As 2017 drew to a close, newspaper reports emerged in Singapore of charges filed against two real estate professionals, Kang Bee Leng, the managing director of Sterling Law Corporation, and Tan Yen Hsi, senior marketing director of CBRE Realty Associates. The charges should send a shock wave through the real estate profession worldwide, as the pair are accused of breaching anti-money laundering (AML) requirements.
In this case, Kang and Tan were arrested after failing to report a residential purchase they completed for a wealthy Chinese client who has subsequently been jailed for her involvement in China’s largest-ever Ponzi scheme. At the time of the transaction, say the court papers, her arrest had already been widely reported.
The Singapore authorities’ willingness to hold real estate professionals accountable in cases such as there is a strong sign of the international focus on money laundering through real estate. The United Nations estimates that money laundering through real estate is worth around US$1.6 trillion a year – around 3% of the world’s total GDP. Money launderers are opportunists and the real estate sector is an attractive target, providing the opportunity to move large amounts of money in a single transaction, in a sector that is largely untouched by AML legislation.
No part of the world is immune, but parts of the Asia Pacific region have been identified as ‘especially at risk’. A report by Transparency International which looked into money laundering through real estate in four major markets identified Australia as the weakest of all; around AUS$1bn of suspicious transactions connected to property deals from Chinese investors alone were recorded in 2015/16 and AUSTRAC, the country’s financial crimes regulator, has described real estate transactions as ‘an established money laundering method in Australia’.
The problem is exacerbated by the fact that real estate agents and developers, as well as law firms and accountants involved in real estate in Australia, are not bound by anti-money laundering (AML) regulations and are not required to report suspicious transactions. There is no requirement to carry out due diligence, politically exposed persons (PEP) checks or establish the beneficial owner of a company that purchases property.
But the tide is rapidly changing. In a growing number of jurisdictions, notably New Zealand and Hong Kong, anti-money laundering laws are beginning to seep into the real estate sector. Our new report, Money Laundering and Real Estate, highlights how AML requirements in every major region are beginning to be applied to real estate transactions. It’s not a matter of if, but when real estate professionals will be bound by similar rules to those applied to banks.
Real estate agents, brokers, management companies and others involved in property transactions need to be ready for this change. Meeting the compliance requirements that come with AML – from Know Your Customer (KYC) and PEP checks to beneficial ownership due diligence – will take planning, good processes and systems, and education sector-wide of what good compliance entails. The work should start now.
 Doors Wide Open: Corruption and Real Estate in Four Key Markets, Transparency International
 China’s dodgy 1 billion in property, The Australian
 Austrac – Money laundering through real esate