Agents gave kickbacks, bankers took cuts: Ethics flew out the window in money launderers’ deals

Beyond ethical concerns, kickbacks may also have an impact on property prices in the high-end market, where the money launderers parked funds

Jun 12, 2024

PROPERTY agents who represented the 10 foreigners in Singapore’s largest money laundering case earned six-figure commissions, but some of them gave up more than half the amount as “kickbacks” in order to close the deal.

Such arrangements were “very prevalent” among buyers of Chinese origin and the agents vying for their business, said an agent, who spoke to The Business Times (BT) on condition of anonymity.

Some bankers were also part of a “dirty and convoluted web” of people involved in such deals, feeding clients and information to agents they worked with and receiving a cut of the commission if a deal went through, the agent told BT in a series of e-mails.

“It was through such methods that these agents gained access to Good Class Bungalow owners for leasing, Sentosa homes for sale, (and) luxury condos in the Orchard area for the Chinese (buyers),” he said.

Confirming what the source told BT, Evan Chung, head of KF Property Network at Knight Frank Singapore, said: “We have heard of property agents who give up half of their commissions or even almost everything, but we tell our agents they must always turn down such deals. This will contravene Council for Estate Agencies (CEA) guidelines. You don’t need such clients, and you should not take such clients.”

He added: “In some cases, newer agents may be told by their mentors that even if they do not receive any commission, they can still get an award and hopefully that would allow them to have more opportunities for deals. The managers still earn a cut of the fees, but the agents bear the costs and still have to pay income tax.

“What has become prevalent in recent times is that now, buyers ask agents for a kickback in return for purchasing the property through them.”

Industry regulator CEA told BT it is investigating property agents who had facilitated transactions associated with the S$3 billion money laundering case.

Some of these kickbacks went to private bankers, with sources estimating that they received between 30 and 50 per cent of the commission in exchange for introducing their high-net-worth clients to property agents.

The agent who spoke to BT said: “They were the ones who brought and introduced them into our system, referred agents and lawyers, and brought them out to wine and dine. Most social gatherings were organised by these private bankers introducing their Chinese clients to agents, lawyers, (and) precious stones and watch dealers.”

An experienced private banker, who spoke to BT also on condition of anonymity, said he had encountered one instance of a banker accepting kickbacks from a property agent. That banker was disciplined after the transaction came to light.

“Because of the sums involved, there will be people who are tempted. Bankers are not prohibited from recommending services, provided (they are) done at arm’s length, and they don’t get anything in return,” the banker told BT.

“However, most banks would have some form of prohibition (on taking) kickbacks, whether it’s an explicit rule or in the code of conduct. Even if it’s not written down, it’s not right... as this would compromise the banker.”

The anonymous agent told BT: “The Chinese buyers always ask for at least 50 per cent of the commission earned by the agents. This is very prevalent, especially for new launches sold by these agents to them, as the commission is quite a good sum of 1 to 5 per cent of the sales prices offered by the developers.”

The 10 foreigners nabbed in the probe, all of whom originated from Fujian, China, had bought several luxury units at new launches including Canninghill Piers, South Beach Residences and Gramercy Park, which were launched between 2017 and 2021.

Some in the group had also bought several landed homes in Sentosa, wanting to “relocate close friends and family within a village”, the agent said.

Either ‘something or nothing’

“Top-performing agents go all-out to build relationships with the Chinese. However, these Chinese have no loyalty to the agents at all. In any transaction, their interests come first and not the agents. This creates fear among the agents serving them that they might be ditched for another agent to close the deal,” he added.

“In essence, it’s either they earn something or nothing.”

Kickbacks were not always in the form of cash, the source said. In some cases, agents helped clients manage a couple of properties for free, or presented them with gifts such as branded bags or watches.

When asked why cash-rich money launderers would ask for kickbacks, those interviewed said the buyers were exercising their “right to take”, or may have merely been proxy buyers benefiting from “pilferage”.

Alan Cheong, executive director of research at Savills Singapore, said: “The term ‘kickback’ was often dropped in conversations among agents (to) the point that – until the recent crackdown on the S$3 billion money laundering case – if an agent purportedly closed a multimillion-dollar deal (with) a buyer from North Asia... we would instinctively ask how much the agent really took home at the end of the day.”

Beyond ethical concerns, kickbacks might also have had an impact on property prices in the high-end market, where the money launderers parked funds in luxury residential apartments, shophouses as well as commercial spaces.

“Prevalent kickback practices distort the economy – it may mean that prices would have to be marked up to account for the hidden payout,” Cheong said.

“Fortunately... this practice of kickbacks is confined to a very small segment of the real estate market. The money launderers, both caught and uncaught, do not make up the bulk of the tens of thousands of transactions we have each year for both the HDB and private residential markets, nor for the other sectors of the real estate market here.”

In total, the 10 individuals arrested forfeited more than S$944 million worth of assets. Based on court documents, 60 properties were among those forfeited to the state.

The amounts paid towards these properties and estimated realisable values stood at S$372.5 million.

Another 17 individuals who fled the country account for the remainder of the assets seized, which are worth more than S$3 billion in total. Police investigations continue.

Property agents found guilty of inducement can be punished according to the Code of Ethics and Professional Client Care.

Depending on the nature of the breach, agents could be issued written warnings or fined, and have their registrations suspended or revoked.

The CEA may impose a fine of up to S$100,000 per case for property agents. It may also censure or impose financial penalties of up to S$5,000 on the errant property agency or agent.