2 Singapore directors fined S$8,500 & S$4,000 for US$2.36 MILLION money laundering SCAM

A SINGAPORE man who was a director of more than 380 companies in Singapore was on Thursday (April 11) ordered to pay a fine of, after two of the companies he incorporated, or helped to incorporate, were found to have laundered millions of dollars in scam money.

Zheng Jia, 41, pleaded to

• One charge each of failing to exercise due diligence in the discharge of his director duties and
• Abetting Er Beng Hwa in the latter’s failure to exercise due diligence in the discharge of directorial duties.

Another similar abetting charge relating to Er Beng Hwa [Er] was considered for sentencing.

• Er, the co-accused, a jobless Singaporean at the time of his offences,

• Was paid to be a director “in name” to 186 companies, of which some had transacted money from scam victims.
• Er was sentenced to a fine of S$4,000 last year.

WHAT HAPPENED

The court heard that Zheng, a Singapore permanent resident who was originally from China, was a chartered accountant who provided accounting and corporate secretarial services via three companies —

• Atoms Global,
• Zhuoxin Global and
• Panasia Secretarial Services.

In November 2019,

• He expanded Atoms Global's incorporation services into the Chinese market by setting up a Panasia Secretarial Services office in Shenzhen.
• Prospective clients would then approach Panasia Secretarial Services if they would like to incorporate a company in Singapore.
• Zheng would then register himself as a director and corporate secretary of these companies to fulfil the statutory requirement for a Singapore-based resident director.

Deputy Public Prosecutor (DPP) Vincent Ong said

• That Zheng would get these clients to sign an engagement letter stating that they would not engage in illegal activities and would not be liable for anything to do with the company since he was not involved with its business.
• Panasia Secretarial Services would run a check on the prospective client on Sentroweb, an online customer due diligence solutions provider, requiring them to submit a due diligence form with their identification documents.
• Beyond that, Zheng would take the words of the client's agents “at face value”,  
• “Beyond the simple online search, he did not do anything to check that the companies were not being used for illegal activity,”  

Between 2019 and 2020,

• Zheng charged S$1,000 to S$1,400 yearly for each Chinese company registered, drawing a monthly salary between S$10,000 and S$15,000.
• Sometime in May 2020, Panasia Secretarial Services and Zheng incorporated Ocean Wave Shela, which purportedly dealt with manufacturing clothes and household appliances.

The company later moved to dealing with wholesale clothing and footwear.

• Ocean Wave Shela later opened a United Overseas Bank (UOB) bank account in Singapore.
• The company’s other director, Zhong Haibo, from China, was the authorised signatory of the account. However, when opening the account, Zheng provided his identification document to the bank.
• In October 2020, an American company fell victim to a business impersonation scam and transferred US$64,630 to Ocean Wave Shela’s UOB account on Oct 28.
• The funds were transferred to a bank account in China on October 29.
• Zheng stopped acting as the director of Ocean Wave Shela on November 9, after police investigations into the cheating began.

LAUNDERING US$2.36 MILLION IN SCAM MONEY

• At some point after sourcing clients from China, Zheng found that he could not handle the volume of companies engaging his services and looked for someone else to act as a director for some of these companies.
• Er, unemployed between April and June 2020, was introduced to Zheng through an acquaintance.
• Er accepted Zheng’s proposal to be paid S$50 a year for each company where he became a nominee director, and an extra S$50 to open a bank account for the company or sign some documents.
• DPP Ong said.

• “While Er did not know what work Atoms Global or Zheng did, he did not ask further questions and agreed to the arrangement because he wanted the money,”
• “Er understood from Zheng that he was to be a director of these companies in name only and was not to have any responsibility over the running of these companies or be required to do anything.”

• From October, Er was employed by Atoms Global for a monthly pay of S$1,400.

• One of the companies where Er was registered as a director and secretary was Rui Qi Trading, which was incorporated here on Aug 3, 2020.
• The company opened accounts with UOB here for which Hou Xiahui, a citizen from China, was registered as the authorised signatory.

• While Er was a director of the company,

• About US$2.36 million in fraudulently obtained funds were channelled through its UOB accounts and then transferred to various accounts overseas.
• Investigations found that Zheng was a director of a total of 384 companies in Singapore. As of January 2021, he held 135 current directorship appointments.
• As of January 2021, Er was a director of 186 companies in total, and 177 of these appointments were held.

• Seeking a jail term of four to six weeks and disqualification from any directorship for five years, DPP Ong argued

• There must be a systematic deterrence against business models that “seek to undermine the applicable regulatory frameworks” in Singapore.
• In this case, Zheng had structured his business model so that it "effectively prevented" a nominee director from supervising his company, thereby "enabling illicit funds to be channelled" through their accounts,  
• Zheng, in this case, was motivated by “monetary returns”,
• Noting that he charged each incorporated company “to do nothing”.

• Defence counsel Che Wei Chin from law firm Fervent Chambers

• Sought a fine of between S$5,000 and S$8,000, or a jail term of between one and two weeks as an alternative.
• He argued that in the case of Ocean Wave Shela, Zheng had asked the China-based director Zhong for necessary financial documents, albeit unsuccessfully, indicating that Zheng “did not completely wash his hands off” the company’s affairs.
• Argued, both the Ocean Wave Shela and Rui Qi Trading cases, Zheng was only negligent in that he could not “detect the suspicious transactions promptly enough”,  
• Said Zheng was also a first-time offender who fell into wrongdoing “in a moment of folly”,  

• For failing to conduct reasonable due diligence as a director, Zheng could have been sentenced to a fine of up to S$5,000 or a jail term of no longer than 12 months.
• Abetment of such an offence also carries a similar sentence.

Source

• https://www.channelnewsasia.com/singapore/s8500-fine-nominee-director-company-involved-laundering-scam-money-4880076