SINGAPORE: A Singaporean man ran a business helping China clients set up companies in Singapore and became a director of 980 companies this way.
However, he failed to fulfil his directorship duties properly, with about US$5 million (S$7.3 million) being laundered through some of the companies under him.
Xie Yong, a 37-year-old Singaporean man, was sentenced to four weeks’ jail and fined S$57,000 by a court on Monday (Dec 18) for multiple charges of failing to exercise his duties as a director and under related charges under the Companies Act.
Xie, also known as Alex, paid the fine in full. He was also banned from being a director for five years.
The court heard that Xie, who has a master’s degree in professional accountancy, set up a company called Tox Technology in 2013, which he later renamed DD Corporate Services.
He pivoted DD to offer accounting and corporate services in 2019, providing accounting and tax services and filing of annual returns, as well as incorporation of Singapore companies that came with the setting up of bank accounts and providing directors for overseas clients.
He was familiar with the duties required of a director of a Singapore-incorporated company, including the need to exercise due diligence.
THE PIVOT TO CHINESE CLIENTS
Initially, DD reached out to local companies. Its clients later became mainly China-based after Xie expanded his reach to China in 2020 and advertised DD’s services on a Chinese online forum.
After this, multiple agents from China contacted DD about its services and Xie worked with the Chinese clients the agents referred him, including a person named Lou Yong, who was known as Leo.
Xie charged S$700 for a package including the provision of nominee director services, corporate secretarial services and a registered company address.
If the company needed a bank account, Xie would charge an additional fee between S$100 and S$150.
From 2020 to 2021, Xie registered himself as the director of the companies he set up for his Chinese clients, in order to fulfil the statutory requirement for a director who resided in Singapore.
Xie also registered himself as the corporate secretary of those companies, while placing his clients as the directors and shareholders.
Xie got his clients to sign an indemnity agreement stating that they would not engage in illegal activities, that he would not be involved in the business and that he would not be liable for anything to do with the companies.
As he knew it was important for him to check the purpose of the companies he incorporated for his clients, Xie would perform simple online searches to check if his clients were linked to criminal investigations.
He would also check if their passports were valid, but otherwise took his agents’ words at face value.
He did not ask the agents about their clients’ activities, as he knew that they would not be able to answer his questions.
He said he intended to get information about the companies’ businesses and activities at the end of the financial year when he had to file their annual returns, and apply to strike off the companies if he discovered any illegal activities.
MONEY-LAUNDERING VEHICLES
Two companies that Xie incorporated this way became vehicles for money laundering.
The first company, called Wei Hui, dealt with the retail of bags, luggage and travel accessories on paper.
Other than Xie, the director of Wei Hui was a Chinese national named Xiao Weian. Xiao had been referred to Xie by Xie’s other client, Leo.
Leo told Xie that Xiao wanted to do a “trading business”, but his business was not usually in Singapore.
Xie understood that Xiao wanted to set up a company to get a bank account, to circumvent foreign currency restrictions in China.
Xie also knew that it was very difficult to open a bank account in Singapore with a Chinese company, and that this was why Xiao wanted to set up a company in Singapore.
He helped set up a multi-currency bank account with DBS Bank for Wei Hui, with Xiao being the authorised signatory.
In October 2020, an American company called Armor Survival fell prey to a business impersonation scam and was cheated into transferring a total of US$1.5 million to Wei Hui’s bank account.
The money was later transferred out of Singapore.
Police reports were lodged in Singapore over this case, and police investigations revealed that Xiao had not entered Singapore.
The company Wei Hui was registered and a bank account opened for it through “exploitation of local banks’ remote account opening processes”, the prosecution said.
Know-Your-Customer processes were allowed to be done through video-conferencing during the COVID-19 pandemic.
In May 2020, Leo asked Xie to take over the directorship and company secretary position for a Singapore-incorporated company called Joy Trader for one of Leo’s clients.
Xie was told that Joy Trader, which had two foreign directors named Wang Huquan and Fan Jing, was a dormant company and that he was just to file the annual returns.
He was paid S$460 by Leo.
Between June and August in 2020, an American company called the Jewish Federation of Greater Washington was cheated via an email scam.
Spoofed emails from a person masquerading as an investor asked for funds to be transferred to bank accounts in Hong Kong.
The company was deceived into transferring US$7.5 million to accounts in Hong Kong. Of this amount, US$.3.1 million was transferred to Joy Trader’s OCBC account in Singapore and later dissipated.
A Hong Kong company called The International Medical Co was cheated in a business email scam in July 2020 and sent about US$731,000 to a bank account, which was later transferred to Joy Trader’s account along with other sums.
The total sum was laundered through Joy Trader’s bank account. It was emptied in November 2020 and closed in May 2021.
BLACKLISTED, BUT PERSISTED
Sometime before May 2020, Xie realised he was being blacklisted by local banks. He did not find out why, but instead looked for other people to be directors for the companies he wanted to incorporate for his clients to get around the blacklisting.
He got to know a 51-year-old China national and Singapore permanent resident named Lan Fang, whose daughter worked for him.
He asked her to be the nominee director for the companies DD set up for its clients, offering S$50 per post.
A company called Aurora Free Trading set up with Lan Fang as nominee director was used to launder money from a scam on an Australian company called Tempo.
Police investigations into Xie’s activities found that Xie was a director of 980 companies in Singapore as of January 2021.
Of these, 831 were active and current appointments. Lan Fang was also registered as a director of about 100 companies under her agreement with DD.
Deputy Public Prosecutor Janice See asked for four to six weeks’ jail and at least five years’ disqualification from acting as a director.
Ms See said Xie “turned the proverbial blind eye” and took “no steps whatsoever” over supervision of his companies’ affairs.
This resulted in significant sums of illicit funds being channelled through the bank accounts of Wei Hui and Joy Trader, amounting to about US$5 million in total, Ms See said.
She said a fine for certain offences would not achieve “the necessary deterrent effect” against Xie, given the degree of culpability he showed in his “total failure to exercise reasonable diligence” and how he took active steps to prolong his business despite “the glaring red flag” that he had been blacklisted from setting up bank accounts for his companies.