Asian Countries are Attracting a Fair Share of Big Time Fraud Operators

As has often been said, forex fraud is global by nature, and neither knows nor respects any national boundaries. Since regulators must adhere to the rule of law, which often stops at a national boundary, no jurisdiction is immune. Yes, cooperative agreements are in place between the major regulatory entities on the planet, but then the issue becomes a matter of allocating scant resources. Translation: Local law enforcement goes after local crooks to protect its own citizens, while ignoring pleas from cross-border victims.

We have seen this storyline play out on a global stage for the past few years, as victims of binary option scams originating in Israel received little, if any, attention from Israeli authorities. It has taken years for this situation to reverse, and, in the meantime, the perpetrators of these shady business operations have had ample time to reorganize elsewhere, move what assets they need to foreign jurisdictions, and continue milking unsuspecting consumers for their life savings and more. These losses are well into the tens of billions of USD. Prosecutions have been scant, and recoveries, minimal.

By all accounts, global investment fraud is breaking every record that ever was. Forex fraud may only be a subset of a much larger picture. A recent accounting of the losses at hand has set off many alarms: “When Bernie Madoff carried off a $65 billion pyramid scam, it was thought that people would be a bit wiser and more vigilant to investment scams and frauds. Yet, global investment fraud is hitting new record levels. Worldwide fraud is costing an estimated £3.24 trillion every year. To put that in perspective, it is a sum equal to the combined Gross Domestic Product of both the UK and Italy.“

Security professionals tell us that these major global fraud operations have roots in organized crime. When there are sizable amounts of money at stake, i.e., in the billions, small time crooks will be pushed aside. Takeovers are the nice way to describe what happens next, but these modern day crime bosses have the resources and technology available to wreak havoc in every market. Once a product strategy is adopted and ready to launch, marketing efforts generally focus on major targets of opportunity.

Where are these targets? They are typically individuals of recent wealth that have no idea what forex fraud is about. The greatest redistribution of wealth has taken place over the past three decades, and the majority of benefactors reside in one place – Asia. From a criminal’s perspective, the developing economies in Asia, including China, India, Malaysia, Singapore, and even Australia, which falls more in the developed sphere of the economic pecking order, are countries where wealthy consumers are ripe for the picking.

Regulators in these countries are struggling to update their legal infrastructure to go after these modern day con artists, but they tend to be woefully behind the curve. As noted, today’s cyber-crime wave is a tsunami that knows no borders. Headline stories may still speak to major arrests in the UK, the U.S., and Europe, but a broader read of articles emanating from the Far East indicates that major crime lords have been setting up shop in several Asian countries and fleecing unsuspecting victims at will.

The brief summaries that follow will touch upon just a few of the more interesting cases. Can justice be brought to bear on behalf of disenfranchised consumers? Can law enforcement officials step up their game to stop these fraudsters in their tracks? At present, the odds favor organized crime, but awareness is the true lesson to be gained in these storylines. These “lessons” may be transpiring in Asia, but what works in one arena will always be adapted to work in others. Stay informed, and remain skeptical.

Asia and Middle East: Thousands of investors fall victim to Financial.org scam

When you begin hearing that hundreds, maybe thousands, of investors have lost money due to some fraudulent scheme in this day and age, it is a safe bet that the legal entity perpetrating the fraud is nowhere near the region where screams from consumers can be heard. Such is the case with Financial.org, an official UK company that is registered as a real estate business. Sales and marketing efforts, however, were focused on investors from Asia and the Middle East. The plot thickened when the firm announced that it had converted investor deposits into “FOINS”, its proprietary Blockchain System.

All deposits must flow through this system, but the firm then “warned depositors that it would cut 20 percent of their money and permanently close their accounts unless they raise the minimum capital to $10,000 from $3,000.” Reuters, who broke the story, said that, “It received complaints from some customers who allegedly contributed with amounts between $3,000 and $400,000 to a Ponzi scheme operated by Financial.org. They provided screenshots of their account pages showing withdrawal requests had been rejected, as well as screenshots of the aforementioned notices posted on a password-protected, members-only section of the firm’s website.” Sound familiar?

At least eight regulators have red-flagged this enterprise, which still claims that it is not a broker. Regulators range from the FCA in the UK to other agencies in Malaysia, Singapore, Indonesia, and Thailand, not to mention the United Arab Emirates. Despite the furor and investment verbiage across its website, “The company, which reportedly has offices in Abu Dhabi and London, describes itself as an educational platform and says it doesn’t operate a brokerage business or handle any investments.” The question now is how do investors get their deposits returned? Good luck, but maybe never.

