Amid the COVID-19 pandemics dozens of millions of people are locked down in their home office or must apply social distancing rules. Hence, their social activities are limited to social media and messenger services. The perfect environment for financial fraud which is right now reaching new dimensions.
Acting cross-border is definitely an important part of the script for any scam, knowing that acting cross-border is still a big obstacle for law enforcement all over the world.
During the past months based on documents provided by victims, we realized that more and more scammers are involving Asian operations to rip off European people.
Hong Kong – a fraud “epicenter and platform”
Lured by fancy brokerage websites, and allegedly highly experienced brokers presenting compelling investment opportunities, unsuspecting European retail investors deposit material amounts with Hong Kong-based Trading Companies for investments in promising Asian Technology Companies.
The role of Hong Kong Company builders in this kind of investment fraud
According to our investigations Hong Kong company builders are used
- to administer the fake promising Chinese “Technology Companies” (the investment opportunities) as well as
- to set up and to administer the fake “Trading Companies” supposed to handle the acquisition of the shares in the promising Hong Kong investment opportunities
Non-active shell companies are marketed as promising Chinese Technology Companies (investment opportunities)
Shell companies, registered years ago, get redressed as promising “Technology Companies” with upcoming IPOS or shares of these companies being on sale. Sophisticated websites and fake reviews in reputable online media pretend a successful Technology Company operational in Hong Kong.
Examples are as follow:
|Company Name||Hong Kong CR#||Date of register||Website|
|Data Control Technitic||1145518||29th June 2007||https://www.datacontroltechnitic.com|
|3D Printer Technology||1910328||21st May 2013||https://www.3dprintertec.com|
|LECTRIFI Limited||2490183||28th February 2017||http://www.lectrifi.com|
|DigitalPay Limited||2121502||17th July 2014||https://www.idigipay.com|
|Green Farm Asia||2105729||6th of June 2014||https://www.greentechfarm.com|
All Trading Companies used to receive the funds for the investment from the European retail investors show the following characteristics:
- The majority of these Trading Companies are newly founded, the setup as well as the registration process was done by only a limited number of Hong Kong Company builders.
- More or less all of them have their registered offices in the relevant Hong Kong Company builder´s offices.
- The registered managing directors and nominee shareholders are Mainland Chinese with no residency in Hong Kong.
- All these Trading Companies have no employees.
- The business purpose as registered in the commercial register of Hong Kong does not match with the obvious activities of these Trading Companies – exclusively acting as illegal payment service providers.
By now a majority of the 55 Trading Companies used for luring investments have been dissolved, all bank accounts are emptied, and the money has been sent offshore.
Hong Kong’s status as an international financial center, the relative ease of company formation and its geographic location evidently expose it to the misuse of legal persons.
The role of the Hong Kong bankers
Hong Kong is an active member of international AML/CFT organizations, having been a member of the Financial Action Task Force (“FATF”) since 1991 and a founding member of the Asia/Pacific Group on Money Laundering (“APG”) since 1997.
With Hong Kong being one of the largest international financial center with a highly externally oriented economy and with a relative ease of company formation, Hong Kong´s authorities must be aware that Hong Kong is attractive for criminals seeking to hide or move funds particularly through the misuse of legal persons.
More astonishingly is the fact that since July 2017 a huge number of European fraud victims have evidently been instructed to send their funds to Hong Kong shell companies (presented as legitimate Trading Companies) – with bank accounts held with some of the biggest and most respectable financial institutions of the world.
In total 29 victims – registered with EFRI – transferred close to 8 mio EUR to 55 Hong Kong registered Trading Companies with 50 different Hong Kong bank accounts and 6 bank accounts in other jurisdictions:
Evidently Hong Kong banks do not carry out proper Know Your Customers Due Diligence and do not monitor ongoing transactions for suspicious transactions as required by the FATF KYC/CFT standards.
Alarming hints that the fraud was even actively supported by the bankers are as follows
- Serial opening up of bank accounts for shell companies organized by Hong Kong Company Builders
- Material wire transfer amounts (some > EUR 200.000) from European retail investors have not any raised red flags within the banks.
- Some transfers made by the victims had incomplete bank account numbers, however the transactions were still completed without any inquiries by the receiving banks.
The total size of the fraud
The fraud experience has tremendous social impacts on the defrauded European investors, who have sent their hard and honestly earned funds to one of the supposedly best regulated and supervised financial markets worldwide.
New victims of these Asia investment fraud schemes are showing up on a daily basis and are raising the total number of loss. The true number of victims must be tremendous and the amounts transferred most probably reach three digit million numbers. Fact based estimations indicate that hundreds if not thousands of victims in Europe are impacted.
Actions taken by the victims
The victims have alerted the Hong Kong supervisory authorities as well as the compliance departments of the banks involved. Criminal complaints against the scammers and the banks involved have been filed in the home jurisdictions of the European victims as well as in Hong Kong.
Still it remains to be seen whether the ongoing investigations indeed will result in any outcome, which provides support and hope for many victims here in Europe, in particular it will be interesting to see whether the banks acknowledge their specific responsibility.
 The group calls its “Action against Investment Scam Asia”. It is an ever-growing group of aggrieved investors from all over Europe. The group has opened its own website (Website: https://www.investment-scam-asia.com/en/) in order to warn the public on this fraud.
 The role of the “company builders in Hong Kong”
Only a limited number of Hong Kong company builders were identified, which registered the great majority of the aforementioned Trading Companies, which also act as company secretary of these shell companies and even provide the official address in Hong Kong for these shell companies. Two names of these company builders stand out: BSIDA International Business (HK) Limited and Hong Kong Ten Yan Business Secretary Limited, only registered on the 12th of January 2018.