SINGAPORE: A brother and sister ran a business that sourced locally resident nominee directors for foreigners who want to incorporate companies in Singapore.

Taking advantage of remote account opening by some banks during the COVID-19 pandemic, they incorporated 109 such companies in 2020, with two Singaporeans installed as nominee directors.

Sixteen of these companies went on to receive US$14.6 million (S$18.9 million) from victims of an international business email impersonation scam, according to the police.

Lee Ay Ling, 33, and brother Lee Chia Yen, 30, were each sentenced to 10 months’ jail for abetting the two nominee directors to breach the Companies Act on Wednesday (Dec 17).

They were also banned from acting as company directors for five years.

They had each pleaded guilty to eight charges under the Companies Act, with another eight similar charges taken into consideration.

The police said this is the first conviction of a corporate service provider after the High Court set out a stiffer sentencing framework for offences involving “silent” directors, who do not exercise oversight of the companies incorporated under their name.

The two Singaporeans who acted as nominee directors were convicted and sentenced earlier.

They are Chng Kok Leng Bernard, who was jailed for six weeks, and Tay Chee Seng, who was jailed for four weeks. They were also banned from acting as directors for five years.

FINDING CLIENTS

Lee Ay Ling is a qualified accountant and was the main decision-maker for Interconnect, the siblings’ business. Lee Chia Yen, her younger brother, holds a degree in finance. He handled the marketing and sales and dealt with clients.

Interconnect was set up in 2018 as a corporate service provider offering services like incorporation.

It charged S$500 to S$1,000 for nominee director services, where it would provide a locally resident person to meet the legal requirement for at least one director of an incorporated company to ordinarily reside in Singapore.

Initially, Interconnect would insist that foreign clients come to Singapore for an in-person meeting to verify their identities and the purpose of setting up a company in Singapore.

“Both Ay Ling and Chia Yen knew that it was important to carry out these verifications to satisfy themselves, otherwise they would not incorporate the companies,” said Deputy Public Prosecutor Vincent Ong.

But in April 2020, Lee Ay Ling learnt about a new practice where some banks were willing to open local bank accounts for foreigners using video conferencing for verification instead of in-person meetings, due to pandemic restrictions.

She decided to capitalise on this new practice to bring in more clients for Interconnect, said the prosecutor.

On May 27, 2020, someone purporting to be a Chinese agent named Chen Guang contacted Interconnect.

Over WeChat, he told Lee Chia Yen that he ran a business in Shenzhen helping Chinese clients to incorporate companies outside China, and had many years of experience doing this in Hong Kong.

He also said that he had a ready pool of Chinese clients with purportedly legitimate businesses in China who wanted to incorporate companies and set up bank accounts in Singapore.

“After initial discussions, Chia Yen and Ay Ling took Chen Guang’s word at face value and decided to take referrals of Chinese clients from him for Interconnect’s business,” said Mr Ong.

“In particular, Interconnect would not meet or speak to any of the clients that Chen Guang referred (whether through phone or video calls) and relied on Chen Guang to meet with the clients in person to do the necessary verification of their identities.”

When Chen Guang referred a client, he would provide the client’s passport image, Chinese identification card, Chinese business licence, tax invoices and know-your-customer form.

The siblings did not perform any verification apart from name checks on Google and Baidu to search for adverse news, and checking the client’s business on Qichacha, a Chinese corporate database.

They relied on the documents Chen Guang provided and his assurances, said Mr Ong.

RECRUITING “SILENT” DIRECTORS

Lee Ay Ling and Lee Chia Yen agreed to recruit others to act as nominee directors as they were not prepared to take the risk themselves. To this end, they posted online advertisements.

Chng and Tay responded to these ads. They were told that they did not need to get involved in managing the companies, and for each company where they stood as nominee director, they would be paid S$250 twice a year.

Both men had questions about the arrangement. During an initial phone call, Chng asked if he would incur any personal liability and whether the companies may be used for money laundering.

Lee Chia Yen assured him he would not be liable as Interconnect would conduct due diligence checks. If the companies were used to launder money, Chng did not need to worry as the bank accounts would not be opened under his name, he said.

Chng went on to be appointed as a nominee director for 52 companies and earned S$13,000. United Overseas Bank (UOB) accounts of 10 of these companies received around US$12.6 million, which has been traced to criminal proceeds.

As for Tay, during discussions, Lee Ay Ling told him that Interconnect would go through the bank documents of the companies he was a nominee director of and would inform the bank of any suspicious transactions.

When Tay still felt that the arrangement was too good to be true, Lee Ay Ling assured him that he had nothing to worry about as everything would be taken care of by Interconnect, including background checks, said the prosecutor.

“Ay Ling also informed Tay that she was an accountant, and that she would ensure that everything she did complied with Singapore laws,” said Mr Ong.

Tay was appointed as nominee director for 57 companies and earned S$14,250. UOB accounts of six of these companies received more than US$2 million traced to criminal proceeds.

The court heard how one of the scams, which netted USS$10 million from a victim in Belgium, worked. It involved Hang Yi, a company that Interconnect incorporated in June 2020 with Chng as nominee director, for a client referred by Chen Guang.

In September 2020, Belgian company Grib Diamond NV received emails purportedly from its CEO with instructions to transfer two tranches of US$5 million to Hang Yi’s bank account.

The Belgian firm did so, but it turned out the emails were part of a business impersonation scam and were not sent by the CEO.

The entire sum was remitted out of Hang Yi’s account to other accounts in Hong Kong, mainland China and Singapore, and has not been recovered.

The Lee siblings came under investigation on Sep 4, 2020. They decided then that the arrangement with Chen Guang was too risky and resigned from all secretarial positions relating to the 109 companies.

In sentencing, District Judge Sharmila Sripathy-Shanaz noted the siblings’ business was deliberately structured around engaging nominee directors who would give up control over company affairs.

Lee Ay Ling and Lee Chia Yen chose to shift the risks of this arrangement to Chng and Tay, and it was “particularly aggravating” that this shift was monetised, she said.

She added that their culpability was heightened by the deceit they used to get Chng and Tay’s participation in the scheme.

Offences that involve breaching the discharge of a director’s duties under the Companies Act are punished with imprisonment for up to 12 months and a fine of up to S$5,000.

Offenders can also be disqualified from acting as directors for up to five years.