REAL estate developers could soon find themselves subject to new measures to counter money laundering loopholes.
Leader of Government Business in the Senate Senator Kamina Johnson Smith said that, although she was unable to provide details, she was aware that the Real Estate (Dealers and Developers) Act was up for reform in order to close the gaps which developers could use to launder money.
“It is indeed important that Jamaica continue to close any gaps that may appear and, certainly, where they exist in respect of real estate developers, as I do recall hearing recently that some [people] were being brought in because of some investigations,” she told Leader of Opposition Business Peter Bunting, who had raised the need for more focus on current loopholes in the legislation.
“I do know, though, that the laws in respect of dealers and developers are up for reform, and that the matter of closing the gaps which are listed is on the agenda. So that was a very important point which you have raised,” she responded to Bunting.
Senator Johnson Smith, who is also minister of foreign affairs and foreign trade, was piloting the Terrorism Prevention (Designated Reporting Entity) (Trust and Corporate Services Providers) Resolution, 2022, the latest order issued by the Government.
She described the passage of the resolution in the Senate on Friday as an effort to strengthen the country's financial and non-financial systems against supporting money laundering, and the financing of terrorist activities.
Senator Bunting noted that Jamaica has already identify remittance companies as the highest level of risk in money laundering, and largely related to them being used by lottery scammers, while the second highest area of vulnerability was in real estate development.
He said that it was interesting that while there is a reporting requirement for real estate dealers under the money laundering measures, he believes there is a gap, because many real estate developers don't necessarily go through dealers.
“They go through the agents who do the selling themselves and it provides, I think, an opportunity for the construction financing to be used to launder illicit funds, and when the units are sold then the proceeds come into the banking system effectively laundered,” Bunting explained.
“Developers who have that in mind would have an incentive to use their own sales team, and not go through a registered real estate dealer that has reporting requirements and, therefore, might flag some of these as suspicious transactions,” he noted.
Bunting also noted that developers had come in for some scrutiny in the public domain recently, but for things other than money laundering.
“I think that this an area that we should look at; bring developers, not just dealers, under the reporting requirements, given that it has been identified as one of the high-risk areas, or perhaps the highest risk area that currently doesn't have reporting requirements,” he stated.
He added that was another area that had jumped out at him, as he read the national risk assessment report as far as beneficial ownership was concerned.
“We have been addressing beneficial ownership in some of our amendments to the Companies Act, etcetera. But, even in looking at the statutory reporting under the Integrity Commission Act, if you look at the standards form you will see deficiencies, such as it doesn't deal with trusts where families might be the beneficiaries. Not necessarily that there is anything wrong with setting up trusts for which there is a legitimate role, but the fact is that it is not captured now in the requirements for reporting under the current form,” he stated.
“I think for good measure, we should tighten that reporting requirement to include…any beneficial interest that we may have in any of these trusts; any ultimate beneficial interest,” the Opposition senator said.
According to Senator Johnson Smith, the current order addresses crucial steps which are being taken to strengthen the effectiveness of Jamaica's anti-money laundering/combating the financing of terrorism (AML/CFT) regime.
She also noted that the current framework addresses technical compliance deficiencies within the Financial Action Task Force (FATF) recommendations, and that the the Proceeds of Crime Act, 2007, is a critical legislative tool in dealing with the AML/CFT regime.
The central bank has been involved in coordinating discussions which are aimed at bringing real estate developers in line with the legal framework, which only covers dealers who buy and sell property.
The resolution brought by Johnson Smith was eventually passed by the Senate with support from both sides.