DBS Bank Taiwan former financial advisor’s alleged collusion with criminal gangs causes over US$1.4 million in losses for victims

TAIPEI, TAIWAN: Concerns have been raised regarding the possible collusion of a former financial advisor from DBS Bank in Taiwan with criminal gang members and fraud groups.

These collaborations have allegedly led to the illicit engagement of wealth management clients in real estate investments, with illegal fundraising also at play.

As reported by Taiwan media, the alarming aftermath has resulted in four victims collectively losing over NT$ 48 million (roughly equivalent to US$1.48 million), prompting a thorough investigation by law enforcement across Taipei and New Taipei City.

On Thursday (2 Nov), Roger Lin (林志吉), Deputy Director-General of the Taiwan Banking Bureau, highlighted that DBS Bank Taiwan reported a significant incident to the Financial Supervisory Commission (FSC) a day prior.

DBS Bank Taiwan’s statement clarified that the financial advisor in question had resigned in March 2020.

Presently, the bank has launched an internal investigation to uncover any potential illicit activities during the advisor’s tenure.

This case of negligence will be a central focus in next year’s financial inspection agenda, as disclosed by Lai Shin-Kuo(賴欣國), Deputy Director-General of the Examination Bureau, who outlined three primary areas of scrutiny for the upcoming year.

The Taiwanese FSC is treating this matter with utmost seriousness. During the Thursday press conference, both officials from the Banking Bureau and the Deputy Director-General of the Examination Bureau addressed the pressing concerns.

The prosecutor’s office will incorporate the management of financial advisors into the primary focus of next year’s financial examination, emphasizing the need to investigate any inappropriate financial transactions between advisors, clients, and fraudulent entities, along with any instances of unwarranted benefits.

Roger Lin also revealed that the ongoing case is currently under investigation by judicial authorities.

To fortify risk management measures, the Banking Bureau will reinforce the oversight of employee conduct, stressing the importance of implementing KYE (Know Your Employee), establishing warning indicators, and instituting a whistleblower system.

The authorities have also mandated the implementation of second and third lines of defence in risk management, alongside the existing first line. These issues will also be brought to the attention of the domestic bank’s general managers’ meeting.

Banks are also required to implement second and third lines of defence in risk management, in addition to the first line. The matter will also be discussed at the meeting of the domestic bank’s general managers.

Starting next year, the FSC will specifically investigate whether advisors have sold unapproved products or become a conduit for illegal financial transactions during financial inspections.

They have requested the rigorous implementation of KYC (Know Your Customer) and KYE protocols, with a specific focus on reviewing product suitability and scrutinizing any signs of improper sales during the financial inspection process.

Roger Lin also stressed the necessity of assessing whether financial institutions have implemented anti-fraud measures, including counter care, thorough account opening reviews, and robust systems for monitoring any abnormal transactions.

While past incidents have involved financial advisors or counter staff embezzling customer funds and colluding with fraudulent entities, this recent revelation of collusion with gangs marks a concerning turn of events.

The Examination Bureau has thus elevated this issue to a key focus for the general financial examination in the following year. The likelihood of additional special inspections will be contingent upon the occurrence of similar cases in the future.

Emerging criminal pattern uncovered in Taiwan’s financial sector

According to Mr Lai, the collusion between the financial advisor and criminal gangs as well as fraud groups represents a newly discovered pattern that authorities are diligently investigating.

They are also conducting inquiries into the possibility of similar situations within other financial institutions.

They will also investigate whether other financial institutions have similar situations.

Additionally, he expressed particular concern regarding the involvement of financial advisors compared to counter staff, as the former has reportedly compromised the sensitive data of high-asset clients.

Consequently, the Taiwanese authorities are committed to investigating whether financial institutions have established robust measures to safeguard personal information, aiming to prevent customer data from being compromised and exploited by fraudulent groups.

Moreover, they will examine any potential instances where fraud groups have improperly manipulated online banking transfer amounts or ATM limits through the facilitation of financial advisors within the banking institutions.