When Yeh Yi-far (葉益發), chief prosecutor of the Taoyuan District Prosecutors Office, saw the words “Chenggong Branch” for the first time in an encrypted chat used by a fraud ring on messaging software Telegram, he was extremely skeptical.  

“Was it really possible that a bank worker was in cahoots with a fraud ring?” Yeh wondered.

The scenario was even more implausible given that the branch belonged to CTBC Bank, a big bank that gives employees at least four months’ salary as year-end bonuses. What also bothered Yeh was that “trust” is the lifeline of the financial sector, with bank workers the last line of defense against fraud.

Online group chat has become a favorite method of scammers. (Photo: Pei-Yin Hsieh)

But as more evidence was gathered, the truth became undeniable. In January 2023, Yeh asked a local court for a warrant to search CTBC’s Neihu Branch, and after checking three proxy accounts, the clues all pointed to a 26-year-old woman surnamed Chu (朱).

It was the first search of a bank in the history of domestic fraud, and since then, six CTBC branches and one branch of Union Bank of Taiwan have been searched and three people have been indicted.

Bank accomplices: allowing NT$30 million transfers

That bank staffers fell into the hands of fraudsters is perhaps the most concerning development amid a widespread outbreak of fraud in Taiwan. 

After years when banks were typically not involved in telecom and internet fraud schemes, why do fraud rings now need bank insiders on their side? 

It’s because “telecom and internet fraud and investment scams are converging,” speculated Minister without Portfolio Lo Ping-cheng (羅秉成), who heads the Executive Yuan’s anti-fraud office.

The result has been a dramatic jump in fraud not only in Taiwan but across the globe. The Global Anti-Scam Alliance’s (GASA) latest estimate is that global losses to scammers exceeded US$1 trillion in 2022, 20-times higher than in the previous year.

Lo believes the huge surge reflects a shift in the type of fraud being committed, going from low-value e-commerce and credit card scams to much more lucrative fake investment schemes, necessitating methods to move larger sums of money.

As the amounts involved in the scams have risen, they have been increasingly likely to exceed bank transfer limits. Fraudsters have faced similar problems when their victims have tried to transfer big sums, with bank tellers finding a way to block the remittances.

Consequently, fraud rings had to come up with a new tactic, and decided to entice and collude with specific bank workers, who are uniquely positioned to raise the amounts that can be transferred from proxy accounts to designated accounts.

Yeh explained that investment scams often involve transfers that add up to more than NT$100 million. The fraud rings are desperate to transfer the stolen funds as quickly as possible, and simply buying up the passbooks of proxies was inadequate to handle such large amounts, Yeh said.

Inspection Chief Prosecutor Yeh Yi-fa (2nd from left), and the team uncovered the first fraud case involving bankers. (Photo: Pei-Yin Hsieh)

The scammers therefore needed bank staff on the inside to help fraud ring proxies get through the vetting process to have their daily transfer limits increased from NT$30,000 to NT$30 million (US$1 million). 

The worst among developed countries

According to a recent survey in Taiwan, eight of every 10 people in Taiwan occasionally or regularly get phone calls or text messages from scammers.

A GASA survey found that losses from fraud schemes in Taiwan in 2022 exceeded NT$200 billion, about 0.9 percent of GDP. That was the 15th highest in the world, but the highest among developed countries, due in part to the development of a technically proficiency fraud network. 

Fraud in Taiwan has become a form of organized crime built on technology with the help of several types of white-collar workers, including internet marketers who keep up with what’s hot, engineers who can quickly expand websites, telecom salespeople who can quickly obtain phone numbers and get through ID verification, and bank workers.

“Right now, organized crime is engaging in digital transformation, moving from street killings to economic crimes,” said National Policy Agency Director-General Huang Ming-chao (黃明昭), making catching the criminals even more challenging. 

