ISCA Conference 2023: Lessons From Fraud Cases In Hong Kong

Like Singapore, Hong Kong is a major international financial centre that sees large volumes of transactions go through its financial systems daily. Unsurprisingly, a lot of the money-laundering cases in Hong Kong are also similar to Singapore’s. This was revealed by Vivian Lee, Superintendent, Money Laundering Expert Cadre, Hong Kong Police Force, in her presentation on money-laundering and fraud cases in Hong Kong. In the city, a number of law enforcement agencies such as the police and financial regulators such as the Hong Kong Monetary Authority help combat money-laundering crimes, which are becoming a focus in recent years.

From 2016 to 2020, there were around 1,850 investigations into money laundering annually. Over 70% of all law enforcement agencies’ investigations stem from fraud-related offences; only less than 10% are related to drugs or other serious crimes. While petty crime like burglary has not gone up in recent years, there has been a significant upsurge in fraud-related cases, said Ms Lee. In 2023, almost half of the criminal cases in Hong Kong are expected to be related to technology and fraud, she added.

Ms Lee related three types of fraud cases that are common in Hong Kong:

• CEO fraud/phishing scam: Criminals may send an email that looks like it came from the CEO of a company, to trick an accountant into transferring large amounts of money or sharing confidential information. Often, the fake email would convey an urgent situation, to minimise scrutiny, to hoodwink the victim. This works because employees are often reluctant to question a CEO’s request.

• Investment fraud: In this situation, firms are asked to invest in a fraudulent investment scheme that only rewards the criminals. Accountants are often told to transfer the money to a third-party account or to inject money into assets such as cryptocurrency. This makes such crimes hard to trace and the losses difficult to recover. Due diligence is important to prevent such cases.

• Staff embezzlement: One case involved a former associate director in a bank who stole money from clients by changing his name to his clients’, and setting up 60 bank accounts across the globe. He then sent the money around the world, in a large breach-of-trust case that involved the transfer of money across borders.

Ms Lee used these examples to highlight the money-laundering and fraud risks for accountants, who often have to handle the funds involved in these incidents. She added that fintech and the globalisation of financial systems now raise new challenges that require closer collaboration with law enforcement agencies and regulators. Accountants, she advised, should adopt a SAFE approach. This means to Screen (for information), Ask (if one has doubts), Find (and reveal information) and Evaluate (whether a suspicion is substantiated). Customer due diligence is important, she emphasised, adding that accountants should report suspicious activities and transactions to mitigate the risks of fraud and being prosecuted.

Rehash the excitement of ISCA Conference 2023 in the video here!