Defendants Allegedly Used ‘Singapore Solution’ to Enable U.S. Clients to Evade Taxes on Over $60 Million Hidden Offshore

4 October 2022, the Accounting & Corporate Regulatory Authority (ACRA) implemented new requirements that make it mandatory for both local and foreign companies in Singapore to keep a non-public register of nominee shareholders and their nominators.

The new requirements also make it mandatory for companies and Limited Liability Partnerships (LLPs) that are unable to identify a registrable controller who has a significant interest in or significant control in them to identify, all individuals with executive control over the company or LLP as registrable controllers by the same date.

The compliance deadline for both is 5 December 2022. Fines for non-compliance are up to SGD5,000 per offence.

These amendments, introduced under the Corporate Registers (Miscellaneous Amendments) Act 2022, which was approved by parliament on 10 January, are intended to strengthen Singapore’s corporate governance regime and bring it into closer alignment with the international standards set by the Financial Action Task Force (FATF).

The Singapore Companies Act already requires companies to maintain a register of members – or shareholders – but in certain situations a shareholder may hold shares on behalf of another person. In such a situation the person holding the shares is known as the nominee shareholder, while the person for whom the shares are held is known as the nominator.

Previously Singapore law did not require the nominator to be identified because he or she was not the shareholder on record. However, because the nominee shareholder typically acts on the instructions of the nominator, the lack of transparency on the identity of these persons who actually controlled the shares was an area of concern internationally.

Under the amendments, both local and foreign companies in Singapore are now required to maintain a Register of Nominee Shareholders (RONS) at their registered office or at the registered office of their appointed Registered Filing Agent. The register is confidential and must not be disclosed to any member of the public, including the company’s auditors.

The definition of a nominee covers anyone who votes or collects dividends on behalf of the nominator. Nominees must notify the company of their status and the identity of the nominator either within 30 days of being appointed or the company’s incorporation, if incorporated after 4 October 2022.

The RONS will need to contain prescribed particulars of the nominator(s) of the company’s nominee shareholder(s). Companies must set up their RONS by 5 December 2022 and are further required to update this register within seven days of being informed by the nominee.

The rule is subject to some exceptions, which mostly relate to listing on a regulated stock exchange, although there is also an exemption for wholly owned subsidiaries of a foreign company that is a Singapore financial institution.

The second set of amendments introduces new requirements in relation to the identification of registrable controllers, for local and foreign companies and LLPs.

Previously, companies and LLPs were required to maintain a Register of Registrable Controllers (RORC) – individuals or corporate entities that have a significant interest in or significant control over the company or LLP – but there were situations where a company or an LLP claimed to have no registrable controllers with significant interest or control.

Under the new requirement, companies and LLPs that are unable to identify a registrable controller who has a significant interest in or significant control over them will be required to identify all individuals with executive control over the company or LLP as registrable controllers. Individuals with executive control are the chief executive officers, and directors or partners who exercise executive control over the daily or regular affairs of the company or LLP through a senior management position.

Companies and LLPs are now required to record the prescribed particulars of individuals with executive control in their existing RORC by 5 December 2022. The same information must also be lodged with the ACRA central RORC within two business days after any update(s) to their own RORC.

The Corporate Registers (Miscellaneous Amendments) Act 2022 also contained other amendments establishing a seven-day time limit for Singapore companies to update their registers of nominee directors and a 30-day time limit foreign companies to update their registers of members. These changes came into force on 30 May.

The article below is dated September 2021

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An indictment was unsealed today in New York, New York, that charges  offshore financial service executives and a Swiss financial services company with conspiracy to defraud the IRS by helping three large-value U.S. taxpayer-clients conceal more than $60 million in income and assets held in undeclared, offshore bank accounts and to evade U.S. income taxes.

