HONG KONG SAR, CHINA Law and Practice Contributed by: George Lamplough, Vanessa Cheng and Curtis Pak, Holman Fenwick Willan
scheme, enabling fraudsters to funnel the same cash through the business repeatedly, falsely driving up revenue figures and enhancing the apparent value of the company. Misappropriation of Funds Fraudsters look for ways to extract funds from businesses that pass casual scrutiny. A com - pany might purchase fixed assets or acquire a business at an inflated price from a connected company or acquire a property in an obscure location making it difficult to verify indepen - dently. Fraud Through Hong Kong Hong Kong banks are often unwitting partici - pants in the money-laundering process. Victims fall foul of all sorts of deceptions, includ - ing email and phone scams, investment and wire frauds, even impostor scams. There is also a constant stream of “CEO” frauds and frauds relating to investments in cryptocurrency. General Characteristics of Fraud Claims The individual heads of claim that apply depend on the underlying facts. Common causes of action that victims rely on include: • fraudulent misrepresentation; • deceit and fraudulent inducement; • dishonest assistance (accessory liability); • knowing receipt; • constructive trust – arises when the recipient holds funds that they know have been paid to them by mistake or in breach of trust; and • restitution on the grounds of unjust enrich - ment – where the unjust enrichment consists of a pecuniary benefit, the claim is known as an action for money had and received.
The first five claims all involve some manner of knowledge or dishonesty on the part of the defendant. The last claim does not necessarily require the plaintiff to prove dishonesty or knowl - edge of the fraud on the part of the recipient. If plaintiffs can prove they have a proprietary claim, then, subject to any equitable defences the defendants might have, their claim may suc - ceed without having to prove that the defendant had knowledge of the original fraud. Defendants regularly argue by way of defence that: • they have changed their position in reliance on receipt of the plaintiff’s funds; and/or • they are bona fide purchasers for value (ie, they paid fair value for an asset acquired with the funds) without notice of the fraud. Other claims include breach of fiduciary duty and breach of the duties of good faith and fidel - ity, which may apply if the wrongdoer owes a duty to the victim but fails to act in the victim’s best interests. Conspiracy claims can be brought against those who make agreements with fraud - sters with intent to injure the plaintiff. The most common relief sought for fraud is dam - ages or restitution. Other remedies may also be sought, including injunctive or declaratory relief or an account of profits, which enables a plaintiff to recover any profits made by a defendant who has utilised the proceeds of the fraud. 1.2 Causes of Action After Receipt of a Bribe Against the Corrupt Agent – Breach of Fiduciary Duty In this context, an “agent” includes any person employed by or acting for another. The “prin- cipal” is the person who has granted an agent
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