Lower Sentence in Novel Case of Director Liability for Company’s Money Laundering – Part 2

Lower Sentence in Novel Case of Director Liability for Company’s Money Laundering – Part 2

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Part 2: Holding of the High Court

In this second articles, we look at the director’s appeal to the High Court in Abdul Ghani bin Tahir v Public Prosecutor [2017] SGHC. On appeal, the High Court reduced the sentence imposed on the Defendant to 12 months’ imprisonment and a S$500,000 fine. The High Court also overturned the costs order.

 

CDSA charges

Section 47 of the CDSA which deals with the offence of money laundering, makes it an offence to acquire, possess, use, conceal or transfer benefits of criminal conduct. The maximum sentence for an individual is a fine not exceeding S$500,000 or imprisonment not exceeding 10 years or both.

Where the offence is committed by a company, section 59(1) of the CDSA imposes a liability of a similar nature on an officer of the company, provided the offence has been committed with his “consent or connivance”, or is “attributable to any neglect on his part”.

The High Court provided the following sentencing guidelines for the CDSA charge:

 

  • Where the charge is for “consent or connivance”, the starting point should be a custodial sentence.

 

  • Where the charge is for “neglect”, the starting point should be a fine. However, relevant aggravating factors could warrant the imposition of a custodial sentence, such as reckless conduct, financial gain, a series of lapses, serious consequences, and the nature of the officer’s role and responsibilities.

 

  • The maximum term where there is consent or connivance would be 10 years’ imprisonment. Where there is recklessness, the maximum sentence would be 4 years. For negligence, the maximum would be 2 years.

 

On the facts, the court found that the Defendant did not act recklessly for the first 3 charges under the CDSA and instead, acted with mere negligence. The court came to this finding based on an examination of the 7-day recall notices from the bank. The court found that the recall notices ought to have put the Defendant on inquiry that through WEL, illicit activities were being engaged in. That being said, the Court also recognised that before the Defendant had received the 4th recall notice – which made a specific alert to him regarding a possible fraudulent transaction – he would not have sufficient cause to believe that WEL was in fact involved in money laundering activities. At that point, while he may have had reasonable suspicion that WEL, like Kassar, was involved in illicit activities of such nature, it was not likely for him to have known that this may have been likely to be the case. It was only after the 4th recall notice that was received by the Director and his failure to make changes did the Defendant’s culpability change from “mere negligence” to “recklessness”.

Thus, the first three charges of custodial sentence were reduced to fines (amounting to a total of S$50,000). With regard to the 4th, 5th and 6th charges, the Defendant was sentenced to a reduced term of 8 months’, 2 months’ and 10 months’ imprisonment respectively, with the sentence for the 4th charge to run concurrently with the 6th.

 

The Company’s Act charge (the “CA charge”)

According to section 157(1) of the CA, a director must act honestly and use reasonable diligence in the discharge of his duties. A breach of this duty may result in the director being considered guilty of an offence and liable to a fine not exceeding S$5,000 or imprisonment not exceeding 12 months or both.

The High Court provided the following sentencing guidelines:

 

  • Where the duty is breached “intentionally, knowingly or recklessly”, the starting point should be a custodial sentence.

 

  • Where the breach is due to negligence, the starting point should be a fine, unless there are weighty aggravating factors.

 

  • The maximum sentence should be 12 months’ imprisonment where there is dishonesty or intentional/knowing disregard, 6 months for recklessness, and 3 months for negligence.

 

Considering the facts of this case, the Court held that the 4-week short custodial sentence imposed by the District Judge was not excessive. That said, the Court ordered this sentence to be run concurrently with the custodial sentence that was imposed for the 6th CDSA charge. Thus, the aggregate imprisonment term for the Defendant’s CDSA and CA offences was 12 months’ imprisonment.

 

Cost

Regarding the issue of costs, the Court found that the Defendant had not conduct his defence extravagantly or unnecessarily.

The Court did agree with the Defendant that costs to the Prosecution should only be awarded in circumstances that are exceptional. The reason why threshold is high is so that it can be ensured that accused persons can conduct their defence without the fear of a costs sanction.

For this reason, the Court rejected the Prosecution’s submission stating that the Defendant had unnecessarily challenged certain points and had conducted irrelevant cross-examination and the costs order was therefore set aside.

 

Concluding words

Money laundering and other financial offences are issues that are considered real and serious in the current business landscape. With an increase in the focus on anti-money laundering and terrorist funding measures, together with the rise in the prosecution of similar offences, companies and their officers are advised to be vigilant against such illicit activities.

This decision is especially relevant to nominee directors, proxy directors, company secretaries and any other business entity or persons offering corporate secretarial services. This demonstrates how officers may be held liable for offences by their companies, regardless of whether they play an executive role and whether they are involved in the daily operations of the company. Accordingly, the officers’ involvement in the money laundering activities committed via the company could be based on mere negligence as opposed to deliberate participation. Further, this judgement provides an important guide on the sentences that could be imposed on officers for their participation in such offences.

 

Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you require legal advice, please contact me at walter@silvesterlegal.com.

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