Fraudsters used ‘thousands’ of Hong Kong bank accounts to launder HK$4 billion in one year

Thousands of Hong Kong bank accounts have been used to collect and launder about HK$4 billion (US$500 million) by local and international fraudsters in the past year, since the city’s anti-fraud squad was set up to discover such illicit payments.

Many account holders were mainlanders believed to have been recruited by underground money exchangers from mainland China. They worked with fraudsters to launder money swindled from victims, according to law enforcement sources.

The fraudsters would control the accounts through online banking services and collect money from four major types of deception – commercial email scams, online romance scams, investment fraud and phone scams.

One source believed more than 2,000 accounts had been used to collect and launder swindled money over the past year, saying that it was possible many other accounts may not yet have been discovered.

But another source said at least 3,000 accounts were involved because in some of the cases, money was laundered through more than 10 accounts in one scam before the cash was channelled out of the city.

He said many of the accounts had been open for more than a year before they were used to collect and launder the swindled money.

“About half of them were business accounts and the others were personal accounts,” he said.

In some cases, several personal and business accounts in different banks were opened by the same account holder. Normally, no transactions were made before they were used to collect money, according to the source.

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“Investigations indicated most of the money involved was transferred into bank accounts in mainland China or Taiwan before officers lost track of it,” he said.

It is understood that even though mainland police helped to catch the account holders, the suspects could not be handed over to local police because there is no extradition agreement for fugitives between Hong Kong and mainland China.

He said Hong Kong police had enhanced intelligence with mainland and overseas law enforcement agencies to tackle such illegal activities. Citing operational concerns, he refused to disclose further details.

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The sources said police also noticed some online swindlers recently found a new way of collecting their gains by demanding it in virtual currencies such as bitcoin – instead of transferring money into bank accounts – to escape detection.

The city’s police chief, Stephen Lo Wai-chung, revealed earlier this year that some perpetrators took advantage of the anonymous nature of bitcoin to commit crimes, such as demanding bitcoin in ransomware blackmail and money laundering cases.

The commissioner said the force’s cybersecurity and technology crime bureau has set up a dedicated unit to monitor the crimes involving bitcoin and enhance the force’s professional ability in handling these cases.

In Hong Kong, money laundering carries a maximum penalty of 14 years’ imprisonment and a HK$5 million fine under the Organised and Serious Crimes Ordinance.

The banking industry is among sectors such as securities and insurance companies, legal and accounting professionals and property agents that are required to monitor and make reports about suspicious transactions under the law on money laundering and terrorist financing.

The Hong Kong Monetary Authority said last Friday that Shanghai Commercial Bank Limited was reprimanded and ordered to pay a pecuniary penalty of HK$5 million for contravening the law on money laundering and terrorist financing by failing to continuously monitor business relationships with 33 customers by examining the background and purpose of their transactions.

A statement issued by the bank said it had fully cooperated with the authority and has accepted the findings.

In the first seven months of this year, the Joint Financial Intelligence Unit, comprising police and customs officers, received 50,610 reports of suspicious financial activity.

More than 92,115 such transactions were reported in the whole of 2017 and it was the most the unit had received in a single year since it began publishing figures in 2012. It also represented a 20 per cent rise from the 76,590 reports received in 2016. There were 23,282 reports received in 2012.

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A government source said the surge stemmed from a flood of reports lodged by the banking industry after local banks enhanced manpower and resources to track suspicious transactions in recent years. More than 93 per cent of the reports of suspicious transactions this year were lodged by the banking sector.

Since it was set up in July 2017, the force’s anti-deception coordination centre has dealt with more than 1,300 requests to freeze the HK$4 billion taken in scams. So far, officers have helped freeze about HK$600 million.

In this year’s biggest commercial email scam, the centre helped a Spanish company freeze HK$60 million after the firm was duped into transferring €11 million (HK$100 million) into several bank accounts in Hong Kong in June and July. Police said about 20 bank accounts were used to launder the money before part of the money was transferred out of the city.

Over the past year, police handled 774 cases of commercial email fraud involving losses of HK$1.3 billion.

In the same period, there were 447 reports of online romance scam fraudsters collecting HK$209 million and 174 cases of investment fraud with losses of HK$674 million. Police also handled 713

reports of phone scams with total losses of HK$92 million.