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The Fall of Hin Leong and the Rise of RegTech

The ongoing Hin Leong scandal highlights the dangers of a lack of oversight and under-reporting necessitating the need for tech solutions that perform these functions in real time.

Hin Leong Trading company is one of the largest independent commodities traders and oil suppliers in Singapore and in fact the world. Before April 2020, they were a reputable giant and many were clamouring to be associated with them.

However, the dream was to soon end when Hin Leong’s owner, Lim Oon Kuin, was found to be fabricating his books and inflating the companies’ asset values in order to get further bank loans.

The accounts receivables were increased by at least US$3 billion by transferring money between bank accounts to create a false sense of cashflow where none actually existed. This inflated their balance sheet making it appear more financially sound to banks’ in order to receive greater loans.

To date, 23 banks are reported to have been hoodwinked by the company, including DBS and OCBC. HSBC faces the greatest threat with an exposure of US$600 million. In a report by PWC, the court-appointed interim judicial manager of Hin Leong, suggests that ‘the scale and regularity’ at which this was done, shows the extent, and routine nature of the fraud committed by Mr Lim.

PWC, being both the company appointed and court appointed manager of the company, released this comment which casts a spotlight over the blatant ill intent of the owner in embezzling funds. To date, Mr Lim has not released any statement regarding the matter due to him being declared ill with his family members producing various medical certificates declaring that he may not be questioned for long periods of time.

The reason behind the scandal

Asian oil trader, Mr Lim Oon Kuin had losses of US$800 million in oil future contracts, and the company had rising debts of up to US$3.5 billion. According to the operating team, the founder had ordered for the losses to be ‘removed’ from the balance sheet and, in the need to raise cash desperately, sold the barrels of oil that were meant as collateral for lenders.

Mr Lim, having been a trader since the earlier years of the company, had lost money due to fluctuations in oil prices over the past decade, especially during Covid-19 where oil prices went negative for the first time. The company is now filing for bankruptcy.

However, interestingly, the big questions are now being directed towards Hin Leong’s auditors . The auditing company in question, Deloitte & Touche, did not find the losses and reported so in their annual report. When questioned, a Singaporean spokesperson replied via email to a news agency that they stand behind their auditing practices as it was compliant to the highest level of audit standards with the information made known to them.

However, Associate professor with the National University of Singapore Business School Mak Yuen Teen disagrees. “You can't sue someone for bad luck. Covid-19 and the drop in oil prices may have contributed but do not explain the US$800m in undisclosed future losses and the allegations of margin calls being recorded as accounts receivables” he said.

Being an exempt private company, Hin Leong is subjected to lower regulatory standards compared to public firms. Prof Teen also is in disbelief that a firm of such massive revenue streams can be seen as a private exempt company just because it has such few shareholders, many of which are family members and therefore has no transparency.

Moreover, there is no board overseeing the management of the company and there are no independent directors in the company. All of which adds to a lack of regulatory oversight allowing for such a scandal to take place.This has been a cause for concern as lately there has been many such scandals within the energy and commodities sector, exemplified with Nobel Group 5 years ago, the BP oil spill and two Shell-Nigeria corruption case over the last two years.

Singapore being a commodities trading hub is starting to lose its reputation as its lack of regulation to promote itself is starting to backfire. However, the bigger question is then why are such cases even occurring?

With the rising influence of regulatory technology in regulated industries, from AML (anti-money laundering) to transaction and risk monitoring, helping to digitise compliance processes, is relying on companies providing ‘adequate’ information to audit companies sufficient?

Is there a need for a regulatory framework to be present in which technology can play a bigger part? Can technology be used by auditing companies which allows for real-time auditing and red flags to be pointed out automatically by software to reduce man hours and increase auditing efficiency and effectiveness? Should introducing technology become compulsory to ensure such scandals are limited and uncovered sooner?

In retrospect, much more could have been done to prevent this incident, instead of allowing the situation to worsen to the point of creditors demanding that banks pay them in lieu especially at a time where cashflow is low and businesses are closing and declaring bankruptcy.

In time to come, more rules and regulations are going to be introduced and more companies caught. If there’s anything Covid has taught us, is that technology could save the companies that embrace it and leave those that don’t, to be caught up in the next wave of inefficiencies, scandals and eventual collapse.


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