WEBVTT - A New Breed of Scammer Is Targeting Asia's Ultra-Rich

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>There's been an explosion in the number of family offices

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<v Speaker 2>opening up in Asian financial hubs like Singapore and Hong Kong.

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<v Speaker 2>These are companies set up to help ultra rich families

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<v Speaker 2>manage their wealth.

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<v Speaker 1>You have everyone from James Dyson, the vacuum billionaire and tycoon,

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<v Speaker 1>to even Ray Dahlio, the hedge fund billionaire whose ship

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<v Speaker 1>was docked here in Singapore not too long ago.

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<v Speaker 2>David Ramley is Bloomberg's investing reporter based in Singapore, and

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<v Speaker 2>he says, along with all this growth, something strange is

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<v Speaker 2>happening in the family office world. He told us about

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<v Speaker 2>an encounter that happened a couple of years ago at

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<v Speaker 2>a conference in Singapore. It involved Eduardo Kolovekio, who is

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<v Speaker 2>managing director of a family office called Oppenheimer Generations Asia. Now,

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<v Speaker 2>Kolovekio was getting ready to go on stage with panelists

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<v Speaker 2>to talk about their industry when he realized something was

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<v Speaker 2>off about another panelist.

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<v Speaker 1>He was just having small talk, as you do with

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<v Speaker 1>other panelists. One of the panelists was from a firm

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<v Speaker 1>whose name he recognized because he'd done business with them before.

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<v Speaker 1>So he asked them some very innocuous questions about the

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<v Speaker 1>family principles, how they were doing, how are things, and

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<v Speaker 1>the guy's face just drew a complete blank. He couldn't

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<v Speaker 1>answer very simple questions about the principles about the family.

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<v Speaker 2>So Kolovikio did some quick digging around and it turned

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<v Speaker 2>out that this person who was supposed to be representing

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<v Speaker 2>this family office had never even worked directly with the

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<v Speaker 2>family office that he claimed to be a part of.

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<v Speaker 1>In other words, the person had exaggerated and managed to

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<v Speaker 1>get so far with that exaggeration that they were about

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<v Speaker 1>to go on stage at a conference in Singapore and

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<v Speaker 1>speak on behalf of the Family Office.

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<v Speaker 2>And David said, as the legitimate people who work in

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<v Speaker 2>this industry say, they are seeing this kind of thing

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<v Speaker 2>happen a lot lately.

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<v Speaker 1>They're encountering more and more of these sort of fake

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<v Speaker 1>or exaggerated family offices. They go out into the world

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<v Speaker 1>and attend conferences and events, and in some cases they're

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<v Speaker 1>even meeting people at government hosted events. That turned out

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<v Speaker 1>to be a little bit not quite right.

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<v Speaker 2>And while it's hard to say how many impostors are

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<v Speaker 2>out there, given the secretive nature of this industry. There

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<v Speaker 2>is a lot of money at stake. Family offices manage

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<v Speaker 2>trillions of dollars globally and just recently in Singapore, ten

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<v Speaker 2>people were convicted in relation to a two billion dollar

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<v Speaker 2>money laundring case and one structure some of them used

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<v Speaker 2>to hide the money family offices. Welcome to the Big

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<v Speaker 2>Take Asia from Bloomberg News. I'm one ha. Every week

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<v Speaker 2>we take you inside some of the world's biggest and

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<v Speaker 2>most powerful economies and the markets, tycoons and businesses that

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<v Speaker 2>drive this ever shifting region. Today on the show, a

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<v Speaker 2>new breed of impostors in Asia's family office business, and

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<v Speaker 2>how people in the wealth industry are getting creative to

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<v Speaker 2>weed out the fakes. When most people look for help

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<v Speaker 2>to manage their money, they usually go to banks, perhaps

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<v Speaker 2>hire brokers, or consult with financial strategists. But for the

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<v Speaker 2>ultra wealthy, there are family offices.

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<v Speaker 1>So a family office essentially is any kind of organization

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<v Speaker 1>set up by a family or a person to look

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<v Speaker 1>after their wealth or even their just life affairs. Some

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<v Speaker 1>people use the family offices to run assets like private

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<v Speaker 1>jets or properties around the world. I know one family

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<v Speaker 1>office that was responsible for everything from the philanthropy to

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<v Speaker 1>the food, the restaurants that people would go to and

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<v Speaker 1>get booked into.

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<v Speaker 2>How much money do you actually need to set up

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<v Speaker 2>a family office?

