how Hongkongers paid HK$9.18 bn to fraud

Hong Kong, an international financial hub with a wealthy population, is plagued by fraud and scams, with cases and financial losses reaching record levels last year.

These crimes are not only becoming a growing epidemic, they are also evolving, aided by technological innovation and the rapid increase in the scale and volume of organised crime globally.

While city regulators, law enforcement and banks have launched numerous measures and campaigns to combat scam schemes, individuals and businesses also need to learn about the issue to protect themselves.

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Here we cover basic definitions and types of scams, some steps for responding, recent cases from Hong Kong and other Asian jurisdictions, and other resources.

Although the terms fraud and scam are often used interchangeably, they refer to different forms of deception. Fraud involves unauthorized access to personal information, such as credit card or bank account numbers, through hacking or good old-fashioned pickpocketing. Scams trick people into giving away personal information through deceptive phishing emails, phone calls, and social media accounts.

In short, scammers rely on illegal access, while fraudsters use psychological manipulation.

Reported financial losses related to fraud cases in Hong Kong last year nearly doubled from the previous year to HK$9.18 billion (US$1.2 billion), while the number of cases increased by 42.6 percent to 39,824, police data showed.

MP Johnny Ng Kit-chong (left) and victims of cryptocurrency scams meet with the media at the Legislative Council complex in Tamar on October 12, 2023. Photo: Edmond So alt=MP Johnny Ng Kit-chong (left) and victims of cryptocurrency scams meet with the media at the Legislative Council complex in Tamar on October 12, 2023. Photo: Edmond So>

This year, the wave continued, with losses of HK$3.79 billion recorded in the first five months, an 80 percent increase compared to the same period last year.

Investment scams caused the most financial losses in 2023, with gross losses at HK$5.9 billion. Fraud scams came in second with losses of HK$1.65 billion, while business, e-commerce and impersonation scams rounded out the top five.

Losses from technology-related crimes rose 31 percent to HK$2.66 billion in the first half of this year compared with the same period last year, with artificial intelligence used to hunt victims, according to data from the Hong Kong Police Force.

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One of the most talked-about scams this year involves deepfake images and audio. In January, a Hong Kong-based finance employee at UK-based engineering firm Arup was asked to transfer HK$200 million to a scammer after attending an online meeting that included someone who looked like the company’s chief financial officer.

Last September, the HK$1.6 billion JPEX cryptocurrency scandal emerged as Hong Kong’s biggest alleged financial fraud case. Police arrested more than 70 people and froze assets worth around HK$230 million in connection with it.

The JPEX scandal broke after the Securities and Futures Commission named the cryptocurrency trading company as an unlicensed platform and accused it of suspicious activities. According to police, more than 53 percent of investment fraud losses recorded last year were related to cryptocurrencies.

Police have arrested more than 70 people and frozen assets worth about HK$230 million in connection with a scandal involving cryptocurrency platform JPEX. Photo: Bloomberg alt=Police have arrested more than 70 people and frozen assets worth about HK$230 million in connection with a scandal involving cryptocurrency platform JPEX. Photo: Bloomberg>

What can you do after a scam or fraud incident?

Fraud and fraud carry different legal consequences that affect how victims can seek to recoup their financial losses.

Credit card companies and banks offer protections against unauthorized transactions, making it easier for victims to recoup fraudulent losses. These cases are often treated as serious crimes, and law enforcement actively investigates and prosecutes them.

Conversely, scams, while also illegal, do not always result in criminal charges or a successful prosecution due to the difficulty of detecting and arresting scammers. Scam victims may have fewer options to get their money back, especially since they may have provided personal information to the scammers.

Jonathan Crompton, partner at law firm RPC, said the first thing to do when faced with a scam or fraud is to “take immediate action” and notify the relevant banks and police.

If the transaction involves US dollars, victims may contact the US Federal Bureau of Investigation (FBI). The FBI operates the Internet Crime Complaint Center, which accepts reports of suspected internet-enabled criminal activity and disseminates investigative and intelligence information for law enforcement and public awareness.

