Hong Kong police crack down on 4 syndicates swindling HK$193 million in pandemic relief funds for companies
- Police arrest 18 people in scam involving 35 companies, which applied for loans under scheme aimed at helping small and medium-sized enterprises
- Some were shell companies, others used falsified documents exaggerating their salaries and operational costs to apply for higher loans
Hong Kong police have arrested 18 people in a crackdown on four fraud syndicates accused of swindling HK$193 million (US$24.6 million) from a government-backed pandemic relief scheme through fraudulent bank loans.
The scams involved 35 companies which submitted their loan applications to banks in 2020 and 2021 under the financing guarantee scheme, aimed at helping small and medium-sized enterprises (SMEs) affected by the coronavirus pandemic, according to the force.
Six women and 12 men were arrested when officers from the force’s commercial crime bureau raided multiple locations, such as the offices of the companies and the suspects’ homes, between July 17 and 29.
Senior Inspector Mak Wai-kwong of the bureau on Wednesday said one of the syndicates was accused of using nine shell companies to apply for loans with forged documents.
He said the companies claimed to operate various companies involved in decorating, computer equipment, clothing and tea, but investigation showed they had no business activities.
“Investigation revealed these companies shared the same office address and some staff also claimed to be employees of the different shell companies,” Mak said.
He added that the money from the approved bank loans was ultimately transferred to the personal bank accounts of the alleged ringleader of the syndicate.
Police said some of the 35 companies had business activities, but they allegedly used falsified documents exaggerating the number of employees, their salaries and operational costs to apply for a higher loan amount.
Senior Inspector Fung Yun-wo of the same bureau said one of the companies had two employees and its monthly turnover in 2020 was about HK$10,000. Yet when applying for the loan, the firm claimed its annual expenditure for staff wages was HK$6 million, meaning the monthly salary of each staff member was about HK$250,000, he said.
Another company also used the personal details of other people including their former staff members, to exaggerate the number of staff and operational costs to get a higher loan, Fung added.
After gathering evidence, police arrested 18 people between July 17 and 29 and seized the companies’ operational and staff records, bank documents, as well as computers and mobile phones.
Fung said police also froze the bank accounts of the suspects and carried out a financial investigation into their assets, such as properties, involving HK$22 million in total.
During the 12-day operation, officers identified another three companies that had links with some of the suspects. Police said the companies had applied for bank loans totalling HK$13.8 million under the government scheme, but their applications had been rejected.
The investigation was continuing and more arrests were possible, according to the force.
Police warned that conspiracy to defraud, fraud and money laundering were serious offences punishable by up to 14 years in jail.
Launched in April 2020, the government’s SME Financing Guarantee Scheme offers loans to companies to help with cash flow problems caused by the Covid-19 pandemic.
According to the Hong Kong Mortgage Corporation, the scheme is aimed at alleviating the financial burden of employee wages and rents by enterprises suffering from reduced income, and to help minimise shutdowns and lay-offs.
The loans are fully guaranteed by the government at a concessionary low-interest rate. The maximum loan amount for each eligible enterprise is the total amount of employee wages and rent for 27 months or HK$9 million, whichever is lower.
