SINGAPORE - The first member of a criminal syndicate to be convicted of a goods and services tax (GST) fraud scheme involving $114 million in fictitious sales was sentenced to jail for three years on Thursday.
Lee Chong Hoong, now 42, served as the director of shell company Nagore Trading between February 2015 and January 2016, during which he and other syndicate members forged at least 183 invoices involving sales of more than $56.5 million.
The Singaporean's job scope included signing all of Nagore's invoices and paperwork, which included endorsing sales invoices. He earned at least $80,000 for his role in the scheme.
In a statement on Thursday, the Singapore Police Force and Inland Revenue Authority of Singapore (Iras) explained how such schemes involving the forging of sales invoices were used to claim fraudulent GST refunds from Iras.
Nagore, a shell company with no real business operations, was set up to generate false invoices to support the sham transactions in the scheme, the authorities said.
The invoices were forged to create the impression that Nagore had paid local suppliers for goods and sold the items to other companies.
These buffer companies that Nagore "sold" goods to were in on the scheme. They forged invoices to other businesses involved, though no actual trade was carried out.
Members of the syndicate then convinced exporters to buy the non-existent goods and sell them abroad to a buyer they had arranged for the exporters.
The exporters then paid the buffer companies the selling price of the goods with GST included, which made up the source of the scheme's criminal proceeds.
Not knowing that the transactions were a sham, the exporters then claimed GST tax refund from Iras.
The authorities said: "These forged sales invoices, together with other documents, were used to support Nagore's declarations of about $114 million in fictitious sales in its GST filings.
"They also formed the basis for the submission of fraudulent input tax claims by other entities amounting to about $8 million."
By the time Iras found out about the scheme, it had paid out $772,189 to exporters.
In January 2016, Nagore ceased its operations. But between February and March 2016, Lee continued to forge at least 409 sales invoices when Nagore was being audited.
On Sept 7, 2022, Lee was convicted of one count of carrying on the business of a company for a fraudulent purpose.
Two other charges of conspiring to commit forgery were taken into account when the former taxi driver was sentenced on Thursday.
Court proceedings for other syndicate members are ongoing.
Iras and the police said they take a serious view of such fraud schemes and will not hesitate to take stern enforcement action against those who perpetrate them.
"Offenders will be dealt with severely in accordance with the law," they said.
Since Jan 1, 2021, any GST-registered business will be denied input tax claims in cases where it knew or should have known that the supply made to it was part of such fraudulent schemes.
The business can also be subject to a 10 per cent surcharge on the input tax denied.