Financial frauds have been epidemic as the modern technologies developing. The number of financial cases has been increasing, expanding to extensive diversities of industries by the most unexpected mean. The following shows the most common financial fraud cases:
- Internet fraud
Internet fraud is a common way to perform financial fraud, meaning that one fraudulently collects funds by fabricating facts or concealing the truth. That can include fake or misleading information released by stock market manipulators, and the manipulators illegally seek gains by dumping their shares pumped-up by the misleading information. Another typical example is fake online auction. Purchased good may not be delivered to the buyer as perfect as the presented one, or maybe it does not exist at all.
- Fraudulent funding
Raising funds by fraud is collecting funds by means of fraud. Typical means are that one does not use the raised funds as he/she promised to use, and even flees with the funds or promises excessively high rates for return.
- Insurance fraud
Insurance fraud refers to acquiring insurance money by fabricating relevant information of the insurant or creating insured incidents with bad faith.
- Contract fraud
Purposed by illegal acquisition, obtaining properties of the other party by faking facts, concealing truths, using hidden traps and other means during the process of concluding and/or enforcing a contract. It also has a form of one party of a contract intentionally concealing the factual circumstances or revealing the fake circumstances that lure the other party to express wrong intentions and conclude the contract. This is one of the fraud techniques as well.
In China’s legal practice, in addition the fraud itself and the amount involved, an element to criminalizing financial fraud is the intent to illegal possession, such as raising funds while knowing he/she is not capable of returning it, transferring and concealing collected funds. The legal consequence is harsh once convicted. For example, one convicted of the financial fraud crime is subject to penalty as high as life imprisonment in cases where the amount concerned is especially huge or other severe circumstances according to Art. 192 of the Criminal Law of the P.R.C.
Generally speaking, when a fraudulent funding is determined, the court will decide on the penalty amount according to the severity of the fraudulent behaviours, ranging from the minimum 20,000 RMB (approx. 2,600 EUR) to the maximum 500,000 (approx. 64,000 EUR) or the confiscation of assets. Additionally, contract fraud is different from fraudulent funding, albeit the similarity that both incurs civil and criminal liabilities, the former is not under specific ranging of penalty in the law itself except the rates to aggregate the sentence time. However, when a contract fraud is penalized with criminal liability, the abovementioned penalty range is applicable.
Regarding the post-fraud remedies for victims, Chinese laws predominantly uses the principle of recovery and compensation, meaning that assets or properties not spent shall be recovered and parts spent shall be compensated. What has been obtained after the recovery and compensation process will be compensated to victims. Due to the increasing number of innovative financing models and their upgrades, Chinese law has yet offered certain economic remedies to the victims in financial markets, and the difficulty for victims to claim proper and sufficient compensation has grown bigger. Such matters should be regarded with extra attention and discretion when entering the Chinese financial market.
Global Connect Admin B.V. | Yichuan Qiu and Xuan Hao