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Two Individuals Charged For Perpetrating A $55 Million Gst Missing Trader Fraud; Another Charged For Breaching Director’s Duties

Following investigations by the Commercial Affairs Department (“CAD”) and the Inland Revenue Authority of Singapore (“IRAS”), Tan Nuan Seng Francis (“Tan”), aged 46, and Yeo Soon Teck, Kelvin (“Yeo”), aged 41, were charged in court today for their alleged involvement in perpetrating a Goods and Services Tax (“GST”) Missing Trader Fraud involving approximately $55 million in fictitious sales. A third man, Sia Hock Chuan (“Sia”), aged 56, was also charged in court on 24 August 2023 for allegedly breaching his director’s duties. This is the second prosecution involving such fraud.

Between September 2015 and December 2015, a Singapore-incorporated company, M_Solution Trading Pte Ltd (“MSTPL”) purportedly sold high-value electronic goods and software amounting to approximately $55 million to various businesses, including Crescendo Hardware Trading Pte Ltd (“CHTPL”). GST was charged on these sales even though MSTPL was only GST-registered from 1 December 2015. MSTPL was allegedly a shell company with no real business operations that was used to generate purchase orders and sales invoices to support the subsequent GST refund claims by the exporters. 

Tan and Yeo allegedly ran MSTPL’s fraudulent operations, and conspired to forge the company’s sales invoices and delivery orders. For their fraudulent operations of MSTPL, they have each been charged under Section 340(5) read with Section 340(1) of the Companies Act (Chapter 50, 2006 Revised Edition) (“Companies Act”) for being a knowing party to a fraudulent business, and two counts of Section 465 read with Section 109 of the Penal Code (Chapter 224, 2008 Revised Edition) (“Penal Code”) each for the conspiracy to forge MSTPL’s sales invoices and delivery orders respectively. 

Tan also allegedly transferred approximately $5 million from MSTPL’s bank account to a bank account in Hong Kong in December 2015, despite knowing that the monies were benefits from criminal conduct. For this, he faces a single charge under Section 47(2)(b) punishable under 47(6)(b) of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Chapter 65A, 2000 Revised Edition) (“CDSA”). 

Relatedly, Yeo was allegedly in charge of CHTPL’s fraudulent operations between October 2015 and April 2016, and forged the sales invoices of CHTPL to facilitate the fraud. He has been charged with an additional count of Section 340(5) read with Section 340(1) of the Companies Act and Section 465 of the Penal Code in relation to CHTPL. 

Sia was the director of MSTPL during the material time. He is alleged to have failed to exercise reasonable diligence in the discharge of his duties as a director of MSTPL, with MSTPL being used to perpetrate the GST Missing Trader Fraud. He faces a single charge under Section 157(1) of the Companies Act. 

If convicted, the offenders may face the following punishments:

  1. For each charge of fraudulent trading under Section 340(5) of the Companies Act, imprisonment for a term not exceeding seven years, a fine, or both;

  2. For each charge of conspiracy to commit forgery under Section 465 of the Penal Code, imprisonment for a term not exceeding four years, a fine, or both; 

  3. For each charge of transferring benefits of criminal conduct under Section 47(2)(b) of the CDSA, imprisonment for a term not exceeding 10 years, a fine not exceeding $500,000, or both; and/or

  4. For each charge of breaching director’s duties under Section 157(1) of the Companies Act, imprisonment for a term not exceeding 12 months or a fine not exceeding $5,000.

The Police and IRAS take a serious stance against GST Missing Trader Fraud offences and will take stern enforcement action against perpetrators of such fraudulent arrangements. Please refer to Annex A for more background and an illustration of the GST Missing Trader Fraud.

In addition, from 1 January 2021, any GST-registered business that claims input tax on any supply made to them which it knew or should have known to be part of a Missing Trader Fraud arrangement, will be denied input tax and be subject to a 10% surcharge on the input tax denied. Businesses are therefore strongly advised to perform due diligence checks and take appropriate actions to address the risks identified to avoid participating in transactions suspected to be part of a Missing Trader Fraud arrangement. For more information, please refer to the e-Tax Guide “GST: Guide on Due Diligence Checks to Avoid Being Involved in Missing Trader Fraud”.

Annex A: Illustration of GST Missing Trader Fraud

In a typical GST Missing Trader Fraud arrangement, a group of businesses would form a supply chain where goods are sold through the chain. At each stop along the supply chain, the seller charges GST on the goods sold. The original upstream seller then disappears without paying the collected GST to IRAS, hence the term “Missing Trader”. In the meantime, the goods sold down the chain are purportedly exported by the last seller in the chain. Since exports are zero-rated, the last seller does not collect GST on the exports but instead claims a refund from IRAS on the GST paid on its purchases of goods. If IRAS refunds this last seller, it will result in a loss to the State because the Missing Trader did not pay the GST that he collected for his sale of goods at the start of the chain.

In some variations of the GST Missing Trader Fraud, goods can either be fictitious, or the same goods can be re-imported and re-exported repeatedly; such an arrangement is also known as “carousel fraud”.  See illustration  below for an example of the GST Missing Trader Fraud. 



06 September 2023 @ 12:40 PM
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