Fraud, cyber and other security incidents are now the ‘new normal’ for Gulf companies, according to the executives surveyed for the 2016/17 Kroll Annual Global Fraud and Risk Report.
The proportion of executives that reported their companies fell victim to fraud in the past year rose significantly to 88 per cent from 62 per cent in 2015, highlighting the escalating threat to corporate reputation and regulatory compliance.
There is no dearth of fraudulent schemes in the region and citizens are not above falling for these scams, here are a few examples:
Con car fund
In one of the largest scams in Abu Dhabi’s history in March 2017, about 3,700 victims were duped out of about $350 million. The multi-portfolio investment fund scam was disguised as a car trading business. The suspects enticed customers to first buy cars from them.
They would then encourage them to resell the cars through their firm at a higher price. Huge returns were offered in return and post-dated cheques were issued to the customers. Since the first few people who joined the investment plan received the promised returns, others were encouraged to join the scheme, till the system collapsed under its own deceitful weight.
A firm recruiting nurses to Kuwaiti hospitals collected a service charge ranging between $10,000 and $30,000, instead of the $300 fee per client allowed by the government of the worker-sending country. The firm reportedly recruited more than 1,200 nurses during a two-year period.
The scam became apparent after tax officials raided the recruitment agency in its home country and found huge sums of unaccounted money. While the firm collected exorbitant sums of money, it forced the applicants to sign a written undertaking that they had paid only the legally permissible amount. The firm reportedly transacted business worth about $30m, before the mastermind was arrested in March 2017.
Foreign currency cheat
An unviable foreign exchange scheme promising to double investors’ money was unearthed in Dubai in January 2017. The forex trading company promised 100-120 per cent returns on $25,000 of investment. More than 6,000 investors, majority of whom took loans to make the initial investment, fell prey to the scam worth more than $200m. While the company honored its promise for a few months, it also encouraged such benefitting clients to reinvest most of their ‘profits’.
After the ‘honeymoon’ period, the relationship managers disappeared and the inherent fraud was exposed. The company owner is in legal custody. According legal firms representing the victims, the fraudsters targeted either airline personnel or specific prayer groups. A former employee claimed that the staff was unaware of the investment model.
Conmen duped internet users into believing that the Emirates National Oil Company (ENOC) was dishing out a cash prize worth about $175,000. The email scam was unraveled in November 2016 after advertising itself as a free raffle draw as part of the oil company’s international annual campaign to fight against HIV/AIDS.
The email touted that eight people had already won the huge cash prize until then. The modus operandi was to extract a ‘processing fee’ via wire transfer from gullible victims and then end their ‘virtual’ existence as far as that client is concerned.
In a now-familiar trick, two companies posing as genuine dealers cheated about 100 trading houses before shutting shop and vanishing into thin air. The Dubai-based companies with a license to deal in maintenance parts and services of ships and boats went on a purchasing spree with firms dealing in related products. These included angle grinders, welding electrodes, bathroom lights, solar panels, pipes, plastics, electronics, flight tickets, hotel bookings, and textiles, among others.
The first few purchases were either in cash or through honoured cheques that were meant to gain confidence. Thereafter, suppliers were issued post-dated cheques by one company, which bounced when presented at the banks due to insufficient funds. The scam came to light in October 2016, when the victim firms tried contacting the parent company and found the phones switched off and the office locked. The second company shut shop even before the cheques were due in the bank.
Black dollar dupe
A criminal gang offering to ‘clean black currency notes’ came to light in Bahrain in May 2016. Several images and videos, involving Asian and African ‘customers’, were posted on social media explaining the process and claiming that legal tender cleaned by them could be used everywhere, including banks. Also known as ‘black dollar scam’ or ‘wash wash scam’, it is designed to cheat victims by convincing them that huge sums of money in their possession are actually currency notes that have been dyed to avoid detection by authorities.
The victims are then persuaded to shell out money to purchase chemicals that will remove the dye, with the promise of a share in the proceeds that would follow. The videos reportedly showed black-coated notes being cleaned with a ‘SSD’ solution and a white-colored ‘activation powder’, sometimes using a printer-like machine. The gang also sold chemicals required for this process – Vectrol paste, Tebi-manetic and mercury solutions, intersteroids and shampoo.