Email Scam or Cyber Crime: a practical guide to asset recovery in Hong Kong
3. Commence legal action for recovery of defrauded funds
In recent years, we have seen a sharp increase in cyber crime, in particular email scams, perpetrated against companies or individuals from all over the world by sophisticated fraudsters. The fraudulent scheme usually involves multiple layers of fraudster recipients in multiple jurisdictions which made it difficult for the victims to trace and recover the stolen monies.
In a recent case, an investment company in Hong Kong had been deceived to transfer approximately US$5.25 million to the fraudster’s bank account in Hong Kong. Similar to other typical email scams, the fraudster: In the unfortunate event that you or your company become a victim of an email scam, what should you do? Contact us
China Resources Building
26 Harbour Road
Wanchai, Hong Kong
(+852) 3468 7200 firstname.lastname@example.org
(+852) 3468 7202
(+852) 3468 7203
disguised himself as both the senior management officer of the company and the company’s overseas business partner;
sent fictitious email to the staff of the company and the overseas business partner using email addresses which look very much alike the email addresses of their senior management officers (ie. CEO or CFO); and
instructed the company to make payment to a designated bank account on an urgent basis.
By the time the company discovered the fraudulent scheme, the monies had already been transferred to the fraudster’s designated bank account.
2. Apply for an injunction
You should immediately report the email scam to your local authority (eg FBI, Interpol etc) and the Hong Kong Police. The report to the Hong Kong Police shall contain information related to the scam, including the date of transfer of funds, the fraudster’s bank account number and a description of the background leading to the transfer of funds. Typically, the Joint Financial Intelligence Unit (the “JFIU”) will then issue a letter of no consent (“No Consent Letter”) to the relevant bank, requesting them to freeze the fraudster’s bank account. However, contrary to an injunction order (see below), the No Consent Letter can be withdrawn by the Police anytime and the protection to you is limited.
1. Report to the local authority and the Hong Kong Police ASAP
Double-check the email address of the sender when a request for payment is made
Always verify the email content with the real person by phone or in person
Implement an authorisation matrix with multiple approval levels
Implement reporting procedures after a fraudulent transaction is discovered Instead of waiting for the JFIU to issue the No Consent Letter, you may also consider applying for a proprietary or Mareva injunction. An injunction is an urgent application to the Court which, in usual circumstances, can be obtained within 1-2 days upon giving instructions to your lawyers. Whilst an injunction application is costly, the advantages of an injunction order together with its ancillary relief are that it allows the victim to:
prevent the fraudster from dissipating the defrauded funds to the fraudster’s other bank accounts immediately;
prevent the fraudster from dissipating its other assets and force the fraudster to disclose details of its assets;
inspect and take copies of banker’s records pursuant to section 21 of Evidence Ordinance; and
conduct tracing of funds upon inspection of banker’s records and apply for injunction against recipients of the defrauded funds in the subsequent layers. a.
In a typical asset recovery action to recover defrauded monies, the defendant (i.e. the fraudster) in most cases will not appear to contest the claim. Typically, your lawyer will first issue a writ of summons along with a general indorsement of claims or a statement of claim, setting out the reliefs sought after. In the event that the fraudster fails to file a notice of intention to defend with the Court, you can apply to the Court for a final judgement. Upon obtaining the final judgement, you can commence garnishee proceedings for an order compelling the bank to pay the funds held in the fraudster’s bank account to you. Set out below are the various stages in a typical asset recovery action:
Reporting the scam to the Hong Kong
Issuing Writ of Summons
Entering of Default Judgment
Commencing Garnishee Proceedings
All information contained in this article are for the purposes of general information only. This article is not to be treated as legal advice or opinion. YTL LLP accepts no responsibility for any loss or damage arising directly or indirectly from any action taken (or not taken) which may arise from reliance on information contained in this article. Please seek legal advice concerning your own circumstances and any legal queries that you may have.
Obtaining the Garnishee Order
Serving the Garnishee Order on the Bank
4. Time is of the essence
As there is a risk that other victims who have been defrauded by the same fraudster have commenced proceedings in parallel to recover their respective defrauded monies from the fraudster’s bank account, you shall instruct your lawyer to initiate action promptly in order to get a head start over the other victims who are also trying to garnish the funds in the fraudster’s bank account.
How we can help
Assist the victim to report the case to the Hong Kong Police
Attend interview with the victim for the taking of statements
Liaise with the bank and the Hong Kong Police
Conduct background check on the fraudster
Advise on possible action to take, including the application for a proprietary or Mareva injunction
Apply for disclosure order to trace funds that have been transferred to other bank accounts
Investigate as to whether there are other victims who have reported the case to the Hong Kong Police and the bank Advise on the approach to take when commencing recovery action
Draft court papers to recover the defrauded funds
Monitor whether there are parallel proceedings commenced against the fraudster
Apply for the continuation of injunction order if necessary
Liaise with the Hong Kong Police and the bank to ensure that no dissipation of the funds in the fraudster’s bank account
Secure release of defrauded funds from the bank to the victim