Singapore: Major regional financial center is beset by forex and binary scams

Singapore is a financial center of Asian trade and is known for its strict laws and strict law enforcement activities. You do not mess with the local police or regulatory agency. Local licensing is arduous and compliance, rigid, yet Singapore is currently under attack by a host of unregulated, offshore enterprises. Singapore may be a small island paradise to some, but there are more high net-worth individuals there than what you might encounter in other Asian countries. As a result they have been targeted for fleecing.

Singapore residents are loosing an estimated USD $40,000 per capita, $5.8 million in this year alone, from offshore brokers of forex, CFDs, and binary options. The Monetary Authority of Singapore (MAS), known for its toughness, along with local police, can only observe with despair and warn consumers: “There is no regulatory safeguard for investors who choose to transact on unregulated trading platforms. Consumers should always be cautious when they come across an investment opportunity that promises high returns with assurances of little or no risks. These are likely to be a scam; if it sounds too good to be true, it most probably is.” This warning sounds familiar, too. Read about more warning signs of forex fraud here.

India: Lapses in audit controls subject Punjab National Bank to billions in losses

Who does not like to read about a banking scandal, as long as your own deposits are not at risk? The latest banking caper to grab the headlines is a $2 billion loss sustained by the Punjab National Bank (PNB) of India. Consumer confidence is reeling because PNB is the “second-biggest state-controlled lender in India’s state-run banking sector, which controls over two-thirds of the nation’s bank assets.” Bank officials have played down the fraud, but a 162-page report was recently released that detailed how and why the funds were misappropriated from 2010 through 2017.

It seems that one very clever branch manager was able to obtain approvals for multi-million dollar wire transfers, move funds via credit instruments that bypassed the banks internal network, and finance the activities of two Indian diamond moguls, Nirav Modi and his uncle Mehul Choksi. Both men have fled the country and have denied any wrongdoing, yet over $2 billion is unaccounted for on the books. Internal auditors, bank managers, and branch employees were at fault, but no one reported the inconsistencies or noted the breakdown in bank policies and procedures. The deputy branch manager, Gokulnath Shetty, escaped detection and remained in his position for seven years. Bank policy requires a transfer after three years, but no one forced the issue. The final comment from the report: “It is “incomprehensible” that branch staff did not notice the fraud being committed.” Widespread risk-control and monitoring lapses can do that sort of thing.

Australia, China, and Taiwan: Power 8 scandal stretched across continents

We have left the best and most interesting story of international intrigue on a grand scale to last. The first rule of any scam is to gain the trust of your audience, and, when the scam is to be broad-based, fraudsters in the past have chosen to use sponsorships with high-profile sports teams or figures to gain the acceptance and trust necessary to move to the next step. Such was the case with the Power 8 franchise that had “arranged for some of Europe’s major football clubs to promote it to an audience of millions.”

One reporter summed up the scam as follows: ”Thousands of investors say they’ve been defrauded of about $1 billion by two global pyramid schemes — Power 8 and EuroFX. Leaked corporate documents and insider testimony suggest Australian accountant Bryan Cook was responsible for funding, staffing and marketing these scams. Cook denies responsibility for any fraudulent activity. But there are thousands of investors in China and Taiwan who know his name, and claim they’ve lost more than $1 billion in scams he created.“ Cook denies responsibility, claiming he is “an honest businessman.” NOT!

At this stage, money has gone missing. Attorneys for the victims are searching for answers, but two points are clear:

• “The first was a fake internet-gambling company called Power 8, which secured high-profile sponsorship deals with big European football clubs — including naming rights for a Barcelona stadium.
• The second was a fake foreign-trading platform that investors claim swindled over $1 billion. It was named EuroFX.”

A few prison sentences have been handed out, but there will be more to come on this story. Stay tuned!

Concluding Remarks

Financial service fraudsters appear to be raking in the dough on a monumental and global scale. As always, you are your first line of defense against these thieves. Awareness is the next step, but you must then be skeptical and wary of any solicitation, whether it comes from the Internet, a close friend, an ordinary phone call, or even via the mail. Do your due diligence and take time with your decision making process.

If it does sound too good to be true, walk the other way!

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