“If it’s a U.S. dollar transaction going from one bank to another, it has to go through a correspondent bank in the U.S., so there’s a point of contact for the U.S. and you can file a complaint with the FBI,” Crompton said. “The FBI is usually very responsive and effective at investigating fraud.”

Crompton said seeking an injunction could also be an option. If a bank is served with an injunction, it is given notice not to allow transactions involving the defrauded funds to continue. However, applying for such an injunction can be costly.

“A tool that we use more often, especially if it’s not a very high-value scam, is to write a letter to banks to let them know that there’s a suspicious transaction,” he said. “We’re asking banks to comply with their legal and regulatory obligations around suspicious transactions and fraud prevention.”

“Virtual assets are new products with volatile prices and varying risks,” according to the Council for Investor and Financial Education, an independent public body and a subsidiary of the SFC. “Fraudsters are quick to take advantage of this situation and create investment scams that claim to offer high returns with low risks.”

Another scam involving virtual money occurred in May, when 10 people reported separately that they were scammed by a syndicate that set up a virtual online platform.

The syndicate falsely claimed that it could provide profitable speculation on tickets for webinars hosted by the scammers. They also offered high-interest deposit schemes to attract significant investments with the slogan “high return, low risk” to lure victims.

Elsewhere in Asia, Singapore police arrested 10 foreign nationals of mainland Chinese origin last August for their involvement in a Singaporean dollar 1 billion (US$747 million) money laundering and financial fraud case.

The men were accused of unlicensed lending in China and illegal gambling involving United Overseas Bank and local units of Citigroup and RHB Bank, according to a Bloomberg report citing the indictments. They also allegedly tried to defraud Oversea-Chinese Banking Corp, Standard Chartered and CIMB Bank using forged documents.

Two suspects in Singapore were accused of operating servers that infected victims’ Android mobile phones with a malicious Android Package Kit app since June 2023, allowing them to control the devices. The malicious app allowed the scammers to modify the contents of victims’ phones and facilitate their infiltration of bank accounts.

Deepfake technology was used in a high-profile scam in China that emerged in May 2023. A businessman in Fuzhou transferred 4.3 million yuan ($591,000) after receiving a video call from someone posing as a trusted friend. The scammer stole his friend’s WeChat account and used advanced AI face-swapping technology to impersonate the person during the video call.

These detailed cases of fraud and scams highlight the urgent need for greater awareness and regulatory measures to protect the public from such deceptive schemes.

“In light of the increasing trend in scams in Hong Kong and globally, the Hong Kong Monetary Authority and the Hong Kong Police Force have taken great steps to detect, prevent and deter scams,” said Lilian Sin, head of financial crime compliance services at KPMG China in Hong Kong. “This includes the introduction of five anti-scam initiatives and the introduction of ‘Scameter’ locally.”

Officers from the Anti-Cheat Coordination Center attend a press conference at the Police Headquarters in Wan Chai on April 9, 2020. Photo: Dickson Lee alt=Officers from the Anti-Cheat Coordination Center attend a press conference at the Police Headquarters in Wan Chai on April 9, 2020. Photo: Dickson Lee>

The five anti-fraud initiatives include real-time fraud monitoring, an interbank information sharing platform, a suspicious proxy identifier alert model, development of a 24/7 payment stop mechanism, and assistance with police investigations.

Launched by the police in September 2022, Scameter is a one-stop search engine that helps people identify suspicious web addresses, emails, platform usernames, bank accounts, mobile numbers, and IP addresses. The public can access it via the CyberDefender website or app to check for suspicious or fraudulent schemes.

Scameter’s use will be expanded to include online banking and transactions at physical branches on Sunday, so users will receive alerts when transferring money to suspicious accounts. Previously, only suspicious transactions made through the Fast Payment System received alerts.

When in doubt, members of the public are advised to call the 24/7 Anti-Fraud Helpline on 18222, operated by the Anti-Fraud Coordination Centre (ADCC), part of the police force.

Citizens can refer to the ADCC website for the latest scam trends and types.

Additional reporting by Mark Gong

This article was first published in the South China Morning Post (SCMP), the most authoritative voice on China and Asia for more than a century. For more SCMP news, please check out the SCMP app or follow SCMP on Facebook and twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.

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