Lack of auditing financial statements and going concern by professionals is a problem around the wholebut in China, the scale is just different. Everything is just bigger.
Guangdong Bangjia sold financial products that promised returns up to 47% on loans and loan funds. The Company targeted senior citizens for these investment opportunities. In a country that is so new to financial products and so large that scale of things just are immense, many investors took the bait. Some 230,000 of them have been investing in the Company during the course of about a decade. But there were no investments. It was a Ponzi scheme.
How did Chinese senior citizens end up investing in this Company’s funds? Well, the Company invested in itself first. It spent money on lavish and grand marketing exhibitions, proving that it can afford to do such things because of its success.
I didn’t intend to write three articles consecutively on financial crimes in China, but I couldn’t help it but notice how big financial crimes can easily get in China. This is a place with very little wealth for the ordinary citizen. But because of the countries fantastic rise and people being exposed to media that show them how wonderfully wealthy some people of little means have become, people are willing to take a chance.
The sad thing is that the United States is becoming this sort of place. Getting ahead by working hard is less and less secure, so, more and more people are gambling. US has the lowest labor participation in a very long time and the average income per employee hasn’t kept up to pace with inflation, even while productivity per employee has increased over the past three decades. Financial crimes involving financial professionals offering hope of a better life is going to be more prevalent if we don’t start doing something to make sure we do something about the system that makes us want outrageous investment returns.
Marcus Maltempo is a Certified Anti-Money Laundering Specialist and a Certified Fraud Examiner with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.