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BoCom uncovers multi-million fraud

(China Daily)
Updated: 2006-06-12 08:42

China's fifth largest bank has admitted being defrauded of roughly 200 million yuan (US$25 million).

The Bank of Communications (BoCom) in which Europe's biggest lender HSBC holds shares reported the fraud in one of its branches in Northeast China.

In a news release posted on its website on Saturday, the bank said the fraud, involving customer funds, was detected at a branch in Shenyang, capital of Liaoning Province, during a recent scheme designed specifically to address suspected fraud cases and upgrade the customer information management system.

"Initial investigations found that about 200 million yuan was involved," it said.
The bank, which was not available for comment yesterday, said it had reported the case to the police.

An emergency mechanism and other measures have been adopted to reduce losses, the bank said. It also promised to enhance internal controls and improve its risk monitoring and control abilities.

The BoCom fraud comes after the Shanghai Pudong Development Bank revealed a potential fraud case involving property loans worth 126 million yuan (US$16 million) in a local sub-branch last week.

While Bank of China, the country's largest foreign exchange lender, has also been ensnared in a recent corruption scandal with a Chinese businessman arrested for allegedly embezzling 146 million yuan (US$18 million) from a local branch.

According to the 21st Century Business Herald newspaper, the head of BoCom's Shenyang branch, Dai Jinggui, was removed from his post two weeks ago, possibly after getting involved in illegal operations.

The paper quoted an unidentified insider saying that quite a few of the branch's officials are involved in the fraud.

But new branch director Tan Shuguang didn't link his predecessor's removal to the fraud, claiming it was a regular personnel transfer.

With a 19.9 per cent stake owned by HSBC, BoCOM was listed in Hong Kong in June 2005, becoming the first major commercial bank from the Chinese mainland to be listed overseas.

Figures from the China Banking Regulatory Commission showed that a total of 55 fraud cases were reported at State-owned commercial banks in the first quarter of this year, involving a total of 563 million yuan (US$70 million)  lower than the same period last year.