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<v Speaker 1>So this is a problem that we faced. The definition

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<v Speaker 1>of a family office doesn't necessarily encompass a set amount

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<v Speaker 1>of money. But when I first started looking at it

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<v Speaker 1>here in Singapore, what I was told by various parties

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<v Speaker 1>is the rule of thumb, and that rule of thumb

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<v Speaker 1>is you really want to have liquid assets of at

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<v Speaker 1>least one hundred to one hundred and fifty million US

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<v Speaker 1>dollars because it costs one to one point five million

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<v Speaker 1>US dollars each year to run a family office, and

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<v Speaker 1>therefore anything smaller than that is cheaper to use external

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<v Speaker 1>service providers, lawyers, bankers, et cetera to do all the

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<v Speaker 1>things that you need them to do.

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<v Speaker 2>And this type of office is booming in Asia, David

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<v Speaker 2>tells us. Part of the reason that's happening is that

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<v Speaker 2>governments in this region are ruling out the red carpet

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<v Speaker 2>for family offices, dishing out tax benefits to attract them.

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<v Speaker 1>What you're seeing is it being used as almost as

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<v Speaker 1>a buzzword for governments from Hong Kong to Singapore and

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<v Speaker 1>even in the Middle East in the UAE to draw

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<v Speaker 1>super wealthy families and their businesses. Because as hedge funds

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<v Speaker 1>and other investors start looking for family office money, governments

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<v Speaker 1>also want family officers to come so that other investors

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<v Speaker 1>in other parts of the finance sector also want a

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<v Speaker 1>base there and turn that place into a hub. And ultimately,

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<v Speaker 1>from Dubai to Abu Dhabi to Singapore and Hong Kong,

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<v Speaker 1>everyone wants to be a massive finance hub for almost

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<v Speaker 1>every category.

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<v Speaker 2>And so far this courting seems to be working.

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<v Speaker 1>Family officers have traditionally been this very sleepy, boring part

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<v Speaker 1>of the finance sector. It's not cool like hedge funds, right,

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<v Speaker 1>you don't get TV shows on family officers. But recently,

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<v Speaker 1>thanks to the rapid growth in Asia and thanks to

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<v Speaker 1>the popularization of the term, it's suddenly become one of

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<v Speaker 1>the hottest spaces to be in globally, but especially in

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<v Speaker 1>this part of the world. If you look at Singapore alone,

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<v Speaker 1>for example, the number of family officers that have taxis

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<v Speaker 1>emptions because their family offices has grown from just two

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<v Speaker 1>hundred in twenty nineteen to oney four hundred as of

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<v Speaker 1>twenty twenty. Three, and we're only talking about the number

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<v Speaker 1>of family offices with tax exemptions registered at the monetary

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<v Speaker 1>authority of Sandpoor.

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<v Speaker 2>And so it's not hard to imagine why some people

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<v Speaker 2>would be looking to lie or fake their way into

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<v Speaker 2>a growing industry like that.

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<v Speaker 1>When you have something that is suddenly so cool, you

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<v Speaker 1>see it as this jewel on the hill, and you

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<v Speaker 1>really want to run towards it. You want to be

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<v Speaker 1>part of it. You want to say, yes, I also

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<v Speaker 1>work at a family office, or I have a family office.

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<v Speaker 1>You know, one person compared it to joining a prestigious

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<v Speaker 1>golf club. Now you might not even really enjoy golf,

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<v Speaker 1>but you join up because you want to have some

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<v Speaker 1>of that magic rub off onto you.

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<v Speaker 2>And David says, one place where you can clearly see

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<v Speaker 2>the advantages of being part of this exclusive circle is

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<v Speaker 2>on the conference circuit.

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<v Speaker 1>If you go to any of the conference is nowadays

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<v Speaker 1>that are held in Singapore, Hong Kong and other places.

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<v Speaker 1>There's always this differentiation in class, right, So if you

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<v Speaker 1>say you're from a family office, or you say you're

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<v Speaker 1>from an institutional investor, you get in no cost. You're

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<v Speaker 1>eating the food for free, you're drinking the free wine

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<v Speaker 1>and the sponsored dinners, and importantly you get there and

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<v Speaker 1>you even get access to investor only sessions, panels or events,

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<v Speaker 1>so you're in the in crowd automatically as screened by

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<v Speaker 1>the conference organizers. That's a very alluring thing for some people.

