Recent arrests and discoveries of asset misappropriation and financial statement fraud suggest a concerning trend of increasing internal fraud in the Asia–Pacific region. Internal fraud threatens organizations across industries and often goes undetected for years, typically coming to light during economic downturns, rapid growth, operational changes, or by sheer coincidence. The discovery of fraud leads to more than financial losses; it forces senior executives and investors to allocate resources to address the issue and causes significant business disruption. A&M’s Disputes and Investigation practice explores common themes and patterns in these recent internal fraud cases and outlines lessons learned to help mitigate risks.

Introduction

In March 2025, Hong Kong’s Independent Commission Against Corruption (ICAC) arrested a group of senior bankers involved in a multimillion-dollar loan fraud scheme. Just weeks earlier, a Singapore-based family office was reported to have been misappropriated by its former employees for millions of dollars. Meanwhile, in late 2024, one of Indonesia’s most prominent start-ups was alleged to have inflated its revenue and profit for years. These cases highlight a troubling trend: While comprehensive data remains limited, anecdotal evidence and recent high-profile scandals suggest that internal fraud is on the rise across the Asia–Pacific region.

Internal fraud — encompassing asset misappropriation, financial statement fraud and other deceptive practices — poses a persistent threat to organisations across many industries. Often, such schemes remain undetected for years, only surfacing as a result of specific triggers, including:

• Economic downturns, which strain cash flows previously used to conceal the misappropriated funds or the inflated revenue
• Exponential fraud growth, where the scheme grows too large to manage and becomes unsustainable, leading to errors or inconsistences
• Operational changes, such as system upgrades or process overhauls, that expose irregularities
• Whistleblower reports, where employees or external parties uncover misconduct
• Sheer coincidence, such as an unrelated review uncovering anomalies

When fraud is discovered, the repercussions extend beyond financial losses. Senior executives and investors, already grappling with operational challenges, market volatility and geopolitical risks, must divert critical resources to investigate, resolve and remediate the issues. To say the least, it creates significant disruption to the business.

This article explores the common themes and patterns in recent internal fraud cases across Asia–Pacific and outlines key lessons learned to help mitigate such risks.

Common Themes in Recent Internal Fraud Cases

While fraud issues can occur in any organisation, drawing from recent experiences in Hong Kong SAR, the Chinese mainland, Singapore and other Southeast Asian markets, we observe that internal fraud incidents frequently affect the following types of companies:

1. Multinational Corporations with lean regional operations
   • Small sales offices or subsidiaries with minimal oversight from headquarters
   • Decentralised decision-making and lack of real-time financial monitoring
2. Private Equity and Venture Capital portfolio companies
   • Growth-focused firms prioritising rapid expansion over internal controls
   • Inadequate due diligence on financial reporting and governance during acquisitions
3. Single Family Offices
   • Informal operational structures and reliance on a small, trusted team
   • Limited segregation of duties, increasing vulnerability to collusion

A common theme among these organisations is underinvestment in support functions, leading to internal control weaknesses, such as:

• Absence of formalised policies and procedures, e.g., no written policies on key processes and the approval framework
• Understaffed finance teams, resulting in inadequate segregation of duties
• Insufficient checks and balances, with minimal oversight from senior management
• Ineffective internal audit function, often managed remotely or outsourced, reducing detection capabilities

These gaps create vulnerabilities that fraudsters exploit, emphasising the need for stronger governance frameworks.

Preventive Measures: Strengthening Fraud Defences

While there is no universal solution, organisations can significantly reduce fraud risks by implementing controls tailored to their operational scale, risk exposure and strategic priorities. Organisations affected by fraud often implement the following remedial actions, which, in hindsight, would have been far more effective as proactive safeguards:

1. Control Framework Review and Adaptation
   • Regularly reassess and update internal controls, particularly during organizational changes (e.g., expansion, restructuring or leadership transitions).
   • Implement system controls and reduce manual review and approval.
2. Strategic Resource Allocation
   • Strengthen finance and compliance functions to ensure proper oversight and segregation of duties.
   • Rotate high-risks roles (e.g., accounts payable and procurement) to reduce over-reliance on key individuals and prevent long-term collusion.
3. Robust Monitoring and Oversight
   • Conduct periodic internal audits with regional or on-the-ground presence to ensure effectiveness.
   • Leverage data analytics to detect irregularities (e.g., duplicate payments and fictitious vendors).
4. Culture of Awareness and Compliance
   • Mandate regular training on anti-fraud policies, whistleblower protections and ethical standards.
   • Foster open communication channels to encourage early reporting of irregularities.

Strategic Considerations for Leadership

When implementing these measures, senior executives and investors are recommended to consider:

• Cost vs. benefit: The cost of fraud prevention is often far lower than the financial and reputational damage of a major scandal.
• Scalability: Smaller firms can use technology-driven solutions, while larger organizations may need centralized compliance teams.

Proactive adoption of these measures not only deters fraud but also reinforces organizational resilience, allowing leadership to focus on growth rather than crisis management.

Conclusion: A Proactive Approach Pays Off

Fraud prevention is not just about compliance. It is a strategic imperative that safeguards shareholder value and operational stability. By embedding strong controls, fostering transparency and investing in oversight, organizations can deter fraud before it happens, freeing leadership to focus on sustainable growth rather than damage control.

Is your organization adequately protected? A proactive review today could prevent a costly scandal tomorrow.