Hong Kong’s anti-corruption and police forces have dismantled a major alleged loan-fraud and bribery network that exploited government-guaranteed financing schemes designed to support small and medium-sized enterprises (SMEs). A recent joint operation led to the arrest of 32 individuals, including bank staff, loan intermediaries, and business owners, implicated in a sophisticated scheme involving HK$140 million in dubious loan applications across 22 companies and 10 banks.
The Independent Commission Against Corruption (ICAC) and the police’s Commercial Crime Bureau (CCB) conducted sweeping arrests on October 30 and 31, unveiling an intricate operation where intermediaries allegedly fabricated business documents and brazenly bribed frontline bank employees to fast-track fraudulent loan approvals.
Orchestrating the Fraud: How the Scheme Worked
The investigation centers on three primary government-backed loan products: the 80% Guarantee Product, the 90% Guarantee Product, and the time-limited 100% Personal Loan Guarantee Scheme, introduced during the pandemic. According to Principal Investigator Grace Yee of the ICAC, the conspiracy was meticulously planned by intermediary firms.
These firms allegedly recruited specific individuals to pose as SME proprietors, often using shell companies with no legitimate operations. Their role was to secure the government-backed loans. Allegations suggest that these intermediaries managed the entire process: recruiting applicants, establishing proxy bank accounts, preparing falsified paperwork, and ensuring submission.
Investigators found that bribes totaling approximately HK$500,000 were involved, paid to bank staff to ignore irregularities and expedite applications, some of which were tied to companies that simply did not exist. In one cited example, an employee allegedly accepted a HK$70,000 kickback—a 6% share—on a HK$1.2 million loan application, highlighting the clear financial incentive driving the corruption. For their cooperation, the “puppet” SME owners typically kept 5% to 7% of the loan amount, with the vast majority allegedly pocketed by the intermediaries.
The Arrests and Scope of Involvement
Of the 32 total arrests, the ICAC detained 25 suspects, including 13 current or former frontline bank employees from 10 different financial institutions, seven principals of intermediary firms (some with prior banking experience), and five other individuals tied to the scheme. The suspects ranged in age from 31 to 63. Searches of multiple locations yielded banking records and over HK$200,000 in suspected illicit cash proceeds.
Separately, the CCB arrested seven loan applicants, directors of nine SMEs across sectors such as logistics, electronics, and daily goods trading. These applicants allegedly used fraudulent documents, including falsified tax records and Mandatory Provident Fund (MPF) statements, to artificially inflate company turnover. According to Chief Inspector Ricky Ho Yun-yin of the CCB, eight of these companies secured HK$50 million in loans, with funds immediately withdrawn and defaulted upon.
Warning to the Public
Authorities have already suspended several loan approvals and disbursements as the investigation continues. Chief Inspector Ho emphasized the severe consequences for those involved in financial fraud. Conspiracy to defraud, fraud, and using false instruments are felonies punishable by up to 14 years in prison upon conviction.
Protecting the Vital SME Sector
The SME Financing Guarantee Scheme, managed by the Hong Kong Mortgage Corporation Insurance Limited (HKMC), is crucial for business vitality. Irene Mok, Vice-President of Operations at HKMC, noted that the schemes have successfully supported over 40,000 enterprises and 800,000 employees since their inception.
While acknowledging the impact of the investigation, ICAC’s Yee stressed that the 13 implicated bank staff represent individual integrity failures, affirming that the banking sector as a whole maintains high standards.
In response to the fraud, HKMC asserted its commitment to collaboration with law enforcement and banks. Moving forward, the corporation plans to proactively analyze red flags, strengthen pre-approval due diligence, and enhance ongoing monitoring of loan performance to prevent future exploitation of these critical government support systems. Further enforcement action remains possible as the agencies continue to trace the illicit funds.