SINGAPORE, April 12 — A man who was a director of over 380 companies in Singapore was yesterday ordered to pay a fine of S$8,500, 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 count each of failing to exercise due diligence in the discharge of his director duties and abetting one 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 was taken into consideration for sentencing.
His co-accused, Er, who was 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 in 2023.
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 the incorporation services offered by Atoms Global into the China market by setting up a Panasia office in Shenzhen.
Prospective clients would then approach Panasia if they would like to incorporate a company in Singapore.
Zheng would then register himself as a director of these companies to fulfil the statutory requirement for a locally resident director, as well as a corporate secretary for these companies.
He would get these clients to sign an engagement letter stating that they would not engage in illegal activities and that he would not be liable for anything to do with the company since he was not involved with the company’s business, said Deputy Public Prosecutor Vincent Ong.
Panasia would run a check on the prospective client on Sentroweb, an online customer due diligence solutions provider and require 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”, said the prosecutor.
“Beyond the simple online search, he did not do anything to check that the companies were not being used for illegal activity,” he added.
Between 2019 and 2020, Zheng charged S$1,000 to S$1,400 annually for each Chinese company registered, while drawing a monthly salary of between S$10,000 and S$15,000.
Sometime in May 2020, Panasia and Zheng incorporated a company called Ocean Wave Shela which purportedly dealt with the manufacturing of clothes and domestic appliances. The company later moved to dealing with wholesale clothing and footwear.
Ocean Wave subsequently opened a UOB bank account in Singapore. The company’s other director Zhong Haibo — a Chinese national — was the authorised signatory of the account, though it was Zheng who provided his identification document to the bank when opening the account.
In October that year, an American company fell victim to a business impersonation scam and transferred US$64,630 to Ocean Wave’s UOB account on Oct 28. The funds were transferred out to a bank account in China on Oct 29.
Zheng stopped acting as a director of Ocean Wave on Nov 9, after police investigations into the cheating commenced.
Laundering US$2.36m in scam money
At some point after sourcing clients from China, Zheng found that he was unable to handle the volume of companies engaging his services and looked for someone else to act as a director for some of these companies.
Er, who was unemployed between April and June 2020, was introduced to Zheng through an acquaintance.
Er accepted Zheng’s proposal for Er to be paid S$50 a year for each company that he became a nominee director for, and an additional S$50 to open a bank account for the company or sign some documents.
“While Er did not know what work Atoms Global or Zheng did, he did not ask further questions and agreed to the arrangement as he wanted the money,” said DPP Ong.
“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 that Er was registered as a local director and secretary for was Rui Qi Trading, which was incorporated here on Aug 3, 2020.
The company opened accounts with UOB here for which a Chinese national Hou Xiahui was registered as the authorised signatory.
While Er was a director of the company, about US$2.36 million in fraudulently obtained funds were channeled through its UOB accounts and subsequently 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.
Er was a director of a total of 186 companies here, 177 of these appointments were held as of January 2021.
Seeking a jail term of four to six weeks and disqualification from any directorship for a period of five years, DPP Ong argued that there must be a deterrence against business models that “seek to systematically undermine the applicable regulatory frameworks” here.
In this case, Zheng had structured his business model in such a way that it "effectively prevented" a nominee director from exercising supervision over his company, thereby "enabling illicit funds to be channeled" through their accounts, said the prosecutor.
Further, Zheng in this case was motivated by “monetary returns”, argued DPP ong, noting that he was charging money per incorporated company “to do basically nothing”.
Defence counsel Che Wei Chin from 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, 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.
In both the Ocean Wave and Rui Qi cases, Zheng was only negligent in that he was not able to “detect the suspicious transactions promptly enough”, argued the defence lawyer.
Zheng was also a first time offender who fell into wrongdoing “in a moment of folly”, said Mr Che.
For failing to carry out reasonable due diligence as a director, Zheng can be 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. — TODAY
