Taiwan’s Scam Artists Go Global

The return to Taiwan last month of some of the Taiwanese suspected of being part of a telecom-fraud ring in Malaysia. (photo: CNA)
This is Part 3 of the Special Report on Public Safety: Links to Part 1Part2Part 4Part 5
From as far afield as Africa, fraud rings made up of criminals from both sides of the Taiwan Strait are fleecing victims.

On a balmy night in August 2014, this reporter hailed a cab in downtown Taipei. As the taxi wound through the city’s empty streets, the driver began to talk about money. “I can’t make any money driving a taxi,” he said. “There’s too much competition and fuel is expensive. I’m thinking of going to Vietnam to launder money. My friend there says I can earn about NT$300,000 (US$9,297) per job.”

“Wouldn’t that be risky?” I asked.

“My friend says Vietnam is pretty lawless. It’s not hard to get away with money laundering there.”

It’s unknown whether that taxi driver followed through with his plan. But the convergence of effective police work in Taiwan with surging wealth creation in China has pushed Taiwan’s fraudsters and their attendant money launderers to move their operations overseas – usually to developing countries without sophisticated law-enforcement regimes – from where they target mainland Chinese.

China’s public security officials say the fraud rings, which are made up of both Taiwanese and mainland Chinese criminals, are defrauding Chinese citizens out of billions of renminbi annually. Common victims include the elderly, students, teachers, farmers, and laborers. In some cases, the scams have involved huge amounts of money. Last December, mainland Chinese media reported 62 victims in China’s Guizhou province were duped out of 117 million renminbi (US$18.07 million).

In a typical scam, which can occur by telephone, text message, or messaging app, a criminal impersonating a law-enforcement official persuades the victim to transfer money to a bank account the criminal controls. “They say your account has been compromised, and you should go to an ATM machine to reset the account security settings,” says Huang Tsung-Jen, deputy director general of the National Police Agency (NPA) under the Ministry of the Interior. “Once a victim does that, the criminals persuade the person to transfer money to them for ‘safety purposes.’”

In some cases, scammers specifically target men seeking to meet women online, Huang notes. “A woman working in the fraud ring says she is in trouble and needs money urgently, and then persuades the man she’s met online to transfer money to her. It can happen repeatedly before the victim realizes what’s going on,” he says.

Fraud scams are organized, but offenders are not typically affiliated with Taiwan’s traditional organized crime syndicates, Susyan Jou, a professor at National Taipei University’s Graduate School of Criminology, said by email. According to Jou, the fraud rings usually have a “CEO” at the top responsible for the planning and execution of the crime. “Capital providers” finance the schemes, technicians handle IT work, while recruiters find people to join the fraud ring and account providers supply bank accounts for the criminals to use. Additionally, there are personal information buyers who purchase databases with contact information for potential victims and “operators” who make calls to targets. At the bottom of the organization are “couriers” responsible for withdrawing cash from a bank ATM once a victim has completed a transfer. The money is often laundered through developing nations to remove any trail.

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Some of the evidence collected in the 2013 arrest in Kaohsiung of five suspects charged with involvement in cross-Strait cases of fraud. (photo: CNA)

Changing dynamics

Jou notes that fraud arrests in Taiwan surged nearly tenfold in the first decade of this century, from 3,200 in 2001 to 31,000 in 2009. By 2014, fraud arrests had fallen to 15,000. “It is believed that the fraudsters and their groups have moved overseas (China, Southeast Asia, other countries) since 2009,” Jou said, citing Chinese police data which indicate fraud cases rose from 130,000 in 2006 to 200,000 in 2010 and 320,000 in 2013. The first media report of a cross-Strait fraud case was published in 2010, and the first Taiwan-Vietnam fraud case appeared in 2013.

Jou notes several factors that have contributed to the fall in fraud cases in Taiwan. First, public awareness campaigns have made Taiwanese more conscious of the scams and how to protect themselves. Second, the financial sector has worked closely with law enforcement to tighten the regulations for establishing bank accounts and limit ATM transfers to a maximum of NT$30,000 a day.

Still, it can be difficult to arrest, prosecute, and convict ringleaders. “Most offenders arrested are at the operational level, such as account providers and couriers, which is not enough to fully close down the organization,” Jou says.

The outgoing Ma Ying-jeou administration says cross-Strait crime-fighting efforts have borne fruit thanks to the pact it signed with Beijing in 2009. That agreement covers joint crime fighting, delivery of documents, investigation and collection of evidence, recognition and enforcement of rulings, and apprehension and repatriation of convicted criminals.

