How fraudsters can exploit complicated schemes

Finance minister LW and his ministry create many convoluted schemes to hand out some sums of money (which TKL describes as bits and pieces) to the beneficiaries. There is the risk that some of these schemes could be exploited by smart scammers.

Here is how it can work.

Each convoluted scheme pays out a small sum of money to the recipients based on multiple conditions - income, housing, etc.
When they compute the scheme, they will say x million people quality and will receive a total of $Y million.

But the people who qualify do not know that they qualify - because the schemes are complicated.

So, when they hand out the money, the person in charges give out the benefit to a smaller number of recipients (i.e. the beneficiaries who were left out do not know that they had qualified in the first place). The money is siphoned somewhere, and nobody is the wiser (except for the scammer).

If the fraud is discovered later, it will probably be covered up, or some excuse would be created to explain why it was unavoidable.

Remember. There are many complicated schemes, with different conditions of eligibility. Many people find it difficult to keep track of these complicated schemes and to know if they qualify or not. They just have to trust that someone in the government will send them the money, if they qualify for it.

In this confusion, it is easy for the fraudster to exploit the system to siphon off some of the large sums of handouts.


There were a few high profile cases in the past where scammers had taken advantage of the government schemes to exploit the loopholes. These include:

a) Claiming large sums on GST refunds
b) Claiming large sums from Skill Credit for training of workers.

These scam show that the crooks are quite smart in exploiting the system.

The best way to avoid this risk is to device simple schemes that everybody understands, e.g. every citizen gets $X as a benefit. Everyone knows if he is a citizen or not, and if he qualifies or not.

Hong Kong adopts the simpler approach (suggested by TKL) to pay out their financial aid. It is not a perfect system, but it is simple and the risk of fraud is reduced considerably (although it is probably not totally eliminated).

Tan Kin Lian
https://tklcloud.com/Feedback/feedback2.aspx?id=5563