IR Global – Meet the Members Asia-Pacific and The Middle East & Africa
Hong Kong is known as one of the world’s most vibrant and dynamic financial centres. However, with the rise of the city’s economy and the free flow of money, data and people, there has been an increase in white-collar crime.
Fraud
One of the most common forms of white-collar crime in Hong Kong is fraud. Fraud occurs when an individual or organisation uses deception to gain a financial advantage. This can include:
- Embezzlement
- Investment fraud
- Insider trading
- “Ramp-and-dump”
- Ponzi schemes.
Many of the cases involve online or instant messaging scams that are international and anonymous.
According to the Hong Kong Police, Hong Kong saw a 45% uptick in fraud cases in 2022 compared to 2021. Deception accounted for almost 40% of all crimes reported. The almost 28,000 fraud cases recorded in 2022 included online shopping, employment, investment and phone scams.
In terms of recovery for victims of fraud, they can file a complaint with the Hong Kong Police and pursue civil action to claim against the fraudsters or anyone that has received or kept the scammed funds.
In Hong Kong, there is an indirect asset freezing regime where the Police could issue a letter of no consent to banks that have accounts with scammed funds in them. The banks that have received such letters would most likely not allow the bank account to be operated (for fear of being accused of money laundering or assisting the crime) thereby “freezing” the funds in the bank accounts. With such a “freeze”, victims could then instruct lawyers to commence a civil action against the bank account holders for a refund to enter judgment and then apply to the Courts to enforce the judgment to recover the scammed funds back.
A victim could also apply to the Court for an asset freezing order (injunction) but with a Police “freeze”, it may not be necessary to apply for an injunction.
For the recovery of funds by civil legal means, for a straightforward case, it might still take 6 to 9 months. The victim has to fund their own costs as the Police will not help to recover the funds apart from conducting a criminal investigation to pursue the culprits and to “freeze” the accounts.
There is no centralised regime for helping victims to recover funds. Sometimes there is a risk that multiple victims might pursue the “frozen” funds in a bank account and with that, the fastest application might receive the funds if the claim is so big that it would take up the whole of the “frozen” funds. Hence, fraud victims need to take swift action.
Money laundering
Another form of white-collar crime that is prevalent in Hong Kong is money laundering. Money laundering is the process of disguising the proceeds of illegal or criminal activities as legitimate funds. This is typically done by transferring the money through a series of complex financial transactions. Hong Kong’s status as a major financial centre, with no foreign exchange control and fast movement of funds by digital means makes it an attractive location for money launderers.
“A lot of the fraud and crime cases take place across borders, boundaries and involve multiple jurisdictions.”
In Hong Kong, there are banks and licenced Financial Service Operators that offer remittance and money transfer services. In mainland China, with its foreign exchange controls, many people turn to “underground” money changers for foreign exchange services. Sometimes these so-called money changers are money laundering syndicates that help fraudsters to launder the scammed funds by pretending to provide foreign exchange services. In reality, these “underground” money changers would arrange foreign currency funds from the fraudsters to pay the party that requires the foreign currency. This would cause the person who thought they had “bought” the foreign currency to be the money laundering suspect, as the scammed funds went to that person’s account.
Bribery and corruption
Bribery and corruption are also forms of white-collar crime that aren’t uncommon in Hong Kong. Bribery is a serious issue, and those found guilty can face significant fines and imprisonment.
Challenges and methods of dealing with white-collar crime
One of the challenges of combating white-collar crime in Hong Kong is that it can be difficult to detect. Unlike traditional crimes, white-collar crimes often involve complex financial transactions and can take months or even years to unravel.
Another challenge is that a lot of the fraud and crime cases take place across borders, boundaries and involve multiple jurisdictions. For such cases, Hong Kong’s law enforcement agencies and regulators might not have jurisdiction in terms of investigation and enforcement. In gathering information and evidence, time and effort are required as overseas law enforcement and regulators would be needed to assist.
In recent years, there has been greater cooperation between law enforcement agencies and regulators in Hong Kong to combat white-collar crime. For example, the Independent Commission Against Corruption (ICAC) and the Securities and Futures Commission (SFC), which regulates Listed companies and licensed intermediaries such as stock brokers, have signed a Memorandum of understanding and carried out joint investigation operations for cases that have elements of bribery, stock market manipulation and money laundering.
The ICAC has criminal investigation powers including the power of arrest that the SFC does not have, while the SFC has powers that have abrogated the right to silence to compel an interviewee to answer questions. The combination of such powers has highly enhanced the investigative process.
In conclusion, white-collar crime is a serious issue in Hong Kong. While the city has taken steps to combat this problem, more needs to be done to protect the victims, many of whom are senior citizens and might suffer huge losses, even including their entire life savings.
