The lining story of loan-fraud at Look’s Securities

One of the advantages of taking off work in the public sector is the cabability to learn the ropes then go on to the private sector and easily make five, six, far more money.

I trained as an attorney at law at the Hong Kong Securities and Futures Commission, before being hired to your legal and regulatory department on the US bank who had a place of work in Hong Kong.

After a couple of years there, I gone after a brokerage called
Look’s Securities Limited (address 1908, 19/F, K11 Atelier, 18 Salisbury Road, Tsim Sha Tsui, Kowloon, Hong Kong).

The reason why financial services companies pay such wages to opportunity seekers like myself who may have served time working for a regulator is that even a lot more than our knowledge of your regulatory landscape, we know the ropes, and know keep away from certain traps.

So while we’re earning more, they are benefiting enormously in our capacity to dodge any regulatory penalty if possible. What we’re not supposed to undertake is help them cover up fraud, or find workarounds to regulatory reporting, or generally facilitate criminal behavior.

My connection with the compliance, legal and regulatory function of Look’s Securities would be that the operation did everything it had not been supposed to accomplish, and even worked to subvert the boundaries from the law.

International securities-lending fraud

Look’s Securities is a licensed investment brokerage, and sits after a sequence of fraudulent activity, selling shares directed to it by a small number of unlicensed, unauthorized financial entities. These are typically out of the US. The firm it does the most business with definitely is High West Capital Partners (who may be an LLC, but you are most likely not).

High West Capital Partners sucker in companies or individuals who desire a simple loan and still have collateral they might put up against it. They will typically provide an almost immediate decision within the loan plus a very quickly turnaround. The rates useful aren’t great, but consumers are paying more with the convenience. A smaller $1m loan may 75% LTV, so they’re getting $750k, with $250k in the primary instance split between High West Capital Partners and Look’s Securities, prior to loan repayments are taken into account.

After the agreement is manufactured as well as the shares are transferred over, the credit manufactured, with all the receiver believing their shares feel safe unless something terrible transpires with this market, or they are unable to create a payment, where case things are all off and both parties walk away. They will lose their collateral then, but activities like that. Securities-lending isn’t hugely renowned, however it’s a niche along with 99% of cases is a sound technique to raise capital.

High West Capital Partners, unlike what they’ve got told their client, purchase the money for any loan by selling the shares via Look’s Securities as well as own networks in Hong Kong, Singapore, Shanghai, and occasionally Dubai in which the regulatory checks are almost non-existent. Wherever possible these are generally off-market transactions that take time and effort to chase.

Look’s Securities exists to broker share deals, however a substantial percent of the trades it executes take place with no consent of the share owner.

Should the company played innocent it might protest to become another unwitting victim in the High West Capital Partners swindle, but it surely is usually a crucial perhaps the jigsaw, and contains quite a few actors that are taking their share from all of these illicit trades. High West Capital Partners, unregulated, could make each of the promises it likes, but on the subject of actually liquidating the shares it a real, authorized partner to achieve the cash, and that is where Look’s Securities come in.

There initially were rumors that folks behind High West Capital Partners orchestrating the fraud tried such like of a decade back beneath a different name. They weren’t back then using overseas brokers selling the shares that they had obtained. They switched to Asia realizing it would make it that more difficult to chase payments and discover trail from the fraud.

Daily operations

After a recommendation from another friend inside the financial district that this was work to not ever miss, I went for doing this and was hired by Look’s Securities managing director Samuel Lee to be effective alongside him, registered officer Vivien Lai, and line manager Hilda Chan.

Component of my role were to draft systems and controls and shape policies that may show towards the Hong Kong SFC as well as other regulators that we were meeting the whole obligations. There’s slides into criminal conduct, it commences with military services weapons signature here, and an occasional look another way, before descending into outright fraud.

Look’s Securities carries a transaction reporting software system which might be considered bespoke, but is similar to a trial version of something with all the current important parts missing. Visually, on the surface, transactions are captured, nevertheless the back-office data, trade reconstruction, reporting, anything which will paint an image something is amiss, is totally screwed up.

You can find effectively two systems running; one who processes normal business, then one which attends to the transactions they should be hide. This lets Look’s Securities to run a clandestine operation concurrently alongside a semi-legitimate brokerage outfit.

Suspect trades that would usually alert the controls officer with plenty warning flag go undetected, with alerts sent to Samuel, Viven, Hilda, and for a while, myself.

I was told this has been due to particular transactions being highly sensitive with clients who did not need to alert others already in the market how the sales were happening, or expose their positions. I bought the excuse at the beginning, since it appeared like methods to appease our clients, for the proviso that i was capturing all transactions, even suspicious ones, and they might all be reviewed.

These transactions has been arrange earlier on through communications with High West Capital Partners, it later transpired, and were completely stage managed with the process right to the point of sale without any trace they occurred.

I wasn’t motivated to review any of the warning signs or help investigate other compliance issues regarding irregular trading activity. All of them underwent Samuel, and absolutely nothing ever came of them. When I asked for documentation to evaluate, I had been told it had all been deliver to the SFC for verification. I’d not read about this method, but didn’t ask any longer questions.

I doubt the computer could truly identify a rogue trade whether or not directed, it seemed an entirely haphazard way of monitoring, which allowed the genuinely illegal activity circulation through another pipeline which was then washed clean by management.

A designated number of trades flowing with the legitimate brokerage were deliberately flagged each and every month and labelled as potentially fraudulent, while they were nothing in the sort. This, Vivien confided, would convince the regulators our systems were working.

A listed US company selling 5 million shares off-market by way of a Hong Kong intermediary is cause of question, but as soon as the senior bosses and legal department as well firm gets a slice of a $10m trade, who’s going to chat up? Not when everyone gets an envelope with cash inside at the conclusion of each month.

Besides, there was not record any of this was taking place. Whistleblowers could speak up, but the property was rigged. There was not ever a telephone message, text or chat message that pointed to incriminating conduct. Even our calls while using the outside compliance team supposedly based in the central bank building weren’t recorded.

I additionally have the experience many transactions weren’t captured whatsoever, when a lot of the daily flow was being channeled through Hilda Chan, Samuel Lee, and Vivien Lai, it had been tough to know.

One thing Used to learn quickly were to remove my name from anything that may set me up being a patsy. They wanted me to audit the trading software – so I’d have my name next to any checks should the entire thing fall down.

Occasionally an aggrieved party tracked us down as being the last place their stock can be traced to. If it absolutely was an American firm, they could be met with a gale of Cantonese gibberish made to throw them off. If Samuel or Hilda took the call, they will be fobbed off with legal jargon and claims that Look’s Securities was merely following orders together with the contracts to prove it, that Look’s was the maximum amount of a victim.

Some of the problem was the resultant market shocks out there sales found their long ago to your defrauded client, either triggering clauses for their loans, or from other own diligence in observing the cost of the loaned stock. When they called up to discover the thing that was happening, these people were months, years behind. Another solid excuse was trades were only continued our system for reporting purposes, a couple of years maximum, and even so, that it was impossible to understand wherein the ledger it had occurred, because we’d updated systems a couple times since them.

Possible charges

Before my departure from Look’s Securities, I started submitting anonymous reports to the SFC, HKMA, and many US regulators by what I’d seen. The SFC contacted me through a safe and secure channel, and I had been made cognizant of a continuous investigation.

This has been around 1 year, maybe 14 months ago. The agency was building evidence against Look’s Securities, the agent said, in particular Samuel Lee, Vivien Lai, Hilda Chan and three some others whose names I never met, but I think were helping facilitate the bribery and ensure the installments went through.