Updates
HK SFC, HK ICAC, and Macao Judiciary Police: Joint Operation Targeting Cross-Boundary Fraud and Misconduct in Listed Company
On 19 and 20 August 2024, Hong Kong’s Securities and Futures Commission (HK SFC), Hong Kong’s Independent Commission Against Corruption (HK ICAC), and the Macao Judiciary Police initiated a coordinated operation codenamed “Demarcation” in response to suspected cross-boundary fraud and misconduct involving senior executives of a Hong Kong-listed company. The individuals in question allegedly engaged in fictitious transactions and false accounting practices amounting to approximately HK$120 million.
As part of the joint operation, six premises were searched by both HK SFC and HK ICAC. Additionally, HK ICAC arrested seven individuals, including the chairman and an executive director of the listed company. The arrestees are accused of committing offences under the Prevention of Bribery Ordinance, specifically using falsified documents with intent to deceive their principal.
The investigation uncovered evidence suggesting that the chairman and other key personnel had falsified business documents and accounting records relating to the company’s subsidiaries in Hong Kong and Macao. These actions allegedly resulted in a reduction of the company’s trade receivables by more than MOP113 million (around HK$110 million). The accused individuals are suspected of using false documentation to conceal the misappropriation of over HK$9 million of the company’s funds.
The fraudulent activities in question may constitute a violation of the Hong Kong’s Securities and Futures Ordinance (HK SFO) concerning the disclosure of false or misleading information, defalcation, fraud, and misfeasance. These offences relate directly to the management and affairs of the listed company which implicates the executives in serious misconduct.
Given the cross-boundary nature of the crimes, the Macao Judiciary Police also commenced a parallel investigation into related fraud offences committed in Macao. This included searches of relevant premises and interviews with individuals connected to the case. The collaboration between Hong Kong and Macao law enforcement agencies is milestone in combating cross-border financial crime, with the Macao Judiciary Police conducting its first simultaneous law enforcement action in coordination with HK ICAC.
In commenting on the operation, Mr Christopher Wilson, Executive Director of Enforcement at HK SFC, stated: “The HK SFC has zero tolerance when it comes to misconduct undermining the orderliness of the market and misconduct by management of listed companies. The joint action demonstrates the determination of law enforcement agencies in both jurisdictions to combat cross-boundary illegal activities involving listed companies. The HK SFC will continue to work closely with the HK ICAC and other local and extraterritorial law enforcement agencies to maintain market integrity and safeguard the interest of investors.”
Mr Ricky Yau Shu-chun, Deputy Commissioner and Head of Operations at HK ICAC, emphasized the importance of this collaborative effort in his statement: “This joint operation underscores the strong partnership between the law enforcement agencies of both cities in addressing cross-boundary corruption and other criminal activities. The HK ICAC remains committed to maintaining a fair business environment and ensuring the effective functioning of the financial market by bringing both local and cross-boundary offenders to justice.”
This coordinated enforcement action signals a continued commitment by both Hong Kong and Macao to clamp down on financial crimes that threaten the stability of the markets and erode investor confidence. As the investigation remains ongoing, no further public comments were issued by either the HK SFC or HK ICAC.