Managing Crime Risks and Employee Dishonesty

A Singapore lawyer has been grabbing the headlines for all the wrong reasons. Jeffrey Ong Su Aun, managing partner at law firm JLC Advisors has been apprehended by Singapore authorities following initial reports of his link to a SGD 6 million theft from CCJ investments. Mr Ong has been charged with cheating, following allegations that he dishonestly induced CCJ Investments, to transfer the funds to his company accounts in February this year.
In a separate incident in May, Mr Ong also made headlines when SGD 33 million reportedly went missing from an escrow account held by JLC Advisors. The funds were for a proposed acquisition by Singapore-based Allied Technologies of another company called Aik Chuan Construction (ACC).
During its annual audit, Allied Technologies’ accountants queried whether the company had proper safeguards surrounding funds placed in escrow with its law firm, JLC. The auditor questioned the rationale and prolonged time-period for keeping the funds with JLC and noted the funds were kept in the general client account of JLC along with funds of other clients. Allied Technologies had been requesting a return of the money from Mr Ong for two months, to no avail. Mr. Ong’s last email to Allied Technology before his disappearance was on May 13. As a result of this incident, the proposed acquisition of ACC has been called off, Allied Technologies filed a police report regarding the theft and The Law Society of Singapore stepped in to take over running of Allied Technology’s account from JLC.
What can we learn?
Details are still emerging, but this incident highlights the importance of effective risk management and the need for risk transfer solutions in relation to significant transactions where funds are held in escrow. Without knowing all the details, we can envision several insurance policies that might be triggered. For JLC, the theft of funds by Mr. Ong could trigger a crime policy and a Professional Indemnity or Errors and Omissions policy may be triggered by claims arising from the failed management of the escrow account. Likewise, if the account was held at a financial institution, then the financial institution’s Errors and Omissions policy could also be triggered if, for example, it was alleged that the financial institution did not take appropriate steps to authorise or verify the transaction. In addition, such incidents can lead to indirect claims under Directors and Officers (D&O) policies, particularly where regulators are called upon to investigate misconduct.
M&A transactions can present a myriad of risks pre and post-closing, as exemplified by this incident. In addition, organisations involved in facilitating or advising on M&A transactions are also exposed to liability arising from the actions of their employees.

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