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<v Speaker 2>The conferences are one way for those who want access

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<v Speaker 2>to the family office world to get their foot in

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<v Speaker 2>the door. And that's because this world is so hard

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<v Speaker 2>to crack. It's long been known for its secrecy.

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<v Speaker 1>We're talking about in industry that while it has certain

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<v Speaker 1>circles and certain groups of people, you very rarely start

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<v Speaker 1>getting put up on your LinkedIn as a workplace. You know.

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<v Speaker 1>One example I have in this store is that Marie Young,

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<v Speaker 1>who's the very highly regarded chief investment officer for the

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<v Speaker 1>family Office of Sergey Brinn, who obviously co founded at Google,

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<v Speaker 1>her LinkedIn has simply said that she's from a Californian

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<v Speaker 1>family office. There's no name, there's no details. The whole

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<v Speaker 1>point of family office is genuinely you will almost never

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<v Speaker 1>know who has a family office if they're running it

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<v Speaker 1>the right way.

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<v Speaker 2>But all this secrecy also means it can be really

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<v Speaker 2>difficult to figure out who's legit.

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<v Speaker 1>And who's not because there is no definition for family

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<v Speaker 1>office technically speaking, are these people even lying if they're exaggerating,

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<v Speaker 1>that's a sort of definitionue right, But it makes the

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<v Speaker 1>job of trying to ferret out exaggerators and fake is

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<v Speaker 1>quite difficult when combined with the fact that even the

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<v Speaker 1>real players in family office are often so vague and

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<v Speaker 1>vacuous in their LinkedIn profiles and their public personas.

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<v Speaker 2>After the break, well here the lengths that the wealth

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<v Speaker 2>industry is going to to ferret out the fakes.

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<v Speaker 3>And when he started to share some stipulets about the

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<v Speaker 3>mismatch of information, each of us were also having interaction

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<v Speaker 3>with that same individual. And then it started to then, oh, yes,

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<v Speaker 3>now I'd understand why it's only info was somewhat on

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<v Speaker 3>the gray area.

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<v Speaker 2>A growing industry with secrecy at its foundation makes it

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<v Speaker 2>tough to catch impostors and hard to know just how

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<v Speaker 2>many bad actors there might be in the family office space.

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<v Speaker 2>Another reason a lack of regulation.

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<v Speaker 1>If I were to open up a hedge fund or

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<v Speaker 1>a venture capital firm, I would need to get a

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<v Speaker 1>license and be regulated. But because family offices are theoretically

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<v Speaker 1>an extension of ultra high networth. All I need to

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<v Speaker 1>do to become a family office owner here in Singapore

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<v Speaker 1>without technically lying, is to register a corporate entity, label

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<v Speaker 1>it as a family office in the back end, and

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<v Speaker 1>that if I wanted, however, to actually get the full benefits,

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<v Speaker 1>be it an employment pass for my staff or a

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<v Speaker 1>tax exemption for my gains, that's where I start to

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<v Speaker 1>interface with more government agencies and I need to get

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<v Speaker 1>those exemptions approved. It's similar in most jurisdictions, but it

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<v Speaker 1>means that if you go to London, New York, Singapore,

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<v Speaker 1>Hong Kong or Dubai, you can start a family office

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<v Speaker 1>just without those benefits.

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<v Speaker 2>So without clear ways to know who's legitimate and who's not,

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<v Speaker 2>those working in the family office space have resorted to

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<v Speaker 2>figuring it out for themselves. And one place where this

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<v Speaker 2>kind of amateur detective work is happening is on messaging

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<v Speaker 2>groups like we Chat and WhatsApp set up by the

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<v Speaker 2>community hither Eric, can you hear me?

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<v Speaker 3>Yes allowing too?

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<v Speaker 2>Eric sewey Neo is a member of one of these groups.

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<v Speaker 2>He's board director of a family office called Midway Investments,

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<v Speaker 2>and he told us of an experience he had with

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<v Speaker 2>someone who said they represented a family office.

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<v Speaker 3>So however, first got acquainted with this person who was

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<v Speaker 3>through LinkedIn, and subsequently we corresponded. You know, it was

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<v Speaker 3>very cordial, it was it looks so normal, right, They

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<v Speaker 3>talked like a family office. You know, they would have

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<v Speaker 3>similar mention of GP names conferences that we do get

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<v Speaker 3>invited to attend, they would have the same access or

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<v Speaker 3>even know the same organizer.

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<v Speaker 2>Neil says. Several members had interactions with this individual, and

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<v Speaker 2>then a member of the group shared a photo that

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<v Speaker 2>raised a lot of questions.

