Hong Kong's official fraudbusters have unearthed yet another outfit using fraudulent letters of credit (L/Cs) acquired using bogus business records in an attempt to defraud a local bank.

In a case brought by the Independent Commission Against Corruption (ICAC), three merchants admitted at a Hong Kong District Court that they had conspired to cheat L/C facilities totalling about HK$1.2 million from a local bank with false business transaction records.

Fung Yin-mei, shareholder of Sunny Leather Ware Mfy Limited; Cheung Ching-man, proprietor of Polybest Company, and Chan Kwok-wai, proprietor of Chinaways Enterprises Company, pleaded guilty to two joint charges of conspiracy to defraud. The judge adjourned sentencing the defendants who were granted cash bail of HK$20,000 each until December 20 pending reports.

The case arose from a corruption complaint, alleging that some bank staff might have accepted advantages to facilitate fraudulent L/C applications. Enquiries by ICAC uncovered a fraudulent scheme to obtain credit facilities with bogus business records.

The court heard that between 1 April 2000 and 31 January 2001, Fung conspired with Cheung and Chan to defraud the Wing Hang Bank Limited by dishonestly causing the bank to issue five L/Cs on behalf of Sunny Leather in favour of Polybest and Chinaways, which were the nominated beneficiaries.

The defendants submitted false documents to the bank, purporting to show that there were genuine underlying business transactions between Sunny Leather, Polybest and Chinaways.

As a result, the bank released HK$324,800 and HK$856,200 to Polybest and Chinaways respectively. After deducting bank charges, Polybest and Chinaways reverted the remaining funds to Sunny Leather, which had subsequently repaid all the L/C debts to the bank.

The court also heard that the bank would not have approved and released the L/Cs totalling HK$1,181,000 if it had been aware of the fraudulent nature of the applications.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DCPRO.