Singapore Charges Five Defendants for Money Laundering-Related Offenses Involving Shell Companies

Singapore has long prided itself on its status as a leading financial, business, and trade center in Asia, in part because of the ease of doing business there.  One element of Singapore’s business environment that many legitimate businesses have found attractive is the use of shell companies.  Because shell companies are often used to conceal criminal transactions and activities, however, the Monetary Authority of Singapore and the Singapore Police Force (SPF) have been increasingly attentive to the use of shell companies for money laundering.

On April 8, the SPF announced that five individuals have been charged in Singapore “for their involvement in seven shell companies which were suspected to be used, or intended to be used, to launder monies obtained from criminal conduct.”  Between 2016 and 2019, the SPF’s Commercial Affairs Department received eight police reports from victims who alleged that they had been deceived into wiring a total of more than USD $1.67 million into the corporate bank accounts of six Singapore-registered shell companies.  In a seventh case, an attempted transfer of more than HKD $3.2 million (USD $417.000) to a seventh Singapore-registered shell company failed because the shell company’s bank account was closed.

The SPF investigations of these allegations found that a director of DM Advisory Pte Ltd, a company that provided corporate secretarial services, had assisted and taken instructions from a person known only as “George Clarke”, who was believed to be engaged in criminal conduct, to incorporate shell companies in Singapore for the purpose of setting up corporate bank accounts.  That director then allegedly engaged a second individual, who was working as a bank officer at the time, to recruit local nominee directors — including three other individuals — to incorporate the shell companies mentioned above and set up the associated bank accounts. Thereafter, control over the corporate bank accounts were believed to be handed over to “George Clarke” via the bank officer and one of the nominee directors.

In March and April 2021, the DM Advisory director, the bank officer, and three of the recruited local nominee directors were charged with various offenses related to money laundering and fraud.  The DM Advisory director was charged with entering into an arrangement to assist “George Clarke” to retain benefits from criminal conduct under Section 44(1)(a) of the Singapore Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, Chapter 65A (“CDSA”).

Under Section 44(1)(a) of the CDSA, “a person who enters into or is otherwise concerned in an arrangement, knowing or having reasonable grounds to believe that, by the arrangement[,] the retention or control by or on behalf of . . . that other person’s benefits of criminal conduct is facilitated”, and “knowing or having reasonable grounds to believe that that other person is a person who engages in or has engaged in criminal conduct or has benefited from criminal conduct”, may be punished by a maximum of 10 years’ imprisonment, a fine not exceeding SGD $500,000 (USD $374,000,) or both.

The bank officer and one of the nominee directors were charged in court with entering into an arrangement to assist “George Clarke” to retain benefits from criminal conduct under Section 44(1)(a) of the CDSA.  The bank director was also charged with abetting two of the nominee directors to fail to act honestly and exercise reasonable diligence as company directors under Section 157(1) of the Singapore Companies Act, Chapter 50 (“CA”), read with Section 109 of the Penal Code, Chapter 224.  Finally, all three nominee directors were charged with failing to act honestly and exercise reasonable diligence as company directors under Section 157(1) of the CA.

Under Section 157(1) of the CA, a director who fails to act honestly and use reasonable diligence in the discharge of the duties of his office may be punished by a maximum of 12 months’ imprisonment, a fine of SGD $5,000 (USD $3,700), or both.

It is too much to hope that the elusive “George Clarke” will be found and brought to justice.  In any event, these prosecutions should remind companies doing business in Singapore of the need to conduct risk-based due diligence if, any point in the course of a planned transaction or payment, they find that the transaction involves a Singapore-registered shell company.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s