The Independent Commission Against Corruption has reported a sharp increase in bank fraud this year despite a fall in the overall number of corruption cases. In the first nine months of the year, the ICAC received 76 corruption complaints involving banks, according to regional officer Helen Lee Ching Po-han. This represented a 15 per cent increase over the 66 cases reported in the same period last year. The total number of corruption reports for the period fell 7 per cent to 2,500. Bank fraud represented 6 per cent of 1,267 corruption reports in the private sector. 'Often in a declining economic situation there appears to be an increase in fraud and corruption because the awareness of such activities increases,' Ms Lee said. She said banks were struggling to cope with the fall-out from the Asian financial crisis and had become more focused on bottom-lines. According to Ms Lee, this made them more alert to fraud. 'A buoyant economy is often accompanied by a reduction in fraud awareness because when people are earning money, they become less aware,' she said. 'They believe the rise in profits will outweigh any wastage through such activities.' Typical bank-related complaints included approval of loans after the acceptance of bribes, the authorisation of forged company documents in the issuing of letters of credit and the falsifying of credit records by staff for personal gain. Ms Lee said rapid advances in information technology posed difficulties for ICAC investigations, especially in tracing the whereabouts of perpetrators. 'We do not know when corruption or fraud is happening in a bank, if it is being perpetrated in Hong Kong, or from elsewhere,' she said. 'We have to equip ourselves to face these challenges ahead.' Last month, ICAC commissioner Alan Lai Nin said despite Hong Kong's sound banking system, institutions needed to implement better system controls. He said many fraud cases involved sums of 'hundreds of millions of dollars'. Ms Lee said ICAC investigations were often hindered by managers reluctant to co-operate because of fears over bad publicity for the bank. She said the public also had a perception that white-collar crime was not serious. 'They see fraud and corruption as no more serious than stealing stationery,' she said. Ms Lee said managers had to 'reach out to staff' and learn to manage them with more integrity. She said banks should introduce random spot checks, avoid complacency and ensure an appropriate level of delegation to avoid abuses of power by junior members of staff. The Hong Kong Monetary Authority said it would look at improving the detection of fraud as part of its ongoing supervision of banks. The HKMA also said it would step up the supervision of banks' expansion into securities broking, fund management and Mandatory Provident Fund products.
