Hong Kong: Maximizing Cyber Fraud Recovery

Feb 2021

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Over the past two years, I’ve seen an alarmingly high number of clients come to us as victims of cyber-fraud.  The modus operandi can vary greatly.

Examples of Cyber Fraud

Here are some examples we have seen:

  • Example 1: Email instructions from a “senior executive” of a company to an employee who is in charge of bank transfers, instructing the employee to make various transfers from the company account to other accounts. In reality, the email is not coming from the senior executive, but instead from a similar email address that is controlled by a Fraudster. For example: [email protected] (not “hk.kwm.com” – the digital sleight of hand). Typically, the destination account is an overseas bank account which makes tracing or recovery of funds difficult.
  • Example 2: Fraudster convinces Victim that they need to “borrow” the Victim’s bank account to receive a transfer of money because they are having some problems with their own bank account. In exchange for this, the Victim gets to keep 10% of the money transferred to their account. In reality, the Fraudster is using the Victim’s account as a conduit for other fraudulent schemes against Other Victims.  As such, when the Other Victims take legal action, they go after the first Victim’s bank account and everything in there (including the first Victim’s own money that was in the account).
  • Example 3: Fraudster telephones Victim impersonating a police officer and alleges that their bank account has been implicated in some wrongdoing, and that a police investigation is ongoing against them, threatening imminent arrest. However, the Fraudster is able to assist with “settling” the matter by payment of certain administrative/ investigation fees.

What’s worse is that the amounts that Victims are duped out of are often in that middle ground where it is high enough to hurt, but not high enough to justify full blown long lasting litigation, particularly when non-enforcement risk is taken into account.

If you’re reading this and thinking – “that would never happen to me”, you’ll be surprised at how many people this does happen to, even at sophisticated enterprises. As a guide, the Hong Kong police intercepted more than HK$3 billion conned from victims of internet and phone scams both locally and around the world in 2019.[1] According to the Hong Kong Monetary Authority website, there has been 11 cyber fraud cases reported in January 2021, where various banks have become the victims of cyber fraud concerning fraudulent websites, phishing emails, suspicious mobile applications.[2]

A high stress situation, with pressure being imposed on you, by a highly skilled Fraudster, can cause even the most careful of us to make mistakes.  These acts of trickery have gotten no small amount of attention from mainstream media (link here), and in fact, the Hong Kong Police has special units (ie. the Cyber Security and Technology Crime Bureau and the Anti-Deception Coordination Centre) that deals with cyber fraud situations just like the above.

Top Tips in Dealing with Cyber Fraud

Here are our top tips on how to react if you find yourself in such a situation or likely situation of cyber fraud:

  1. Act with extreme expediency – the longer you delay, the more opportunity and time the Fraudsters have to move the stolen funds further away from you, making asset/fund tracing exercise much more difficult.
  2. Alert your bank of any suspicious transfers and enquire about reversing the remittance/freezing funds.
  3. File a police report in the place where the bank account is.  Depending on where you are, the police might be able to freeze bank accounts faster than an injunction order. For example, the Hong Kong Police, through their Joint Financial Intelligence Unit (JFIU) can issue a letter of “no consent” to the bank informing them that the JFIU does not consent to the transfer of funds/dealings of a Hong Kong bank account that has received the “stolen funds”.
  4. Contact local lawyers that have experience in dealing with these situations. Typically, very quick action needs to be taken to start proceedings, get an injunction order, and a disclosure order to find out where the money is. Experience and a great deck of precedent papers in one’s arsenal helps a lot!

[1] https://www.scmp.com/news/hong-kong/law-and-crime/article/3064633/hong-kong-police-intercept-more-us384-million-swindled).

[2] “Beware of Fraudsters”, HKMA, https://www.hkma.gov.hk/eng/smart-consumers/beware-of-fraudsters/#fraudulent-bank-websites-phishing-emails-and-similar-scams, last visited 1 February 2021.

 

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