordinarily resident director, foreigners based overseas often look for local nominee directors to act on their behalf on matters relating to their company. 

58. To address this need, corporate service providers provide services for nominee directors to be appointed, among other services. As some individuals take on nominee directorships as a business service, it is understandable for them to hold multiple directorships, to support their clients in due diligence checks and incorporating their business. Nominee directors have the same legal obligations as other directors and are required to discharge their duties responsibly, with honesty and reasonable diligence. Those who fail to do so can face sanctions, including disqualification and debarment.

59. Mr. Melvin Yong asked about the number of individuals who have held a large number of directorships. In line with international benchmarks like the UK, US and Australia, there are currently no limits to the number of companies that a director can be involved in. Having said that, 99% of directors hold fewer than 10 directorships.

60. ACRA has been studying restrictions on directorships, both to ensure that nominee directors are fit and proper to take up the role and whether it would be useful to limit the number of nominee directorships that one can hold. These proposals were put out for public consultation in 2022. We will take into account risk factors and business needs, in deciding whether to introduce additional measures. These proposals will also be tabled in Parliament early next year. 

D. BENEFICIAL OWNERSHIP OBLIGATIONS

61. A third area, which Mr Don Wee asked about, is to address the cloaking of the ownership of companies and the identity of money launderers through the use of complex corporate structures, by requiring companies to identify their beneficial owners and file this information with ACRA. ACRA manages a central register of controllers, which sets out the beneficial owners of companies, i.e. the individuals who ultimately own or control a company. 

62. This data on beneficial ownership is crucial in combating money-laundering and foiling the plans of criminals. It aids law enforcement agencies in their investigations, by enabling them to peel back the different layers, identify the criminals behind companies that are used for illicit activities, and bring them to task. 

63. To maintain its data quality, ACRA conducts regular inspections to ensure that companies file their beneficial ownership information in a timely manner. Enforcement action is taken on those who fail to comply. 

E. SETTING UP OF INTERMINISTERIAL COMMITTEE

64. Sir, I have outlined the various measures that ACRA has in place to prevent the misuse of corporate structures, whether directly relating to the companies or through the regulation of RFAs and the requirements for nominee directors for foreign-owned or controlled companies. 

65. As part of its detection efforts, ACRA utilises data analytics to identify individuals who may be nominee directors of high-risk companies that are potentially being misused, as well as registered filing agents (RFAs) who might be involved in the setup of such companies. 

a. In addition, as Minister Teo mentioned earlier, as a sectoral regulator, ACRA works closely with the STRO and law enforcement agencies, and flags high-risk individuals to them regularly for more in-depth review. 

b. ACRA also undertakes checks and takes action with the help of intelligence received from other agencies, such as the CAD.

66. Should ACRA or CAD’s investigations uncover any wrongdoing, ACRA will take action to impose sanctions on the RFA, which could include cancellation or suspension, and against the company and its directors. 
 
67. Notwithstanding all these efforts from various agencies, our anti-money laundering efforts are an unending endeavour. As this case has shown, criminals are becoming increasingly sophisticated. Even as we identify new areas to tighten, criminals will invariably find new loopholes to exploit. 

68. As criminals will constantly find new ways to circumvent our laws and regulations, government agencies and relevant industry players must become ever more coordinated to successfully uncover and arrest money laundering. To this end, we must strengthen our information-gathering and intel-sharing capabilities so that we can better detect illicit activities conducted by companies incorporated in Singapore. 

69. To ensure that our AML regime remains robust, the inter-agency steering committee will continue to oversee the Whole-of-Government anti-money laundering efforts. In addition, we will be setting up an Inter-Ministerial Committee comprising political office holders from MAS, MHA, MinLaw, MOM, and MTI, and chaired by myself to review our system with the benefit of what we are learning from this case, and to keep our regime up to date with increasingly sophisticated crimes. 

70. The review will focus on four main areas: 

a. First, on how we can better prevent corporate structures from being abused by money launderers; 

b. Second, how financial institutions can enhance their controls and collaborate more effectively with each other and authorities to guard against and flag suspicious transactions;

c. Third, how other players in the system, like corporate service providers, real estate agents and precious stones and metals dealers can help to better guard against money laundering risks; and

d. Fourth, how we can centralise and strengthen monitoring and sense-making capabilities across government agencies to better detect suspicious activities. 

71. Where gaps are identified, we will tighten our regulations and enforcement to prevent exploitation by criminals. The Committee will share its progress and findings in due time.

72. Singapore is determined to preserve our hard-earned reputation as a clean and trusted business hub. We will continue to uphold our zero-tolerance approach towards money laundering, and do our best to ensure a strong and robust regulatory regime.

PROCEDURAL NOTE

73. Mr Speaker, Sir, I have come to the end of my statement. May I suggest that t