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Corruption and bribery have long been central concerns in Hong Kong’s legal and regulatory landscape, undermining market integrity and public trust. “Conspiracy to defraud”, an offence that captures schemes where individuals collude to dishonestly deceive victims for unlawful gain, is a wider concept and is usually carried out by means of bribery, the acceptance of advantages and the receipt of benefits in a corrupt environment.

Today, conspiracy to defraud is among the most commonly prosecuted offences in Hong Kong, which often involves complex networks of actors – professionals, intermediaries and insiders – working together to manipulate systems or conceal misconduct. This article particularly examines conspiracy to defraud through the financial lenses of insurance fraud and breaches of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong (listing rules), illustrating how conspiracies exploit institutional vulnerabilities.

Understanding the offence of conspiracy to defraud in Hong Kong

Conspiracy to defraud in Hong Kong is a common law offence punishable under section 159C(6) of the Crimes Ordinance (cap 200), with a maximum penalty of 14 years of imprisonment.

The authoritative definition was laid down by the Court of Final Appeal (CFA) in Mo Yuk Ping v HKSAR (2007) as “by becoming a party to an agreement with another or others to use dishonest means (1) with the purpose of causing economic loss to, or putting at risk the economic interests of, another; or (2) with the realisation that the use of those means may cause such loss or put such interests at risk”. See also: HKSAR v Cheng Chee-Tock Theodore (2016).

HKSAR v Chen Keen (2019) inter alia discussed the circumstances when an agreement has been reached, namely by showing that the co-conspirators agreed to act in concert to achieve a common object or purpose. So long as a common fraudulent purpose has been agreed on, the absence of (1) direct communication with one another; (2) reaching an agreement at the same moment; or (3) precise steps to be taken is not detrimental to the establishment of an agreement.

The CFA further confirmed that the test for dishonesty is the two-stage Ghosh test, requiring determination of (1) whether, according to the ordinary standards of reasonable and honest people, what was done was dishonest; and (2) whether the defendant themselves must have realised that what they were agreeing to do was dishonest by those standards.

Insurance fraud and conspiracy to defraud in Hong Kong

One of the most common ways to commit the offence of conspiracy to defraud is by colluding in making bogus insurance claims and thereby gaining advantages. This is particularly so as Hong Kong is a leading insurance hub in Asia, with 164 insurance companies in Hong Kong generating gross premiums of more than HKD560 billion (USD71.9 billion) in 2019. That said, it exposes vulnerabilities, as the vast network of agents and commission-based structures creates opportunities for abuse and fraud.

In several recent cases, authorities illustrate the scale of these problems:

(1) In HKSAR v Wong Fung Yi and Another (2025), a district manager and three of her downline agents conspired to submit 32 false policy applications, deceiving the insurer into paying more than HKD1.4 million in commissions and bonuses.

(2) In HKSAR v Lo Yin Wah and Ors (2025) the branch manager of an insurer recruited dummy agents to falsely claim the handling of 478 policies, resulting in HKD52 million in fraudulent payments.

(3) Similarly, three agents in HKSAR v Li Chung Hing and Another (2024) colluded with a handling agent to exaggerate policyholder salaries and secure a large sum of commissions.

(4) The insurance agent in HKSAR v Wong Ka Keung and Ors (2024) was, among others, convicted since he took out for himself six insurance policies with critical-illness coverage, conspired with others to arrange for a critically ill patient to falsely pose as the defendant, causing the insurer to pay out compensation totalling HKD11.28 million. In this regard, lay citizens may wish to exercise extra caution when approached by insurance personnel offering something for a price.

Recognising these risks, the Independent Commission Against Corruption (ICAC) has collaborated with the insurance industry in issuing the Corruption Prevention Guide for Insurance Companies, which identifies common malpractices such as the use of bogus documents, falsification of claims and diversion of business for bribes, and emphasises the importance of ethical culture, corporate governance and internal controls, offering safeguards across core operations.

After all, fraudulent claims may be facilitated through the bribery of agents, medical professionals or officials. Corruption within institutions can further enable fraud by weakening oversight, allowing networks of insiders to manipulate records, inflate payouts or even suppress investigations.

