Hong Kong police arrest 37 over use of loan scheme to defraud banks of HK$210 million
- Twenty-three sham directors and 14 employees of shell companies submitted loan applications under government-backed scheme
Superintendent Gar Kam-lam of the Kowloon West regional crime unit said on Thursday that the suspects, who were arrested between Monday and Wednesday, comprised 23 directors and 14 employees of companies allegedly set up by the racket to carry out the loan scam.
Gar said the company directors included an alleged ringleader and seven core members of the syndicate. It submitted 42 loan applications to banks under the financing guarantee scheme aimed at helping small and medium-sized enterprises (SMEs) affected by the Covid-19 pandemic.
Police investigations began in November last year after two banks reported suspicious account activities.
A source familiar with the case said the loan scam involved 42 firms set up by the syndicate, with police discovering that most of them were shell companies.
The insider said the applications, totalling more than HK$210 million, were approved and investigators were still trying to track down the funds.
Police were still searching for dozens of suspects, including 19 company directors, but a few of them could have already fled the city, he added.
According to the force, the suspects approached potential accomplices through different channels, and enticed them with money to use their identities to set up companies.
Chief Inspector Yau Yu-sing said the syndicate also obtained personal information from various sources to create fake employee accounts for these companies.
Explaining how the syndicate had deceived banks, Yau said it “fabricated the company turnovers, exaggerated the number of employees and inflated salary expenses to make it seem like the companies were experiencing significant losses”.
Yau also noted the syndicate had rewarded directors of the companies with amounts ranging from HK$600,000 to HK$1 million, and those who sold personal information for use as fake employees received varying sums “usually in the thousands of Hong Kong dollars”.
Once the loans were granted, the gang immediately transferred the funds to other bank accounts so they became untraceable, Yau said.
Senior Inspector Wong Kim-hei, explained that the suspects had avoided drawing suspicion from the banks by “leaving some money in the accounts to create the appearance of normal repayment”.
After gathering evidence and identifying those involved, police conducted an operation to arrest the suspects.
More than 100 detectives from the Kowloon West regional crime unit were deployed to raid more than 50 locations across the city between Monday and Wednesday.
During the operation, code-named “Coldclouds”, police arrested 29 men and eight women, and also seized documents, electronic devices and bank cards.
The suspects, aged 21 to 72, were detained on suspicion of conspiracy to defraud – an offence punishable by up to 14 years in jail.
Gar said the investigation was ongoing and officers would spare no effort in bringing all suspects to justice.
The Special 100% Loan Guarantee of the SME Financing Guarantee Scheme was launched in April 2020 and offered loans to help businesses struggling to pay employees and rent, in a bid to prevent closures and lay-offs.
The loans were fully guaranteed by the government at a concessionary low interest rate, with applications only closing in March of this year.
The maximum amount for each eligible enterprise was the total sum of employee wages and rent for 27 months, or HK$9 million, depending on whichever figure was lower.
