SPEECH BY ER DR LEE BEE WAH, MP FOR NEE SOON GRC, AT THE SECOND READING OF THE DEVELOPERS (ANTI-MONEY LAUNDERING AND TERRORISM FINANCING) BILL IN PARLIAMENT ON 20 NOV 2018
Mr 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 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 organization, 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 wish 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 like 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 regards to ML/TF, there are still many more players along the value chain. Are we expecting more amendments to come up? Why don’t 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 just another paper exercise and form signing.
In Chinese please. 杜绝洗黑钱和恐怖份子资助显然很重要，不过这个法案中对地产开发商的要求未免太高，我担心因此增高成本甚至导致疏漏。根据法案，地产商必须查明顾客的背景是否可疑，否则不能把房产卖给他。地产商是否有足够的训练可以查明顾客的背景？如果他们使用律师或产业经纪帮他们卖房，这些人是否也要查明顾客背景，他们做得到吗？
I support the Bill, Mr Speaker. Thank you.