Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC at the Second Reading of the Developers (Anti-Money Laundering and Terrorism Financing) Bill [Bill no. 45/2018]
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 of clarifications.
Guidance on implementation for housing developers
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 everybody involved.
The developer said, “The process in the showflat does not quite work that way.”
Could 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?
Guidance on interpretation of new requirements
My second point is about specificity.
It seems to me that this Bill leaves quite a bit of room for housing developers to make their own judgment calls.
The word “appropriate” appears twelve 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 programs, and adequate procedures.
Sometimes these broad guidelines are translated into specific measures. For instance, the Bill states that developers must appoint at a compliance officer at the management level. This is clear and unequivocal. It is useful to companies trying to do right 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 every thing 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 doesn’t 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 checks?
My concern here is that if it is the property agent who is doing the checks and we go after the director who really has never 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.
Unexplained source of wealth
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 on criminal activity. The UK introduced 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.
The bill we’re 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 this Bill.