Recovery of funds procured by wire fraud

With the increased sophistication in technology, fraudulent schemes are evolving and becoming more prevalent in Hong Kong. Fraudsters are continually finding new methods of deceiving victims into parting with their money. This article looks briefly at the steps to take in the case of a wire fraud.

There are an increasing number of wire frauds targeting large, multinational companies. The fraud is often complex and elaborate and the fraudsters often already have knowledge of the financial operations of the company in question. Wire frauds are popular amongst fraudsters because once an international transfer is made, it becomes difficult to reverse. If the victim does not act swiftly, there is a risk that the funds may be dissipated.   

A typical wire fraud occurs when a person poses as a senior member staff of a company, either by hacking into the email of the senior staff member, or by creating a very similar email to impersonate him. The fraudster then contacts an actual staff member of the finance department of the company and gives instructions that payments be wired into a Hong Kong bank account for settling an alleged urgent business transaction. With the high volume of business payments processed daily, payments such as these can pass through, before being detected as a fraud.   

Freezing the funds

It is critical that when a wire fraud is discovered, the matter is immediately reported to the police and the banks which processed the transfer. If the transfer payment is made to a bank account in Hong Kong, then it should be reported to the Hong Kong Police. If the transfer payment is made to a bank account overseas, then the matter should also be reported to the police in that jurisdiction.  

After making a report, the police will consider the matter and decide whether to freeze the funds. The quickest and most cost effective method to secure and freeze the funds in the bank account is requesting the Hong Kong Police to issue a “no consent” letter to the bank involved.  This is basically a statement that the Hong Kong Police do not give consent for the bank to move the funds in the relevant bank account. Banks generally adhere to these instructions, as acting contrary to the “no consent” letter may have ramifications for the bank.   

Conversely, if the police decide not to freeze the bank account, then consideration should be given to applying to Court for an injunction freezing the funds. The police and the relevant bank may be helpful in this regard and provide an indication of the balance of the funds in the account. Time is of the essence when applying for a freezing injunction, as there is a risk that the funds may be dissipated. 

Once the funds in the bank account are secure, action should be taken to recover the funds. The police generally do not assist victims in the recovery of the funds and civil proceedings are thus required for their return.

Procedure for recovery of funds

The goal is the return of the funds and so a writ is issued against the bank account holder. Generally, the bank account holder in a case of wire fraud will not contest the proceedings, in which case the plaintiff can obtain a default judgment against the defendant. As the defendant is unlikely to appear at any stage of the proceedings, the bank’s assistance will be required to transfer the funds back to the plaintiff. To achieve this, the plaintiff has to obtain a garnishee order, ordering the bank to transfer the funds back to the plaintiff.