Customer Due Diligence: What Salespersons Need to Know About Preventing Money Laundering and Financing of Terrorism

As gatekeepers of Singapore's property market to prevent money laundering and terrorism financing, real estate salespersons (RESs) must conduct proper Customer Due Diligence (CDD).

This article highlights key areas where CDD compliance lapses and breaches commonly occur and how you can avoid them.

Timing is Key

RESs must complete all CDD measures before their client enters any agreement for the acquisition or disposal of a property. This includes obtaining and documenting their client's information, getting their written acknowledgement that the information they have provided is accurate, and verifying their client's identity using reliable and independent sources (e.g. NRIC and passport).

Some RESs omitted to date the Customer’s Particulars Form, which is used to obtain their client's particulars and acknowledgement, when it is completed or only complete such checks much later when submitting their transaction documents to their EA.  Such delayed checks are non-compliant with regulatory requirements, and RESs may be liable for disciplinary action for such breaches.

RESs must check if their clients are politically-exposed persons (PEPs) or connected to such persons. These due diligence checks need to be documented. RESs must also check whether their clients are terrorists, designated persons as defined in regulations under the United Nations Act, or suspected of money laundering or terrorism financing.

If there is reason to suspect that a client is involved in money laundering or terrorism financing activities, the RES should file a Suspicious Transaction Report (STR).

RESs can refer to the Guide on Estate Agents (Prevention of Money Laundering and Financing of Terrorism) Regulations for the information required for CDD checks.

Remember: Complete the CDD checks BEFORE any property agreement is signed. If an RES is engaged by a company to transact the property, CDD checks must be conducted on the company, the beneficial owner(s) and any other third parties involved in the transaction, which brings us to the point below.

Know who the real client is and whether they are acting for another party

RESs must clearly identify who their client is – a natural person, an entity or legal arrangement – and determine if the client is acting on behalf of another party.

One common mistake RESs make when dealing with companies is failing to understand the ownership and control structure of the company and to identify the beneficial owner(s) behind the company. This is a common pitfall which further results in RESs failing to conduct CDD on the actual beneficial owner(s).

For example, a director of a company engages an RES to facilitate a property transaction by the company. The RES conducts CDD measures only on the director and the documentation incorrectly indicates that the RES's client is the director himself, rather than the company and its owners.

Another common mistake is the failure to verify a company’s legal existence. This verification can be done by obtaining an up-to-date ACRA business profile, which provides information about the company’s registration and current status.

RESs must identify the actual beneficial owners(s) and third parties involved in the transaction and perform the required checks on all parties.

Tips to Stay Compliant

1. Complete all CDD measures before agreement signing.

2. Know your true client.

3. Conduct required screening on all involved parties.

4. Make sure you document all checks and findings properly.

The CDD requirements are essential safeguards against money laundering and terrorism financing in the real estate sector. RES must remain vigilant in conducting the necessary checks.

If you have further questions about CDD requirements, you may refer to CEA’s Preventing Money Laundering and Financing of Terrorism webpage, or write to us at Inspection@cea.gov.sg for clarification.