Money laundering and property — real estate agents should be on the ‘alert’, say experts

• “Real estate agents are reporting institutions, which have obligations to carry out, among others, customer due diligence measures if there is reasonable suspicion of the commission of a money laundering offence or a terrorism financing offence.”

KUALA LUMPUR (Sept 28): A recent high-profile scandal involving 60 real estate agents suspected to be linked to the sale and rental of properties related to one of Singapore’s biggest money-laundering cases has no doubt rocked the island republic known for its clean governance.

Ten suspects were arrested on Aug 15 in the Lion City over an anti-money laundering probe “that has been described by the prosecution as unprecedented in size and scope”, reported channelnewsasia.com. A billion dollars’ worth of assets, including luxury cars, houses and cash, were seized. The 10 arrested were reported to be foreigners.

In an update, channelnewsasia.com reported about 60 real estate agents “purportedly involved in deals linked to the case are assisting with investigations”.

Up to 105 properties, estimated to be worth S$831 million (RM2.86 billion), are involved in the probe. They are seven bungalows in Sentosa Cove, 79 condominium units and 19 commercial spaces, with 19 units still under construction. All the properties have now been issued with prohibition of disposal orders as a result of the investigations. 

Not surprisingly, property agents in the city state are focusing their attention to compliance checks in an attempt to weed out property deals that may involve money laundering.

According to the news portal, “Subscriptions to the Singapore Estate Agents Association's (SEAA) anti-money laundering (AML) web service have spiked, with more than 400 new users from mostly boutique property agencies in the weeks since the case broke in mid-August”.

Can commissions paid be ‘clawed back’?

Meanwhile, a Straits Times report quoted lawyers saying that commissions “paid to agents for the sale or rental of property caught up in the S$1 billion money laundering case could be clawed back”.

It added that the “process would be a legally complex one and would rest on how much knowledge an agent had when a property transaction was under way”.

“Whether the commissions paid can be clawed back will depend on all the circumstances, including whether the agents are complicit in any crime,” the Law Society of Singapore AML committee chairman S. Suressh told the daily.

In Malaysia, Chur Associates managing partner and founder Chris Tan is of the view that our real estate agents should be on the “alert” for such issues.

“Real estate agents are reporting institutions, which have obligations to carry out, among others, customer due diligence measures if there is reasonable suspicion of the commission of a money laundering offence or a terrorism financing offence, failing which, they may be liable under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA),” said Chris.

To "claw back" these commissions means that the authorities or investigators are taking legal action to reclaim or seize the money paid to these agents as commissions. This action is usually taken because the commissions are considered to be part of the proceeds of the illegal activity (money laundering) and should not benefit the individuals or entities involved. In this regard, Malaysian authorities have the raison d'être to “claw back” commissions earned, added Chris.

So, are the arms of law in Malaysia long enough to nab these culprits?

“Generally, it has very much to do with the positioning of a country and how accommodative its policies are in facilitating the flow of funds in and out of the country,” said Chris.

“Money laundering is a dynamic process that innovates according to the ever changing legal regulations that are mostly reactive in nature. If you are in a position of trust and manage stakeholding funds of others, you are in a privileged position with responsibility and liability that eventually impact your credibility in the long term,” he added.

Malaysian Institute of Estate Agents (MIEA) president Tan Kian Aun is also of the view that agents have an important role to play to keep money laundering activities involving properties.

With AMLATFPUAA, Kian Aun said that agents that see a “red flag” must “comply with the requirement to report any suspicious transactions by filing a Suspicious Transaction Report (STR)”.

As for the ability of the authorities to confiscate the commissions earned from such transactions, Kian Aun felt that it could be “a bit challenging and it also depends on the time frame. Sometimes it may take a long time just to prove a person’s wrongdoing”.

As for local agents being alert to such money-laundering activities linked to real estate, Kian Aun admitted that “probably the level of awareness in Malaysia is not up to the required level yet”.

“Our agents definitely need to be educated and we owe a duty of care to the profession and the industry. It is our duty to protect the professionalism of the industry. We also have our code of conducts in our Act and rules (Valuers, Appraisers, Estate Agents and Property Managers Act 1981 or Act 242) that protect the public and prevent activities that constitute unauthorised practice of law,” Kian Aun stressed.

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