Companies should review due-diligence practices in light of billion-dollar money-laundering case

SEVERAL companies have already been named in connection with the 10 foreigners rounded up in Singapore’s high-profile, S$1 billion money-laundering case. The number is set to increase.

The prosecution told the court on Wednesday (Aug 23) that it was awaiting statements from at least 10 financial institutions linked to the accused who were picked up in the raid.

Citibank Singapore and CIMB Bank are two financial institutions named in some of the charges.

What is clear is that more companies – including non-financial institutions – are likely to be embroiled in this case.

In the police blitz last Tuesday, about S$1 billion in assets were seized, including more than 35 bank accounts, which have been frozen. Prohibition-of-disposal orders were also issued to forbid transactions on gold bars, jewellery, luxury watches, 105 commercial and residential properties and 50 vehicles that were seized. 

Catalist-listed food and beverage operator No Signboard Holdings (NSB) made a clarification announcement in its Singapore Exchange filing on Tuesday to distance itself from former non-executive director Su Haijin.

Su has been charged with resisting arrest; some of the nine accused persons are facing allegations of money laundering or presenting banks with forged documents. To be clear, he and the others have not been convicted and are presumed innocent until proven guilty. 

NSB said that Su was appointed to the board in October 2021, after he acquired a 20 per cent stake in the company from the largest shareholder, GuGong. He resigned from NSB in May 2022, but still owns the stake in the company. There has been no bourse filing on the disposal of his shares. 

He had paid S$6.5 million for the 20 per cent stake in NSB in May 2021. The shares he bought were not through placement by NSB, but from GuGong – which counts suspended NSB chief executive Lim Yong Sim and former chief operating officer Lim Lay Hoon as directors and shareholders.

The responsibility to perform due-diligence checks should, nonetheless, still fall on the companies.

A spokesperson for Singapore Exchange Regulation (SGX RegCo) told The Business Times: “Listed issuers must conduct the necessary due diligence when dealing with their principals, such as business partners, shareholders and director candidates. 

“SGX RegCo expects listed issuers, including the nominating committee, to undertake the relevant checks and evaluate a director’s suitability, including experience and expertise, and to ensure that the director has the character and integrity required under the listing rules.” 

However, companies should not be the only ones to play goalkeeper; financial intermediaries also have a duty to guard against illicit funds.

“Intermediaries involved in fundraising activities by listed issuers must carry out their own due diligence on parties from which funds are raised. SGX RegCo too will undertake anti-money laundering checks for fundraising by listed issuers,” the frontline regulator stated in its response to BT.

Although the enforcement agencies have not taken any company to task so far, this case has shone a spotlight on the adequacy – or inadequacy – of the due diligence by companies. 

Companies should use this opportunity to review their due-diligence practices to see if they are rigorous, up to date, and understood by new joiners, as well as to ensure that they are being faithfully carried out.

This is especially true of financial institutions, luxury goods retailers, real-estate agencies and property developers.

Due diligence requires the cooperation of all members of a company, from frontline staff who deal with customers, to the management that sets the culture.

Past incidents have shown humans to be the weakest link, even when there is a robust system in place. The price to pay could well be as hefty as the revocation of a company’s business licence by the regulator.

While the checks are onerous – the Guide on Estate Agents (Prevention of Money Laundering and Financing of Terrorism) Regulations 2021 is a 45-page document – due diligence cannot be taken lightly.