Jou observes that the pact has produced some concrete results. Through 2015, a total of 151 cross-Strait crimes were solved. Chinese authorities helped Taiwan collect almost 40,000 pieces of evidence and documents. Finally, more than 6,000 suspects were repatriated to Taiwan. Beijing says it has arrested 4,600 Taiwanese telecom fraud suspects since 2009.

The NPA’s Huang says Taiwan “has cooperated successfully with China to fight cross-Strait crime.” Moreover, “the Chinese police have learned from our crime-fighting techniques, which are advanced.”

“Of course, there could be more collaboration in the future, but China often has to consider factors such as political context, lack of law-enforcement resources, and the wider jurisdiction,” Jou says. “Sometimes they are willing to provide us with victim and witness statements, but this is not always the case. Without those statements as part of the evidence, Taiwanese police or prosecutors are unable to process the case.”

Troubling trend

In recent months, the arrest of nearly 100 Taiwanese for fraud in Kenya and Malaysia has increased tension between Taipei and Beijing as President-elect Tsai Ing-wen of the independence-leaning Democratic Progressive Party (DPP) prepares to take office. Since the victims in both cases are residents of mainland China, Beijing claims jurisdiction.

In the Kenyan case, 23 of the 45 Taiwanese suspects had been acquitted of telecom fraud charges. Yet Beijing alleged that those 23 Taiwanese had swindled more than 100 Chinese victims out of 6 million renminbi (US$925,000) and in mid-April successfully pressured Kenya to deport them to China for investigation.

Taiwan’s parliament condemned that move in an April 15 statement that accused Beijing of “forcing Taiwanese to be deported to China with rude and violent means.” The statement implored China to repatriate Taiwanese suspects in extraterritorial crimes to Taiwan for trial.

In the Malaysian case, 20 Taiwanese wire-fraud suspects (out of a total of 52) were sent back to Taiwan in March. They were initially released, as the Taiwanese authorities cited a lack of evidence of their crimes. Later 18 of the 20 suspects were detained after the Malaysian authorities provided evidence of the suspects’ wrongdoing.

Unhappy with Kuala Lumpur’s deference to Taipei, Beijing weighed in on the second round. And sure enough, on April 30, Malaysia deported 32 Taiwanese nationals to China to face wire-fraud charges.

Taiwanese officials say a 2011 incident in the Philippines should have set a precedent for the Malaysian and Kenyan cases. Speaking to legislators in April, Mainland Affairs Council (MAC) minister Andrew Hsia noted that Taiwan was displeased when the Philippines deported 14 Taiwanese telephone fraud suspects to China in 2011. But after five months of negotiations, Taipei and Beijing agreed that Taiwanese and Chinese who commit crimes in a third country would be deported to their country of origin. China then sent the Taiwanese back to Taiwan to face trial.

“Their failure to honor the agreement this time was probably due to the emergence of new types of fraud,” Hsia said.

Neither Kenya nor Malaysia has extradition agreements with China or Taiwan, observes Ross Darrell Feingold, a Taipei-based lawyer and senior adviser at DC International Advisory, a political risk and market access consultancy. As a result, “the disposition of these situations will be a combination of legal analysis of their respective laws, and foreign policy considerations,” he says. “If legal analysis allows for the extradition to China, then analysis of political considerations may be unnecessary. In the Kenyan case, suspects that flew to Kenya from China, used forged Chinese passports to enter China, or are facing criminal charges in China gave Kenya valid reasons to send the suspects to China.”

Feingold points out that Taiwan has previously requested that countries with which it lacks extradition agreements repatriate R.O.C. nationals accused of a crime in Taiwan. Notably, in 2007 Taipei asked Singapore to repatriate Rebar Asia Pacific Group chairman Wang You-theng. “Singapore declined to do so. Taiwan’s recent requests to Kenya and Malaysia are analogous,” he says.

On May 1, Premier-designate Lin Chuan said the incoming DPP administration intends to discuss the repatriation issue in criminal cases with Beijing. Better communication is needed in cross-Strait crime fighting, Lin said, adding that the Kenyan and Malaysian incidents “undermine Taiwan’s judicial power.”

It will be imperative for Taipei and Beijing to better communicate as the fraud problem is unlikely to ebb anytime soon, experts say. “If the economic situation in China stays strong and Taiwan’s economy [further] weakens, cross-Strait fraud will result in more Chinese victims, with high levels of Taiwanese offenders,” criminology professor Jou says.

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