July 25, 2011

Many in Asia are shocked by the recent discoveries of crime rings in Southeast Asia. In the past days, over 600 people have been arrested with charges of internet fraud and scams. As we read through the News lines, our eyes get wider, because we’ve seen this ring getting bigger, emerging mainly in Malaysia in partnership with China, Indonesia, and Cambodia. Although the scam and fraud types have varied, the criminals are organized and are targeting small businesses, multi-national corporations and investors seeking access to the Asian economy.

Malaysia private investigators have uncovered that the main frauds performed in this Asian region have to do with money transfers that fake companies in Malaysia and China mainly, and victims impacted small businesses around the world, individuals and even Fortune 500 companies. “Criminals in this region have discovered that the internet offers the anonymity they need to escape prosecution, in most cases,” explains John Wallace, Director or Background checks at Wymoo® International. “Because the criminals have operated from multiple countries, shutting the crime rings down requires the coordination of law enforcement in several countries, and that has been the biggest challenge.” In all, over 600 people were arrested and who was the leader of the group has yet to be revealed. The damage done to international businesses operating in or trying to invest in Asia has been in the hundreds of millions of dollars. The fraud and scams levels are still growing in Asia, despite the arrest, and experts say caution is advised.

Scammers in this recent bust, and also in many that continue to operate usually use the internet and VOIP (Voice Over Internet Protocol) to telephone their victims. Through email and many phone calls, and of course a lot of fake documents and bank accounts, the criminals convince their victims that they represent a real company or government agency. Somewhere along the line, an agreement will be made, and a payment will follow. Once payment is made, the scam has been completed. In the case of corporate investors, commodity suppliers, hedge funds and other large business transactions, the cost of the fraud can be very high. International private investigators say that without visiting the Asian country to see the company you’re dealing with directly, it can be very difficult to know who is real and who is not. And even then, there is still risk.

These con artists who are scamming major businesses and investments typically have very strong communication skills, and they speak the industry logo and have done their homework. All of the front is part of convincing the victim that the deal and opportunity is real. And there is pressure, because if the foreign company wants to get in on the Asian deal, to investment in Shanghai or Kuala Lumpur, etc, they have to act fast. The offer from the supplier, company or investor (the criminal himself) is only valid for a short amount of time, and payment is required to close.

Most of the internet crimes perpetrated could have been avoided if the targets would have been aware of the high risk in the region, and would have taken better precautions. Seasoned investors and business people who have worked in China, Malaysia and Vietnam know that due diligence is essential, and it is a cost of doing business in the region. Entering a business relationship without conducting a comprehensive background check and due diligence is very ill-advised.

The opportunity in China and Malaysia is attractive, and there are certainly opportunities to be had. However, given the high risk for fraud and scams, experts say international due diligence is part of the investment and should be the foundation from which to build. Going in blind or with your fingers crossed is asking for trouble, and in Asia, trouble can be very costly. Managers and CEO’s should think twice and consider a professional due diligence services as a valuable risk management tool to verify companies, contacts, offers and operations in Asia.

All the best,

S. Birch

© 2011 S. Birch
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