David Barboza Exposes the Billions Hidden by China's Prime Minister

GUEST BLOGGER

Emily Primeaux
Assistant Editor, Fraud Magazine

David Barboza has been a correspondent for The New York Times based in Shanghai, China, since November 2004 and has served as the paper’s Shanghai bureau chief since 2008. In 2013, Barboza was awarded the Pulitzer Prize for International Reporting “for his striking exposure of corruption at high levels of the Chinese government, including billions in secret wealth owned by relatives of the prime minister, well documented work published in the face of heavy pressure from the Chinese officials.”
 
At the 2014 ACFE Asia-Pacific Conference in Hong Kong, China, Barboza spoke with attendees about his exposure of Wen Jiabao, the prime minister of China.

Barboza started by explaining that early on, during dinners with people in finance and banking, he heard "rumors" that interesting things were happening with the sons and daughters of high-ranking families. He heard that they held secret shares in major companies, even listed companies.
 
With this information, Barboza decided he wanted to look into the most powerful men in China. In 2010, one major rumor was that Jiabao's family held secret shares in the world's largest insurance company and that his wife controlled the diamond industry. It was known that his son had co-founded one of the biggest private equity firms, and it was rumored that state department memos mentioned that children of the elite controlled each of these different businesses.
 
Jiabao's family just so happened to also hold shares in a listed company that had a public prospectus. On the prospectus, listed with major companies like Goldman Sachs and HSBC, were many Chinese companies he'd never heard of. Barboza told attendees, "I asked myself: Who are these companies? Who are the shareholders behind these Chinese-listed companies?"

After extensive research — which included a trip to the cemetery to confirm a relative's name and the names of her kin, all listed on the tombstone — Barboza discovered that hidden behind fake names and layers of partnerships and investment vehicles, many relatives of Jiabao's became extraordinarily wealthy during his leadership. They controlled assets worth at least $2.7 billion. Barboza uncovered a detailed look at how politically connected people profited from an intersection of government and business.

"I wonder to this day why it took so long for me, or someone else, to find out this kind of thing. It's sitting in public records," Barboza told attendees. "And while it did take me over a year to do this project, I'm amazed at how much is out there in the public domain. Just within three months, we knew we had a story, just by seeing relationships."

"So, to me, I think one of the big lessons is, often it's sitting right in front of you," said Barboza. "And you've got to make the connections."

Read David Barboza's full New York Times report here.

Fraud Week 2014: What You May Have Missed

AUTHOR’S POST

Mandy Moody, CFE
ACFE Media Manager

The ACFE would like to say “thank you” to all International Fraud Awareness Week Official Supporters, supporting media, bloggers, tweeters and posters for the amazing participation in Fraud Week last week. We would also like to thank our Featured Supporters this year: Orange, CRI Group, BNP Paribas and Wynyard Group. The success of Fraud Week could not have happened without all of these dedicated people working together around the globe to spread the message that fraud will not be tolerated.

Even with the many articles and resources shared, you may not have seen all that was done to highlight fraud detection and prevention. Here are some Fraud Week highlights you may have missed:

Remember, fraud awareness doesn't begin and end with Fraud Week. It is a year-round effort being supported by fraud examiners all over the world. Thank you all again, and we look forward to next year’s event!

 

Restoring Consumer Confidence: The case for a collaborative coalition in the fight against fraud

GUEST BLOGGER

Jackie Barwell
Head of Product at ReD

High-profile, large-scale data breaches at major retailers, as well as the increasing ingenuity of fraudsters, continue to shake consumer confidence in retailers and financial institutions. A recent study conducted by ACI Worldwide and Aite Group, which surveyed 6,100 consumers across 20 countries, demonstrates the challenge that these organisations have ahead of them in re-building consumer confidence.

The survey found that:

  • 29% of global consumers do not trust merchants to protect stored personal and financial data against hacking attempts and data breaches.
  • 45% of consumers feel that stores do not use security systems that adequately protect their financial data against hackers and data breaches; and 38% believe that online shopping websites do not adequately protect this information.
  • 23% of consumers have changed financial institutions due to dissatisfaction after experiencing fraud.
  • 43% who received replacement cards as a result of a data breach or fraudulent activity use their new cards less than they used the originals.

This lack of consumer confidence threatens an immediate and long-term impact on customer loyalty, revenue and fee income.

To address these concerns and make real progress in combating fraud, financial institutions and retailers must take a more proactive role, not only by investing in fraud prevention and educating consumers about preventative measures, but also by working together as a collaborative coalition in the battle against fraud.

The data elements of a transaction — things like IP address, device ID, telephone number, card number, delivery, shipping and billing addresses — are not all held by any one party in the payments chain. An individual retailer or bank does not have a holistic view of the transaction, making it difficult for them, individually, to determine whether that transaction is genuine or suspicious. By sharing data — between retailers, or between retailers and banks — through initiatives such as the ReD Fraud Xchange and RFX Club, we can have a real impact on the effectiveness of fraud prevention. We can help each other to identify fraud attacks more quickly, highlight fraud trends and take fast, effective preventative measures.

In this way, we can reduce fraud losses and, most importantly, regain the trust, loyalty and confidence of consumers, ensuring that the only loser is the fraudster.

In the spirit of International Fraud Awareness Week we would encourage every retailer and financial institution to look at ways to support collaboration across the payments chain to share intelligence and work together in shutting down fraud.