Engineers: “It’s just another job”

At the end of last year, Yifan Liu (劉怡汎), a senior investigator with the Criminal Investigation Bureau’s Criminal Investigation Affairs, arrested a main fraud suspect surnamed Wu and three engineers and brought them to the police station for questioning.

Over the previous three years, the four had worked with more than 20 fraud rings in creating websites and apps used to scam victims, but they only met each other in person for the first time when they were together at the police station.

The clues Liu had to work with in Taiwan came from an Indonesian police report, which said that a fake Malaysian website was being used for phishing. After investigators looked into the website’s SSL certificates and IP, they found it was from Taiwan.

Liu followed the lead and found one of the engineers, surnamed Chen (陳). After seizing Chen’s computer, he found that Chen was building fake websites that posed not only as a Malaysian bank but also as Chinese, Vietnamese and Thai civil courts and public security agencies.

Chen’s involvement in the case originated with Wu, whom Chen met while playing online games. Wu was responsible for taking jobs and understanding the needs of the fraud rings, and assigned Chen and another engineer with the same surname to create web pages and apps.

Every service had a clearly established fee, similar to a standard web design business that builds websites for clients. But the earnings were better. The group charged a monthly “subscription” fee of NT$30,000 to NT$60,000 per website, and an additional fee was charged for related apps.

Wu would split the take 70:30 with the engineers, a still lucrative arrangement for Wu’s assistants. Chen, who had yet to hit the job market, made more than NT$1 million (US$32,000) in six months and was driving a sports car.

Liu was stunned when he questioned Chen, who did nothing to hide his digital footprint because he felt there was nothing to hide.

“There’s no difference between building a scam website and a regular website. For both, I do what you want me to do. It’s easy money. Why wouldn’t I take it?” Liu quoting Chen as telling him. 

“Most people don’t have direct contact with the victims, so they don’t think they are committing a crime,” observed Edward Lai, a professor in Central Police University’s Department of Crime Prevention and Correction, pointing to the biggest worry prosecutors have when taking on organized crime fraud.

No sense of guilt

Lai was commissioned by the Ministry of Justice’s Academy for the Judiciary to do a study that involved interviewing convicted fraudsters in prison at the end of last year.

He found fraud rings to have a clear division of labor at multiple levels, reducing the sense of guilt of the perpetrators at each level because they do not have direct contact with the victims or directly receive stolen money.

“During the interviews, everybody felt they were innocent,” Lai said. 

The machine room people, he said, felt they were only responsible for making calls, and did not see the money going directly into their pockets. Drivers said they were only responsible for making withdrawals, and simply received a commission for their work, not the victims’ money.

One of the convicts even mocked a Lai research assistant, saying that master’s degree students were barely making NT$50,000 a month, while he “will have a million-dollar luxury car waiting after being locked up for two years.”

There are many indications that the collusion of the bank worker Chu with a fraud ring was not an isolated case, as crime rings continue to systematically recruit bank workers. A police officer familiar with how fraud cases have evolved saw fraud groups blatantly pursuing bank workers on Telegram at the beginning of this year, offering “better terms for personnel on the inside.”

Over the past 10 years, Chuo Chun-chung (卓俊忠), a prosecutor in the Taiwan High Prosecutors Office and the chief secretary of the Criminal Investigation Bureau’s anti-fraud center, has been on the front lines of fighting fraud.

He has seen the increasing proficiency of fraud syndicates over that time. When investigators have searched machine rooms, they have found court rulings, orders not to prosecute, and bank teller manuals, pointing to their growing sophistication.

“The fraud rings may have already hired lawyers to give them help,” Chuo sighed.

Payouts for proxy accounts soar

Just as bank workers were hired to help manipulate the settings of proxy accounts, Yeh of the Taoyuan prosecutors office suspects the fraud rings have indeed hired lawyers to analyze prosecutor decisions not to indict suspects and help devise procedures that make it harder for prosecutors to make their cases.

