02 Aug 2023

Rajah & Tann pioneers automated anti-money laundering platform for property developers to comply with new AML rules

Rajah & Tann has launched an anti-money laundering (AML) legal-tech solution for Singapore property developers grappling with the latest AML rules. The platform enables speedy due diligence of property buyers in real time and on an ongoing basis.

Under the new AML guidelines, developers are required to identify, assess and understand the money laundering and terrorism financing risks relating to their business and implement policies, procedures and control approved by the senior management to minimise the exposure to such risks. They are required to document the risk analysis and provide such risk analysis and policies to the Controller of Housing when asked.

They will also have to conduct customer due diligence checks on purchasers and, amongst others, file a Suspicious Transaction Report with the relevant authorities if and when they find a potential purchaser or purchaser to be on a watchlist or have suspicious links, without tipping off such a potential purchaser or purchaser. The customer due diligence checks are also applicable to ongoing projects launched before 28 June 2023 when the new AML rules kicked in.

Gazalle Mok, Partner at Rajah & Tann’s Corporate Real Estate practice, said: “This is potentially a three-to-five-year period of exposure, and it’s not a numbers game: a single hit would be extremely detrimental to a developer. Without technology, it becomes very intensive and complex to monitor every purchaser for the entire period.”

The platform, a combined effort of Rajah & Tann lawyers and their tech colleagues at Rajah & Tann Technologies (RTTech), addresses this requirement by including screening, ongoing monitoring, and reporting capabilities, automating much of what would otherwise be a very tedious, cumbersome set of checks.

“It is a comprehensive platform that minimises AML and combating the financing of terrorism (CFT) compliance risks for developers managing the public launch of large-scale real estate projects,” said Mr Raymond Lum, Group Chief Executive Officer of RTTech.

The customer due diligence, for example, is a scan that takes just seconds to complete the necessary background AML/CFT checks on a prospective purchaser during a property launch, such as the screening against international watchlists and checking against additional data sources such as country-specific risk factors and known associates.

“Often when transacting properties, time is of the essence – any slowdown in the sales process especially when the market is hot, could result in a buyer walking away,” added Mr Norman Ho, Senior Partner of Rajah & Tann’s Corporate Real Estate practice.

The need to conduct ongoing monitoring on purchasers until legal completion is another requirement that, while important, is currently a point of concern for developers.

For example, it’s not uncommon for criminals to purchase properties using a nominee purchaser with no apparent links to criminal organisations.

Money laundering and terrorism financing also tend to happen in stages, and a property purchase holds multiple transactional opportunities. What if, after having exercised the Option to Purchase, the nominee purchaser turns up on an Interpol watchlist a year later?

The steps afterwards are less clear: developers may be risking potential legal liability to rescind such a sale and purchase agreement, and in the meantime, they cannot reveal the real reason for backing out of the agreement as it may be considered tipping off.

About Rajah & Tann Asia – https://www.rajahtannasia.com/

Rajah & Tann Asia brings together leading law firms and lawyers in Cambodia, China, Indonesia, Lao PDR, Malaysia, Myanmar, Singapore, Thailand, the Philippines and Vietnam, with each offering the highest standards of service to locally-based clients while collectively having the capability to handle the most complex regional and cross-border transactions and to provide excellent legal counsel seamlessly across the region. With 970 fee earners, all working towards one shared goal, we are lawyers who know Asia and who give our clients home advantage.