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Email Hack and Scam in Hong Kong
Fraud by email hacking and sending fraudulent payment instruction happened frequently in the Hong Kong Courts. As Hong Kong is wholly free in cross-border money wire without any restriction, Hong Kong has become a popular destination of inbound funds for frauded assets. As fraud assets tracing, freezinga and recovery legal practitioner in Hong Kong, we have handled different kinds of fraud cases, such as investment fraud, romance fraud, cyber fraud including email fraud, etc. In this article, I will introduce email scams and how to handle such cases by civil litigation.
Email Hack and Fraud: How it Happens?
This kind of scams use a Hong Kong company’s bank account as the recipient account for the scam proceeds. The fraudsters firstly use different ways (including computer virus) to obtain the email account and password of the commercial parties in business and hack their email accounts, and then will stay dormant and scrutinize the email content of both parties. When it comes to the point when the buyer is to pay the seller, the fraudster will control and intercept both parties’ email correspondence, impersonate as the seller and request the buyer to pay the funds (eg. purchase price) into a Hong Kong bank account apparently disignated by the seller (but actually disignated by the fraudster). The fraudster often says various reasons for this change of bank account, such as the purchaser’s usual bank account is under bank’s due diligent and cannot be used, or the disignated bank account is bank account of a supplier of seller to whom the seller owns some debt and request the buyer pay directly to the supplier’s bank account). The buyer is completely unaware of the scam, because the instruction email comes out from the seller’s usual email (or a very similar email impersonating to be the seller’s email), and as parties in business are usually from two different countries and often only rely on emails to communicate.
After the sum is deposited into the fraudster’s designated bank account (Account A), it will soon be transferred to second layer bank accounts through cyberbanking, then the fraudster will make ways to transfer them offshore (e.g. Mainland China).
How to Handle the Email Fraud Case to Recove the Loss
After discovering the scam, the victim should immediately do the following:-
1) contact the remitting bank and the recipient bank immediately and inform them the payment has been made as result of a scam and request the banks to stop the payment if the funds are still on the way of wire;
2) report the case to the Hong Kong Police Force immediately, request Hong Kong Police to freeze the fraudster’s Hong Kong account as soon as possible. Hong Kong Police have an online report portal at Hong Kong Police Force e-Report Centre.
3) The problem is that the Hong Kong Police usually is slow to handle the investigation and it take several weeks or months to the Hong Kong Police to be able to freeze the account. A more effectient way to freeze the recipient bank accounts is to engage a solicitor firm in the practice of fraud tracing, freezing and recovery, such as our firm, to apply for urgent pre-action injunction to freeze the recipient account involved and for a disclosure order requesting the banks to disclose the identity of the bank account holders and whereabouts of the funds paid by the victim;
4) initiate civil litigation in Hong Kong Courts, request the company who holds the recipient account to refund the proceeds. If there are balances left in the recipient bank accounts after they are frozen, the possibility of getting back the funds is relatively high.
Why a Court Action is Necessary?
Regarding freezing of the recipient bank account, Hong Kong Police, by practice, do have the power to issue a No Consent Letter to bank to the effect of freezing the bank account. However, as freezing of the recipient account by the Police usual takes time, an alternative and more efficient method to freeze the recipient bank account is that we can represent the client to apply for an urgent freezing order (Mariva Injunction Order and Proprietary Injunction Order) and serve the order on the bank, which is usually much faster and can take place in several days.
In Hong Kong, the Police’s power and duty is to investigate criminal acts, and the Police has no power and no obligation to directy pay the victim’s fraud back to the victim from the recipient’s bank account. If the victim wants to recover its loss, the only way is to engage a Hong Kong lawyer to initiate a civil litigation to obtain a court judgment, and then apply to the court for a garnishee order to recover the funds from the bank.
Claim and Defence in Email Fraud Case: the Usual Ground
In many email fraud litigation cases, the defendent recipient account holder does not come to defend. In some cases, the defendant does come to defend. A usual defense raised by the defendant is that they are bona fide purchaser without notice and/or change of position.
Essentially, the plainiff (victim)’s claim is uausally based on his proprietary interest over the fund paid to the recipient account and/or unjust enrichment of the recipient. The plaintiff’s prima facie burden of proof is easy to establish. As the fund is paid by the plaintiff to the recipeint’s bank account as result of fraud, this itself establishes the plaintiff’s claim of proprietary interest so long as the fund in the recipient bank account represent the plaintiff’s payment. It also establish the plaintiff’s claim of unjust enrichment as the recipient is enriched by the fraud victim’s loss.
The Defendant, in order to successfully defend the case, usually have to prove it is a bona fide purchaser for value without notice of the fraud and he has changed his position bona fide.
Settlement – An Alternative way of dispute resolution
In many cases where the defendant come to defend, the parties finally reach settlement agreement to end the litigation, especiall where the amount of dispute is reletively small and cannot justify the substantial legal costs to be paid by the parties to maintain a litigation. From a reasonable commercial prospective, sometimes it is a viable way to end the litigation. If the client intend to settle the case with its litigation opponent, we can assist the client in settlement negotiation.
For any issue regarding email fraud case, you are welcome to consult our lawyer of litigation team by email to info@cnhklawyer.com
(Author: Mr. Bob Yan, principal solicitor of YAN Lawyers, Hong Kong Solicitors and PRC Lawyers)