Abdul Ghani bin Tahir (appellant) was in the business of providing corporate secretarial services to small and medium business enterprises. As part of these services, the appellant incorporated companies on behalf of his clients and acted as the resident director of companies whose directors are not ordinarily resident in Singapore.
The case concerns companies incorporated by the appellant for clients that were introduced to him by one Nadia Monica. The company which carried out the money laundering in this case, World Eastern International Pte Ltd (World Eastern), was incorporated by the appellant on 11 December 2011. He had, however, previously incorporated other companies for clients introduced by Nadia. The history of these other companies is important as the court found that they gave rise to red flags that ought to have alerted the appellant that money laundering was being carried out.
The key incidents are as follows:
- September 2011: The appellant incorporated Kassar Logistics Pte Ltd (Kassar) and agreed to act as the local resident director. He applied to Standard Chartered Bank to open a bank account but the application was rejected as a “check on the directors did not turn out well”. He was able to open bank accounts with OCBC and HSBC.
- 11 December 2011: Nadia asked the appellant to incorporate a company for one Marius-Antonio-Costel Sima. The appellant incorporated World Eastern for him. He and Sima were registered as the only two directors. He never met or spoke with Sima. The principle activities of World Eastern were described as the “wholesale of parts and accessories for vehicles”.
- January 2012: He helped World Eastern to open a bank account with UOB. The appellant sent the internet banking token and cheque book for the account to Sima. He also applied to OCBC, however, it rejected World Eastern’s application to open a bank account. OCBC also closed Kassar’s bank account.
- 2 February 2012: The appellant was interviewed by the police about Kassar. The officer informed him that Kassar was being investigated for money laundering. During the interview, the appellant asked the police officer what he could do if there were other companies involved in money laundering. The court found that this was an indication that he already suspected then that the clients introduced to him by Nadia were involved in money laundering.
- April and May 2012: Various deposits and withdrawals were made into and out of the bank account of World Eastern. Although World Eastern’s business was described as being the wholesale of vehicle parts, substantial payments were made by companies with names that had nothing to do with vehicles, such as Amano Fisheries Enterprises, Silver Foods, and Meng Chong Foodstuffs. More significantly, the appellant received various notices from UOB to cancel some of those payments. All the appellant did was to scan the notices and send them to Nadia for her to deal with. She never replied.
- 30 May 2012: The appellant received a notice from UOB seeking to cancel a payment on the basis that the payer asserted that the payment was made pursuant to a fraudulent transaction.
- 4 June 2012: The appellant received a visit from a director of a company saying that payment had been made by mistake to World Eastern and asking for the money back. The appellant referred the matter to Nadia and Sima, but the matter was not resolved.
- June 2012: Further notices were sent in respect of other payments.
- Throughout this period, the appellant took no action other than acting as a mailbox for Nadia and Sima, forwarding all correspondences to them for their action. He also did not query or press them for answers when no responses were received.
Decision on Section 59(1) of the CDSA
The Singapore High Court held that the appellant had acted recklessly and that the money laundering conducted by World Eastern was attributable to his neglect. Accordingly, it sentenced him under section 59(1) of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) to 12 months’ imprisonment.
Section 59(1) states:
“Where an offence … committed by a body corporate is proved … to be attributable to any neglect on [the part of an officer of the body corporate], the officer as well as the body corporate shall be guilty of the offence and shall be liable to be proceeded against and punished accordingly.”
The Court held that, for the purposes of section 59(1), to prove neglect, it must be shown that:
- The officer knew or ought to have known of the existence of the relevant facts;
- Those facts required him to take steps which fell within the scope of the functions of his role to prevent the commission of the offence by the company; and
- He failed to take such steps.
In assessing the state of his knowledge and the scope of action which he allegedly neglected to perform, the functions of his office will be a relevant consideration. The more remote his office from the facts surrounding the offence, the more difficult it is to infer that the officer was negligent. The severity of the officer’s neglect goes towards issues of sentencing and not whether the offence is made out.
As a director of World Eastern, albeit a non-executive director, the appellant still had a duty to exercise a minimal form of supervision or control over the affairs of the company. As the only local director, he was required to exercise reasonable due diligence to ensure that the company was not engaging in any acts in contravention of the law in Singapore. This was especially so where he had notice of sufficient facts to raise alarm bells as to the propriety of World Eastern’s activities.
In the view of the Court, prior to 30 May 2012, the appellant had at least a reasonable suspicion that there was a likelihood that World Eastern was being used to conduct illicit activities. After 30 May, when the recall notice from UOB was received seeking to cancel payment on the basis that the payer asserted that the payment was made pursuant to a fraudulent transaction, this would have increased to beyond a likelihood. In the view of the Court he could have asked questions of Nadia and Sima about World Eastern’s activities, he could have pressed for a response when none was forthcoming, he could have taken steps to strike off World Eastern, or he could have alerted the authorities. The appellant instead was content to do nothing.
The money laundering carried out by World Eastern was attributable to this neglect. The Court held that the test for whether an offence is attributable to neglect is not the higher standard of primary causation or “but for” causation but mere simple causation; any degree of attribution is sufficient. What matters is whether the officer could and should have taken steps to prevent the offence; not whether any steps if taken by the officer will more likely than not or most definitely have prevented the commission of the offence. Accordingly, it did not have to be shown that if the appellant had taken active steps such as alerting the relevant authorities and the bank or making a police report the offences would not have materialised. Nor was it relevant that the appellant could not have stopped the withdrawals as he was not signatory to the bank account or that he only knew of the deposits after the monies had already had been withdrawn.
Decision on section 157(1) Companies Act
Section 157(1) of the Companies Act requires a director to “use reasonable diligence in the discharge of the duties of his office”. The Court held that applied to a local resident director, such a director cannot simply be a “dummy director” who approves, ignores, or is nonchalant as to whether the company is engaging in any illegal activities. While Prima Bulkship Pte Ltd v Lim Say Wan  SGHC 283 had held that a local resident director does not engage in or shoulder responsibility for commercial decision making, this was in relation to legitimate business decisions.
The Court also noted that the appellant was a chartered accountant with many years’ experience. He had also acted as a director of 22 other companies. This meant that the requisite standard to be expected of him should be raised.
The Court held that the appellant had breached the standard of reasonable diligence under section 157 as evidenced by the following facts:
- He placed the company out of his control and beyond his understanding of its affairs.
- He relinquished financial control of World Eastern when he sent the internet banking token and cheque books to Nadia and Sima.
- His understanding of World Eastern was limited to what was stated in the records of the Accounting and Corporate Regulatory Authority.
- He merely assumed that the company was involved in the genuine business of vehicle parts and accessories even though he had never seen any evidence of such business activities (e.g., invoices, purchase orders or receipts).
The Court ruled that his complete lack of action was reckless and therefore the Court sentenced the appellant to four weeks imprisonment to run concurrently with the 12 month term imposed for the offences under the CDSA.