He has experienced cases in which proxies who had been detained voluntarily went to a police station as soon as they were let out and crafted a story aimed at getting themselves off the hook. Producing screenshots of text dialogues, they would tell police they were victims of employment scams and that their bank accounts fell into the hands of the fraudsters.

Now, however, “the proxies are involved in the crimes to a much greater extent, more seriously than in the past,” Yeh observed. Over the past 10 years, he said, the payout for a proxy account has catapulted from NT$2,000 per account to NT$200,000 today.

That’s because the proxy accounts involve more than simply handing over a passbook. The accounts handle bigger sums, and the proxies must go through the vetting process to get approval for foreign currency accounts, designated transfers, and higher transfer amounts. At the same time, many proxies are willing to be locked up for 10 days to two weeks to work with the fraud rings.

“Proxies are no longer simply helping people commit crimes. They’re actual accomplices,” Yeh said. That explains why the number of watch-listed accounts in Taiwan have risen six-fold over the past 10 years, surpassing 110,000 accounts at present.

The sheer number of fraud crimes has also resulted from the convergence of several factors. As organized crime has grown more sophisticated, there have been fewer innocent people and more accomplices. The more refined the division of labor, the more white-collar workers have been willing to compromise on ethics, especially as their actions draw milder condemnation.

The result is a social system that has become paralyzed, faced with a crisis in basic values.

“There are too many fraud cases. Everybody is prosecuting them without any light at the end of the tunnel,” a grassroots police officer said with indignation. “We want to devote police resources to truly major cases rather than spending all day chasing garbage fraud cases that have left us paralyzed in place.”

19th century laws for 21st century criminals

More than one prosecutor pointed out there were now more people in detention centers for suspected fraud crimes than for drug cases, and they are all young people.

“We are using 19th century laws to catch 21st century criminals,” said Taiwan Network Information Center Chairman and CEO Kenny Huang (黃勝雄) in explaining the root of the problem.

Taiwan lags far behind when it comes to technology and the rule of law. But combating telecom, internet and investment scams, which involves personal information, telecom, social media platform and financial management, also requires technology-driven tools to prosecute cases.

At the same time, although Taiwan’s Personal Data Protection Act was overhauled in 2016, it was not until the end of May 2023 that the Personal Information Protection Commission was established as the competent authority on this issue.

The rampant investment scams found on Facebook and Instagram are in part a product of technology outpacing legal constraints.

An analysis conducted by CommonWealth and the Institute for Information Industry’s Software Technology Institute found that fraud rings are now making their pitches through ads appealing for “donations to charity to get free books.” The government does not have any legal basis for demanding that social media platforms crack down on these ads.

In fact, fraudsters can even create fraud ads with very similar content by spending a mere US$1 to change the URL linked to the ad, enabling them to proliferate, and Facebook will allow them to continue to run.

Social values in danger

“A small minority of bank workers have gone bad. Our entire industry is trying to help atone for their crimes,” said a vice president of a major financial holding company with a sigh.

Since the discovery of bank workers colluding with fraud syndicates at the beginning of the year, all of Taiwan’s banks have prepared for the worst. They have reviewed the processes related to “designated accounts” and increases in caps on transfer amounts to determine if those processes have become too concentrated in the hands of a few specific bank workers.

Rock Tsai, Taiwan Mobile Vice President and Chief Information Officer. (Photo: Chien-Ying Chiu)

“This is a war,” declared all of the people interviewed for this story over a period of two months.

What they called a war, however, is not simply a fight attacking and defending against criminal activity, but a vital project to rebuild a sense of ethics and interpersonal trust in Taiwan’s society 

Taiwan Mobile Co. Chief Information Officer Rock Tsai (蔡祈岩) pointed to the potential longer-term danger, saying: “When trust in society collapses, everybody will think society is rotten, leading to a lower sense of ethics and even skepticism over democracy.” 

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Translated by Luke Sabatier
Uploaded by Ian Huang