On Nov. 15, a financial adviser in the retail banking sector was detained on suspicion of stealing money from some of his clients’ accounts. The amount of money involved in the case is greater than in any similar case up until now.
A client of Taishin International Bank had noticed abnormal transactions in their account and reported it to the bank. Only then did Taishin discover that Chou Li-hung (周勵宏), a financial consultant at its branch in New Taipei City’s Jhonghe District (中和), had allegedly been secretly diverting money amounting to NT$290 million (US$10.06 million) from at least three long-standing clients.
Why do cases in which financial consultants steal from their clients’ accounts keep happening? Why have banks not set up and implemented internal controls? How can clients’ rights and interests be safeguarded?
According to initial police investigations, Chou had since 2010 allegedly been taking advantage of his familiarity with long-standing clients and their trust in him to sell them financial products such as funds, stocks, bonds and financial derivatives.
In some cases he had allegedly said that he could privately help his clients to make investments.
Having persuaded his clients to sign or stamp their personal seals on multiple disbursement vouchers, on the grounds that this would make it easier to carry out the necessary deals, he then allegedly used them to embezzle money from the clients’ accounts.
According to data provided by the Financial Supervisory Commission (FSC), cases of financial consultants embezzling clients’ money have occurred at more than 10 state-owned and private banks. This shows that the banks have failed to learn from previous cases and failed to implement internal controls.
Notably, the FSC in June last year announced that it had drawn up “10 commandments for financial advisers” to more effectively guard against fraud. The measures include random inspections of financial advisers’ workplaces to deter them from privately keeping their clients’ seals and other items. The FSC also banned financial advisers from having any financial dealings with their clients and ordered banks to set up rotation systems for financial advisers.
When financial consultants steal their clients’ money, it is not enough for the company to pay back the embezzled money to the clients. The Consumer Protection Act (消費者保護法) stipulates that banks must also pay the clients punitive compensation of between one and five times the stolen amount.
The FSC must apply potent medicine to eliminate the problem of financial advisers stealing from their clients. This would mean imposing especially heavy fines on banks that do not implement internal audit systems and on those that are repeat offenders. It could even order them to replace the heads of the departments involved.
The FSC itself should initiate a special audit of financial consultants, evaluate banks’ internal control mechanisms and publish the results for consumers’ reference.
Consumers should also be reminded not to rely too much on financial advisers or put too much trust in them. They should definitely not hand their bank passbooks or personal seals over to their advisers or stamp disbursement vouchers with their personal seals in advance.
They should also tell their advisers to regularly give them printouts of their account statements, which they should then check in detail. If they notice any problems, they should immediately report them to the Consumers’ Foundation or the FSC. Only by so doing can clients safeguard their rights and interests.
Cheng Jen-hung is honorary chairman of the Consumers’ Foundation and a professor at Chinese Culture University.
Translated by Julian Clegg
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