Why do so many Hongkongers fall victim to money scams? Head of investor education body has answers

Hongkongers are knowledgeable about investments but still expose themselves to scams because they tend to forget useful advice, according to the head of a body dedicated to making residents smarter with their money.

Victor Dawes, chairman of the Investor Financial Education Council, said interest in investment was prevalent in the city, but an ever-evolving list of reminders was nonetheless indispensable in keeping residents informed and their money safe.

“I think people are more knowledgeable than in the past, but unfortunately, when you talk about potential pitfalls and scams, they are also becoming more and more clever,” said Dawes, a senior counsel and the chairman of the Hong Kong Bar Association.

The number of investment scam cases has continued to rise in recent years, despite the council and various authorities such as police repeatedly warning the public of traps and issuing alerts through fraud detection systems.

The force last year handled 5,105 reports of online investment fraud, up by 170 per cent from the 1,884 cases logged in 2022. Losses last year reached HK$3.2 billion (US$409 million), a 250 per cent increase over the amount recorded in 2022.

The collapse of cryptocurrency exchange JPEX last September was the city’s largest fraud case to date, with 2,569 victims losing an estimated HK$1.57 billion as of the end of October last year.

According to Dawes, such cases did not come as a surprise, but rather underscored the importance of constant reminders.

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Victor Dawes, chairman of the Investor Financial Education Council, has stressed the importance of re-emphasising key messages to combat scams. Photo: Yik Yeung-man

“I think it can be said that we all have slightly short memories … but for example, you look at the recent scams, a lot of them were advertised on the basis of extremely high and unrealistic returns and people fall for it,” the chairman said.

“Throughout history, this has happened a lot of times, and so that is why we are really trying to re-emphasise the key messages over the years.”

Dawes said investors should fully understand the properties and risks of a financial product before making an investment, adding they should seek out reliable sources of information.

“You shouldn’t just blindly follow your friends or people who make money, or just follow catchy headlines or advertisements on the internet,” he warned.

While the council has rolled out a litany of campaigns involving cartoon videos to online seminars over the years, it has decided to ditch the computer screen as the platform for making appeals in its latest endeavour.

The public body opened a learning centre at The Mills in Tsuen Wan last month, where the public can play games in an immersive environment to understand key principles of investment.

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In one of the games, players must use a shovel to irrigate and fertilise a patch of farmland, and as they race to reap as much produce as possible, they must make investment decisions about their operation.

The graphics and inventive format of the games are aimed at bolstering the council’s message: think twice and get to know the investment product and one’s risk appetite before making a decision.

According to Dawes, these principles are not only useful in avoiding scams. Sometimes, losses occur when investors have yet to grasp the nature of a complex investment product or when they act beyond their risk tolerance.

“Whenever there are high profile scams or fraud, there’s always the issue of [whether] we have done enough investor education,” Dawes said.

“My attitude is, no matter how hard we try, you can’t eliminate frauds. It’s happening throughout history and we’ve just got to constantly remind the public to be vigilant [ …] we just got to do our very best.”

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