According to the indictment, from 2009 to 2014, Ivo Bechtiger, Bernhard Lampert, Peter Rüegg, Roderic Sage, Rolf Schnellmann, Daniel Wälchli and Zurich, Switzerland-based Allied Finance Trust AG allegedly defrauded the IRS by concealing income and assets of certain U.S. taxpayer clients with undeclared bank accounts located at Privatbank IHAG (IHAG), a Swiss private bank in Zurich, Switzerland, and elsewhere. In order to assist those clients, the defendants and others allegedly devised and used a scheme called the “Singapore Solution” to conceal the bank accounts of the U.S.-based clients, their assets, and their income from U.S. authorities. In furtherance of the scheme, the defendants and others allegedly conspired to transfer more than $60 million from undeclared IHAG bank accounts of the three U.S. clients through a series of nominee bank accounts in Hong Kong and other locations before returning the funds to newly opened accounts at IHAG, ostensibly held in the name of a Singapore-based asset manager. The U.S. clients allegedly paid large fees to IHAG and others to help them conceal their funds and assets.

“Prosecuting offshore tax evasion remains one of the Tax Division’s highest priorities,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Taxpayers contemplating hiding money abroad – and the foreign bankers, attorneys and finance professionals who design and execute strategies to assist their evasion – should know that the Tax Division and IRS have the investigative resources and expertise to unravel even the most elaborate schemes.”

“As alleged, the individual defendants and the Swiss firm Allied Finance conspired to defraud the IRS by assisting U.S. taxpayers in avoiding their tax obligations,” said U.S. Attorney Audrey Strauss for the Southern District of New York. “They allegedly did this through an elaborate scheme that involved concealing customer assets at a Swiss private bank through nominee bank accounts in Hong Kong and elsewhere, with funds returning to the private bank in the name of a Singapore firm. One such U.S. customer, Wayne Chinn, pleaded guilty to his participation in the so-called ‘Singapore Solution,’ forfeited more than $2 million to the United States, and awaits sentencing for his admitted crime.”

If convicted, the defendants face a maximum penalty of five years in prison, supervised release, and monetary penalties, and the corporate defendant faces monetary penalties. An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Also unsealed today was the guilty plea of Wayne Franklyn Chinn, of Vietnam and San Francisco, California, one of the U.S. taxpayer-clients, who participated in the Singapore Solution scheme.

According to court documents filed in relation to his guilty plea, from 2001 through 2018, Chinn concealed approximately $5 million in undisclosed and untaxed income. During this period, Chinn held accounts in nominee names at Privatbank IHAG. Beginning in 2010, Chinn wired funds from these offshore accounts through nominee accounts in Hong Kong before returning them to newly opened accounts at IHAG held in the name of a Singapore based trust company acting on behalf of two foundations created to conceal Chinn’s ownership of the accounts. Chinn subsequently transferred the funds out of Switzerland to undeclared accounts in Singapore. Chinn did not file any tax returns or disclose his foreign bank accounts during the years at issue.

Chinn pleaded guilty to one count of tax evasion which carries a maximum penalty of five years in prison. Chinn also consented to the civil forfeiture of 83% of the funds held in five accounts at two Singapore banks, which resulted in the successful forfeiture and repatriation to the United States of approximately $2.2 million. The civil forfeiture proceeding is United States of America v. Certain Funds on Deposit in Various Accounts, 20 Civ. 3397 (LJL).

Chinn is scheduled to be sentenced on Nov. 19, and faces a maximum penalty of five years in prison. He also faces a period of supervised release, restitution and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division; U.S. Attorney Audrey Strauss for the Southern District of New York; and Chief James Lee of IRS-Criminal Investigation made the announcement. The Department of Justice Office of International Affairs, the Singapore Attorney-General’s Chambers and the Commercial Affairs Department of the Singapore Police Force provided significant assistance in this matter.

The IRS-Criminal Investigation Division is investigating the case.

Senior Litigation Counsel Nanette Davis and Trial Attorney Sean Green of the Justice Department’s Tax Division and Assistant U.S. Attorney Olga Zverovich of the U.S. Attorney’s Office for the Southern District of New York are prosecuting the case.

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