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<v Speaker 3>So one of the one of the community member shared

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<v Speaker 3>a screenshot of all name cards that he had our

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<v Speaker 3>dad individual representing different companies of family officers. I think

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<v Speaker 3>it's a boat one, two, three, three, four name cards.

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<v Speaker 3>And it was all within less than a year. And

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<v Speaker 3>if you come from a family office or you work

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<v Speaker 3>for a family right, it's quite rare that you change

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<v Speaker 3>to different family offices representing different families within in the

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<v Speaker 3>less than a year.

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<v Speaker 2>And there were other things that didn't add up. Digging

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<v Speaker 2>into their past, members of the group learned the individual

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<v Speaker 2>had lied about their education and that some of the

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<v Speaker 2>firms they claimed to have worked for didn't even.

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<v Speaker 3>Exist, and that's where you know. I started to ask

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<v Speaker 3>which family office do you represent and who is the

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<v Speaker 3>principal and the individual couldn't even give a name.

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<v Speaker 2>Eric, it sounds like you guys all put on your

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<v Speaker 2>detective hats to investigate this person.

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<v Speaker 3>Correct, yeah, or you can call it s a scientists

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<v Speaker 3>of factual investigation.

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<v Speaker 2>Neo says the administrator kicked this individual out of the

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<v Speaker 2>message in group, and he says if he and other

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<v Speaker 2>family office professionals are tricked into sharing information with people

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<v Speaker 2>who misrepresent their role, it could have a cost.

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<v Speaker 3>We don't want to run into a risk of exposing

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<v Speaker 3>unnecessarily critical, sensitive private information to someone that we thought

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<v Speaker 3>was legitimate right to a private banker. We also don't

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<v Speaker 3>share a lot of things, but from a principle to

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<v Speaker 3>principal perspective, we do.

0:13:20.600 --> 0:13:23.800
<v Speaker 2>Neo says. The community worries that the information they share

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<v Speaker 2>in private could be used in unintended ways, and a

0:13:27.920 --> 0:13:31.559
<v Speaker 2>recent high profile case in Singapore has presented a real

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<v Speaker 2>threat to the wealth sector's reputation and put people like

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<v Speaker 2>NEO more on guard. Unfolding scandal that have seen at

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<v Speaker 2>least ten people arrested in connection with this alleged money

0:13:45.520 --> 0:13:49.520
<v Speaker 2>laundering case. The ten people who were convicted with crimes

0:13:49.559 --> 0:13:53.560
<v Speaker 2>in that massive money laundering scandal in Singapore had links

0:13:53.559 --> 0:13:57.160
<v Speaker 2>to at least five family offices among them. That's according

0:13:57.200 --> 0:14:00.199
<v Speaker 2>to documents reviewed by Bloomberg News and people familiar year

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<v Speaker 2>with the.

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<v Speaker 3>Matter, with many individuals that was caught with different passports

0:14:04.280 --> 0:14:07.839
<v Speaker 3>and everything. So it's self titlished the wealth industry to

0:14:07.920 --> 0:14:11.800
<v Speaker 3>some extent. And so I think the interested parties that's

0:14:11.880 --> 0:14:14.480
<v Speaker 3>really going full cs on these basically with the best

0:14:14.520 --> 0:14:17.600
<v Speaker 3>interest to say, look, we want to maintain the integrity

0:14:17.600 --> 0:14:19.600
<v Speaker 3>of the industry. We want to maintain the integrity of

0:14:19.640 --> 0:14:23.640
<v Speaker 3>the family office people, whether you're professionals or principles yourself,

0:14:24.480 --> 0:14:25.680
<v Speaker 3>let's help protect one another.

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<v Speaker 2>Of course, one path to possibly preventing fraud in this

0:14:30.120 --> 0:14:34.360
<v Speaker 2>industry is regulation. I asked a reporter David if more

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<v Speaker 2>regulation could help weed out the bad actors.

