In Nov 2017, a veteran Managing Director lawyer with 15 years of experience in conveyancing work, and a Senior Marketing Director of an international real estate agent were both charged in the Singapore Courts for failing to report to the authorities a suspicious property deal in the Sentosa Cove district.
The charges were under the serious criminal Section 39(1) of The Corruption, Drug Trafficking and other Serious Crimes (Confiscation of Benefits) Act, commonly known as the CDSA.
Read the full story as reported in the Straits Times.
Given that the said property transaction had pre-dated the convict’s arrest in mid-Jan 2016, it begs the questions: Can the conveyancing lawyer & real estate agent subsequently detect the suspicious deal post-trade? And could they have done something to mitigate their liability, during the 4 months prior to the Commercial Affairs Department’s (CAD) investigations? Sadly, the answers to both are “yes”.
What The Law Says – For the Legal & Real Estate Industry
Singapore – LPA’s Part VA and Rules 2015:
As early as 2015 May 23, the Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules 2015 came into effect under the New Part VA of the Legal Profession Act (LPA) on Prevention of Money Laundering and Financing of Terrorism. The key sections in the Rules involve Customer Due Diligence (Part 2) and Record Keeping (Part 3) when preparing or carrying out any transactions concerning relevant matters.
The regulatory framework will apply to both Singapore lawyers and law practices, as well as foreign lawyers and foreign law practices.
Singapore – CEA’s PC 04-15 and PC 03-17:
Similarly, in September 2015, the Council for Estate Agencies (CEA) issued a Practice Circular (PC) on the Prevention of Money Laundering and Countering the Financing of Terrorism (PC 04-15) to spell out the duties of estate agents and salespersons. This Practice Circular takes effect from 1 December 2017.
The Practice Circular guidelines will apply to both the estate agents and its salespersons.
The CEA’s Practice Circular (PC) on the Prevention of Money Laundering and Countering the Financing of Terrorism (PC 04-15)
The CEA’s Checklists For Estate Agents and Salespersons on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) (PC 03-17)
Hong Kong – Anti-Money Laundering and Counter-Terrorist Financing Ordinance:
Similar regulatory requirements can also be found in Hong Kong. According to Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap. 615, specified financial institutions are required to conduct customer due diligence (CDD) and record-keeping. From March 2018 onward, the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Ordinance 2018 came into effect to extend the statutory CDD and record-keeping requirements to cover designated non-financial businesses and professions (DNFBPs), including legal professionals, accounting professionals, estate agents, and trust or company service providers (“TCSPs”).
The “Suspicious” Transaction
Under the law, Managing Director of Sterling Law Corporation Kang Bee Leng, 56, and Tan Yen Hsi, Senior Marketing Director of CBRE Realty Associates, are required to make a Suspicious Transaction Report (STR) when a deal looks like a bid to launder money or finance terrorist regimes.
In Oct 2015, a Chinese businesswoman Zhang Min who was a client of Kang and Tan, had bought a bungalow house in the prime Sentosa Cove district. Subsequent to the property’s sales & purchase agreement, Zhang was arrested in China on 14 Jan 2016 for financial fraud in one of China’s largest Ponzi scheme of US$ 7.6 billion (S$10.3 billion).
Court documents now state that on 12 Jan 2016, Kang had reasonable grounds to suspect that the close to $5.5 million used to buy the property in Zhang’s name might represent the proceeds of criminal conduct. It also added that Zhang’s arrest had been reported by various international and local media platforms.
“However, despite the adverse news reported on their client, they failed to file any STR (suspicious transaction reports) on the said private property purchase,
which came to their attention in the course of their trade, profession, business or employment.”
Hence, with a 4-month window from Zhang’s arrest to the start of CAD’s investigations, the Singaporean duo could have filed the STR, but they had failed to do so. Consequently, the charges were brought against them in Nov 2017.
Fast Forward to 2017 – What Could Have Done Differently?
Assuming you are in Kang & Tan’s shoes today and you had been contacted by Zhang to help complete the said property purchase, what could you have done differently?
Note that the handling and management of client’s moneys, securities, assets, bank or securities accounts are “relevant matters” as defined in Part VA of LPA.
So to comply with the both the LPA’s Rules 2015 & CEA’s PC 03-17 guidelines, key actions to take include:
- conducting proper Customer Due Diligence (CDD),
- proper Keeping of the Records,
- On-going Monitoring, and
- if required, to log a Suspicious Transactions Reports (STR).
It was noted that CAD had begun investigating Kang & Tan in May 2016 – almost 8 months after the transaction had started in Oct 2015, and 4 months after Zhang’s arrest was reported. In the duo’s case, the on-going monitoring of any adverse media relating to their client, might help trigger an alert should the said client have been subsequently sanctioned, arrested, or charged in the Courts for financial crimes. Consequently, this would have helped to highlight the suspicious transaction, and the deduction that the monies used in the purchase might represent the proceeds of criminal conduct. This could then trigger a follow-on STR.
However, the On-going Monitoring process is likely to be tedious and time-consuming, as one would have to constantly keep an eye on the news for adverse media reports and developments; and if there are indeed name matches, to then determine if that would constitute a red-flag for further actions e.g. file a STR.
Fortunately, Help Is Available
Fortunately, more efficient and productive commercial search and ongoing-monitoring tools are available. Commercial database such as SentroWeb-DJ (backed by the database from Dow Jones) can help alleviate the tedious & time-consuming process – a search on SentroWeb-DJ for the client “Zhang Min” would only involve a few clicks and a few seconds to show a result.
SentroWeb-DJ also provides audit trail & on-going monitoring services to the searches, and an add-on digitised CDD module – all important potenital mitigants in any investigations and proceedings.
The On-going Monitoring feature on SentroWeb-DJ could trigger an alert shortly after Zhang is arrested to alert Kang & Tan to file an STR. Click here to learn more about how SentroWeb can enhance your AML process and schedule a free demo now.
In the past three months, an average of one case a month relating to money-laundering, was charged in the Singapore Courts. This suggests the authorities are stepping up their AML oversight and enforcement efforts, along with higher regulations. This trend is likely to continue given the expected upcoming the FATF audit review for Singapore.
Whilst the sentence for contravening Section Section 39(1) of CDSA is not financially crippling – if found guilty, a fine of up to $20,000 each – the resulting negative publicity and consequences of a blemished reputation could be irreparable. So paying a small annual subscription for a commercial screening tool backed by a reputable database source like Dow Jones, would be seen as a potentially wise decision for Kang & Tan, retrospectively. The duo is awaiting their separate trials in mid and late-Dec 2017.