Commentary: Case of director of 980 companies drives home a problem for business-friendly


CHALLENGE REMAINS MONITORING AND ENFORCEMENT

While money launderers and perpetrators of other financial crimes need only one company for malicious use, it is clearly absurd for one individual to be a nominee director of as many as 980 companies.

The number of directorships held by a single individual should be at least be an “orange flag” of potential problems as part of a risk-based approach to monitoring and surveillance – particularly if these companies are not part of a group where there may be legitimate business reasons to have many subsidiaries.

Subsidiary legislation introduced in 2015 under the ACRA Act relating to filing agents and qualified individuals specify factors for assessing whether an individual is fit and proper, who are considered qualified persons, and courses and training. These could be applied to nominee directors.

The challenge is effectiveness of such rules and their compliance, monitoring and enforcement. An individual could well meet the fit and proper requirements before they are caught and simply attending courses and training does not necessarily guarantee that an individual is equipped or inclined to fulfil their responsibilities.

In addition to better use of technology and data analytics to identify relationships and red flags, regulators should also encourage whistleblowers to come forward and provide better protection for them. Surveys have repeatedly found that most frauds are discovered through tip-offs.

While ACRA’s website provides a means for complaints to be filed, it may be quite intimidating for those who wish to do so. For example, while it seems reasonable to ask for contact details to facilitate investigations, it suggests that anonymous complaints are not allowed. If individuals are hesitant to log a complaint under such circumstances, ACRA may miss out on an important source of information.

The recent abuse of shell companies and nominee directorships requires firm action from the authorities so that Singapore will not lose its hard-earned reputation of being a trusted financial hub.

Mak Yuen Teen is Professor (Practice) of Accounting and founding director of the Centre for Investor Protection at the NUS Business School, where he specialises in corporate governance.



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