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<v Speaker 1>So, needless to say, the people in this industry, both

0:14:41.440 --> 0:14:45.080
<v Speaker 1>real and fake, are very wary of regulation. It's something

0:14:45.120 --> 0:14:48.880
<v Speaker 1>that they don't think is necessary or welcomed. One point

0:14:48.960 --> 0:14:51.520
<v Speaker 1>made by a gentleman from UBS is that the bigger

0:14:51.640 --> 0:14:54.160
<v Speaker 1>the family office and the more money they have, the

0:14:54.280 --> 0:14:56.800
<v Speaker 1>less these people would want to be on a register

0:14:57.000 --> 0:15:00.080
<v Speaker 1>because they are so private in both the case a

0:15:00.280 --> 0:15:03.440
<v Speaker 1>real family officers and the case of fake or exaggerated

0:15:03.600 --> 0:15:08.800
<v Speaker 1>family officers. We are, however, seeing some jurisdictions like Singapore,

0:15:09.240 --> 0:15:13.680
<v Speaker 1>starting to see certain places get stricter trying to differentiate

0:15:13.720 --> 0:15:17.440
<v Speaker 1>between the more real family officers and the faker family officers.

0:15:17.920 --> 0:15:22.760
<v Speaker 1>So everything from the annual report that family officers need

0:15:22.840 --> 0:15:25.920
<v Speaker 1>to supply to the Monetary Authority of Singapore in order

0:15:25.960 --> 0:15:30.080
<v Speaker 1>to continue qualifying from tax exemptions, that's getting more stringent

0:15:30.320 --> 0:15:33.040
<v Speaker 1>and more difficult. In fact, the most recent version I've

0:15:33.080 --> 0:15:37.040
<v Speaker 1>seen specifically asks family officers if they have either been

0:15:37.120 --> 0:15:41.120
<v Speaker 1>charged with or found guilty of money laundering or terrorism financing,

0:15:41.520 --> 0:15:43.720
<v Speaker 1>not just in Singapore but any jurisdiction.

0:15:44.600 --> 0:15:48.320
<v Speaker 2>A spokesperson from the Monetary Authority of Singapore told Bloomberg

0:15:48.360 --> 0:15:51.640
<v Speaker 2>that potential money laundering is the key risk linked to

0:15:51.680 --> 0:15:55.760
<v Speaker 2>wealth inflows from family offices, and to address that, Singapore

0:15:55.800 --> 0:15:59.240
<v Speaker 2>and authorities are ramping up scrutiny of family offices and

0:15:59.360 --> 0:16:03.800
<v Speaker 2>demanding more disclosures from them. But David says the secrecy

0:16:03.960 --> 0:16:07.680
<v Speaker 2>that makes it easier for bad actors to operate isn't

0:16:07.720 --> 0:16:09.320
<v Speaker 2>going away anytime. Soon.

0:16:09.760 --> 0:16:13.880
<v Speaker 1>I think any industry where you have limited regulation and

0:16:13.960 --> 0:16:18.240
<v Speaker 1>you have maximum interest combined with huge fun flows is

0:16:18.320 --> 0:16:21.480
<v Speaker 1>always going to be ripe for good and bad actors,

0:16:21.800 --> 0:16:25.160
<v Speaker 1>and this is no different from that. To be Rich's glorious.

0:16:25.200 --> 0:16:27.560
<v Speaker 1>Part of that glory comes with being quiet when you

0:16:27.560 --> 0:16:29.200
<v Speaker 1>want to be quiet, and loud when you want to

0:16:29.240 --> 0:16:31.880
<v Speaker 1>be loud.

0:16:36.840 --> 0:16:40.000
<v Speaker 2>This is The Big Take Asia from Bloomberg News. I'm wanh.

0:16:41.040 --> 0:16:44.640
<v Speaker 2>This episode was produced by Young Young Jessica Beck, Thomas

0:16:44.680 --> 0:16:47.680
<v Speaker 2>Lou and Naomi Um. It was mixed by Blake Maples

0:16:47.680 --> 0:16:51.120
<v Speaker 2>and fact checked by Adriana Tapia. It was edited by

0:16:51.160 --> 0:16:55.520
<v Speaker 2>Caitlin Kenny, Claire Ballentine, and Brian Chapada, additional reporting from

0:16:55.600 --> 0:16:59.400
<v Speaker 2>Lulu E. Lun Chen and Claire Balentine. Our senior producers

0:16:59.480 --> 0:17:02.880
<v Speaker 2>are named Shaven and Kim Gettleson. Our senior editor is

0:17:02.920 --> 0:17:07.040
<v Speaker 2>Elizabeth Ponso, Nicole Beemster Bower is our executive producer, and

0:17:07.119 --> 0:17:10.800
<v Speaker 2>Sage Bauman is Bloomberg's head of Podcasts. Please follow and

0:17:10.880 --> 0:17:13.800
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0:17:14.080 --> 0:17:17.080
<v Speaker 2>It helps new listeners find the show. See you next time,