SINGAPORE: A man and his brother were recruited by a friend of more than 20 years to hold company directorships and bank accounts for a suspected transnational money-laundering scheme.
Heng Boon Liang, 54, and younger brother Heng Joo Keng, 46, also known as Wang Yuqing, were on Monday (Jul 4) jailed for 18 days and 10 days respectively for their roles in the conspiracy.
The older Heng was also fined S$18,600, after pleading guilty to seven counts of cheating and six charges under the Companies Act. Another 18 charges were considered for sentencing.
The younger Heng, who pleaded guilty to four counts of cheating and two charges under the Companies Act, was fined S$4,500. Six more charges were considered for sentencing.
The court heard that the older Heng was recruited into the scheme in June 2014 by long-time friend Glazov Maxim, a 57-year-old permanent resident from Russia.
Heng, who was unemployed then, agreed to replace Maxim as the director of five companies he had incorporated: ASK Trading, JGHT Trading, MGHQ Import & Export, AMA Consultants and TB Logistics.
Under this arrangement, Heng received a monthly salary of S$3,000 and an additional S$2,000 per company each year. He assisted with TB's operations, but otherwise the financial affairs and daily operations of the companies remained under Maxim's control.
These companies are suspected to have been intermediaries for transactions involving parties in China, Russia and Eastern Europe, with none of the purported goods actually delivered to Singapore.
Around March 2017, Maxim sold the five companies to Kritskiy Anton, a 37-year-old Russian national.
In April 2017, Maxim told Heng that the banks were going to close the accounts of the five companies because of United States sanctions on Russian individuals and entities, and "political issues" between the two countries.
He asked Heng to open bank accounts or take over as the bank account-holder for the five companies, in order to circumvent the banks' "know your customer" controls.
To this end, Heng made false declarations to DBS Bank and RHB Bank that he was the ultimate beneficial owner of the companies ASK and TB.
This passed the banks' due diligence checks as Heng was listed as the sole director and shareholder of the companies on their Accounting and Corporate Regulatory Authority (ACRA) profiles.
About US$2.9 million (S$4 million) and €1.2 million (S$1.7 million) were transacted in the accounts for ASK and TB respectively.
But Maxim and Heng soon started encountering more difficulties opening accounts for the companies. Anton also needed a Singaporean to act as the local nominee director and account-holder for two more companies, Gemini and Capricorn.
Heng therefore decided to recruit his younger brother in May 2017, claiming that he was "blacklisted" by authorities and that Maxim and Anton could not use their names due to US sanctions. Heng would be paid S$2,000 per company each year.
The younger Heng agreed, and falsely declared himself as the ultimate beneficial owner of Gemini and Capricorn in order to open accounts with DBS and Oversea-Chinese Banking Corp (OCBC). More than US$148 million and €78.9 million were transacted in these accounts.
He went on to cheat Maybank and Associated Foreign Exchange (Singapore) in a similar manner.
In May 2017, the Commercial Affairs Department (CAD) was informed of a suspected money-laundering network in Singapore operated by Maxim and Anton. CAD found reason to suspect that most, if not all the purchases made by the companies were fraudulent or fictitious.
Investigators found large amounts of money flowing through the seven companies that did not correspond to their turnover, paid-up capital, assets or age.
They also found that the counterparties to the companies' transactions were not from the same industries, transaction amounts were disproportionately high and the companies bought similar goods from the same suppliers using repeat orders.
Investigations into possible money-laundering offences are still ongoing.
The Heng brothers also failed to exercise any due diligence when they were directors, as they were not involved in daily operations, did not conduct checks on the affairs and did not supervise the financial affairs of the companies. This constituted their offences under the Companies Act.
NO EVIDENCE THE BROTHERS KNEW
Deputy Public Prosecutors Magdalene Huang and Tan Zhi Hao sought the jail terms imposed on the brothers, highlighting that the offences involved the deception of multiple financial institutions and deserved deterrent sentences.
The cheating offences - carried out over a period of eight months by the older Heng and seven months by the younger Heng - were premeditated and difficult to detect, said the prosecutors.
But the prosecutors acknowledged that there was no evidence the brothers were alerted to the probably fraudulent transactions conducted using the companies with which they were associated.
Defence counsel Diana Ngiam argued that both her clients did not think there were and did not know of any illicit transactions happening in the companies.
When questioned by District Judge Janet Wang on the brothers' education and employment, Ms Ngiam informed the court that the older Heng had obtained his O-Level certificate, while the younger Heng had graduated from the Institute of Technical Education and worked as a technician.
The prosecution added that the older Heng worked in the food and beverage industry before working as a stationery shop assistant, where he met Maxim more than 20 years ago.
Ms Ngiam also argued that the younger Heng was "parachuted in to help his brother", and his culpability was therefore lower. She added that both men were remorseful and cooperated fully with authorities.
Maxim will appear in court to plead guilty to his charges later in July. Anton has absconded and is believed to be in Russia. A warrant for his arrest has been issued.
Those convicted of cheating can be jailed for up to three years, fined or both.
The punishment for failing to exercise reasonable diligence in discharging duties as a director is jail for up to a year, a fine of up to S$5,000, and any profit made or damage suffered by the company as a result.
The penalty for failing to keep accounting and other records to explain the transactions and financial position of a company is jail for up to a year, a fine of up to S$5,000 and a penalty.