Listing rules violations and conspiracy to defraud in Hong Kong

Another aspect that would lead to criminal liabilities under the offence of conspiracy to defraud is the non-compliance of listing rules that extend to listed issuers, directors, CFOs, compliance officers, Securities and Futures Commission-licensed placing agents and professional intermediaries. Very often, conspiracies flourish within a corrupt environment where conflicts of interest arise, and compromised officials make fraud easier to execute and conceal.

In a recent unanimous decision in HKSAR v Mak Kwong Yiu & Others (2025), the CFA restored criminal convictions of four persons, including senior executives of a then-listed company Convoy Financial Holdings Limited (CFHL), for conspiracy to defraud arising from the deliberate concealment of a connected transaction through the use of an intermediary “front” company. In fact, the ICAC’s investigation of this case first started after receiving complaints in 2017, which alleged breaches of the Prevention of Bribery Ordinance and the Securities and Futures Ordinance.

What happened was that CFHL engaged in bond placements as part of its strategy to expand its loans business. Under Hong Kong’s Capital Investment Entrant Scheme, CFHL targeted Chinese mainland investors seeking residency in Hong Kong. These investors, referred to as “1019 consultants’ clients”, borrowed funds directly from CFHL to subscribe to the company’s bonds. By structuring the transactions in this way, the company generated profits through the interest rate differential between the loans it extended and the bond subscriptions it received.

The CFA in gist held that: (1) a transaction may qualify as a connected transaction under rule 14A.25 of the listing rules even without a direct contractual link; (2) the principle of “substance over form” applies, meaning that the use of a “front party” lacking genuine commercial purpose – arranged solely to involve a connected person – will still trigger chapter 14A obligations; and (3) deliberate concealment of a director’s conflict of interest and avoidance of independent oversight can be grounds for criminal liability for conspiracy to defraud.

Similar cases arose before the CFA decision involving non-compliance with listing rules, including HKSAR v Yuen Chi-ping & Ors (2024). The case concerned loans issued by Applied Development Holdings Limited (ADH), a listed company, to On Tai International Credit Limited (OTI), in which D2 was a major shareholder. It was alleged that D1, serving as ADH’s CEO and executive director, concealed his marital relationship with D2. It was further claimed that D1 collaborated with D2 and D3 in orchestrating fraudulent conduct.

After trial, they were acquitted since (1) the evidence did not establish that D1 was aware of any nominee arrangement between D2 and D3 concerning D3’s shareholding in OTI; (2) given the circumstances, multiple possible explanations existed for such an arrangement, and there was no certainty that it served a dishonest purpose aimed at evading listing rules; and (3) there was no evidence of an “agreement” among all defendants or of “dishonesty”, both essential elements of conspiracy to defraud.

Another instance is where the prosecution, among others, alleged that the defendants defrauded the SEHK, listed company Benefun International Holdings Limited (Benefun), and Benefun’s existing shareholders and potential investors, by dishonestly: (1) falsely representing that the acquisition of another company, Ample Rich Enterprise Limited (Ample Rich), for the consideration of HKD500 million was a transaction conducted and concluded at arm’s length; (2) concealing the fact that HKD100 million of the HKD500 million was to be paid to the chairman of Benefun and/or his authorised person(s); and (3) falsely representing that the acquisition would not result in a change in the composition of Benefun’s board of directors.

It was further alleged that the defendants: (4) caused the SEHK to approve the publication by Benefun of an announcement and a circular in respect of the acquisition; and (5) caused Benefun to approve, confirm and ratify an agreement in relation to the acquisition. The defendants respectively faced charges of conspiracy to defraud and conspiracy to offer advantages to an agent: Secretary for Justice v Lo King Fat & Ors (2016). This is another case in point demonstrating the interplay of the two charges, and how bribery and corruption are common methods used within conspiracies to defraud.

Conclusion

Conspiracy to defraud has become a cornerstone of Hong Kong’s enforcement framework, reflecting its breadth in tackling complex misconduct across financial markets, whether through fabricated insurance claims, deceptive practices breaching listing rules or schemes fuelled by bribery and corruption. These intertwined offences not only distort fair competition but also erode institutional integrity, underscoring the need for heightened awareness. One must take care to avoid inadvertently falling into any of the above-mentioned traps.

Ultimately, joint efforts, including sustained vigilance, rigorous enforcement and transparent governance, remain essential to preserving investor confidence and safeguarding the credibility of Hong Kong’s reputation as a global financial hub.