Exam Cheating + Pre-Revenue Biotech = Fraud Concerns

By James Tunkey, COO

One of the biggest potential challenges for investors in pre-revenue biotech companies preparing to IPO in Hong Kong may be linked to the region’s problem with exam cheating.

The value of pre-revenue biotech companies is directly linked to the quality of their science, and progress through clinical trials to full regulatory approval for human use.  But determining the quality of a biotech company’s scientific research is extremely difficult, even for specialists.

Fraud is a big problem for the industry globally.  One fundamental building block for a good biotech company is the quality of its research.  But there is a global problem with fake peer review, where lies are told by people trusted to offer an independent assessment of a company’s science.  Biotech values also skyrocket when a drug progresses through government clinical trials.  Unfortunately, these can also be faked, with investors paying the price.

There is no evidence that Asia’s Ivory Tower has better academic integrity, or that science in Asia is immune to fraud and falsification of scientific results.  Instead, Asia appears to be ground zero for massive cheating scandals.  I-OnAsia has specialized in the investigation of exam cheating syndicates since 2001.  Highly sophisticated fraudsters sell exam results for nearly every exam or certificate imaginable, including health related certifications.  Networked student groups reverse engineer entire exams by collecting individual answers, and trade cheating tips on chat rooms and the Dark Web.  And the problem appears pervasive within the culture.  One 2016 report suggested that academic cheating by international students, particularly Chinese students, was fifty times (50X) worse than cheating by U.S. students.

The problem of exam cheating in the region could be particularly pronounced for Asia’s pre-revenue biotechs, given the importance of academic research to determining corporate value.  Old habits are hard to break, and common (un)ethical practices are likely to threaten the industry.  Fraud allegations have touched high profile western biotech companies such as Theranos, Aveo Pharmaceuticals, AnC Bio, Turing Pharmaceuticals, PixarBio, Innate Immunotherapeutics, and Sterling Biotech.  Asian companies are likely to follow.

Screening for fake degrees and false statements of academic achievement is already a common due diligence practice.  For Asia’s pre-revenue biotech companies is more valuable.

Likewise, pre-investment due diligence typically examines relationships between a company and politicians for compliance purposes.  More of the same activities are now essential to uncovering any untoward relationships with regulators overseeing clinical trials.

It is common for the quality of executives’ historic business relationships with third parties to be tested as part of any due diligence process.  The quality and background of any peers that reviewed early scientific research should be reviewed.

Finally, regulators frequently examine corporate culture when considering whether any firm is fit to sell stock to public investors.  Whether or not a company’s employees tolerate cheating is likely to be an important metric for measuring the quality of pre-revenue biotech leadership teams.

Crisis Management Authority James Tunkey Briefs Compliance Professionals

I-OnAsia’s COO James Tunkey has been asked to present to the Society of Corporate Compliance and Ethics on October 25th on the subject of Crisis Management Best Practices.  Tunkey will draw from his 25 years’ experience, including 4500 cases since establishing I-OnAsia’s office in the Americas.  “In order for compliance leaders to respond to real problems, they must have good intelligence,” says Tunkey.  Fake news has increased the value of accurate and reliable information gathered by trusted sources.  A senior executive cannot handle the worst case scenario, such as a social media PR crisis, without good information.  Tunkey will also present on crisis management issues relating to international whistleblower complaints.  Click here for a copy of the brochure.

The CEO’s Ruminations

I powered up my computer the other day and noticed an interesting article regarding the hackers du jour known as “Fancy Bear”.  Allegedly a sophisticated outfit owned and controlled by the GRU, a Russian military intelligence agency, Fancy Bear apparently attempted to create fake internet domains mimicking conservative Yank political institutions.  Microsoft, the media-proclaimed “Internet Cop”, claims to have thwarted these efforts (https://wsmh.com/news/nation-world/microsofts-anti-hacking-efforts-make-it-an-internet-cop).

Fakes?  Mimicking?  Microsoft as altruistic, Internet saviour?  Hmmm…

“Always judge a book by its cover.” – Derek Elmer

That’s right!  In the world of modern cyber-scams, you always need to accept my new twist on the old idiom “Don’t judge a book by its cover”.

Why should you judge a book by its cover?  The simple answer is to protect yourself against conduct similar to those naughty bears and, in a word phishing or the attempt to obtain sensitive information like username, password, bank details, the details of staff in a position to transfer funds.  For example, the Hong Kong Police recorded 653 cases of cybercrimes in 2005, which was the first year it began tracking such offences.  By 2016, the number of cases reached 5,939 in 2016 and resulted in HK$2.3 billion of losses to the victims!

Ouch…some fairly big winners and losers in this scenario.  Hard to blame the real police as they usually only get involved after the horses have bolted from the barn.  Heck, people (I use the term loosely) even publish information on “how to create a Facebook Phishing Page”.  I did not click on the link, which is www.hackingloops.com/how-to-create-a-facebook-phishing-page…perhaps you are braver (I use the term sarcastically) and want to give it a go.

However, in my never-ending search for a culprit and in view of Microsoft’s apparent, recent defeat of the naughty bears, I decided to have a look at these new Guardians of Cyber World – the likes of Yahoo!, Facebook, Google, Microsoft – as well as some governments’ efforts to protect us.

Are they doing enough or for that matter anything to educate their clients?  Does the average Internet user know anything about how to protect himself/herself?  Are there pro-active, “good samaritan” sites out there?

Let’s take a look at a small sampling of “free” websites offering education and reporting.  I avoided the plethora of consultants offering to protect you albeit I have to confess many offer some good solutions.

First, as in any new endeavour, I thought it useful to start with education.  Our Guardians of Cyber World are publishing quite a bit of information to get you up to speed on the “do’s” and “dont’s”.  Below is a sampling.


Yahoo!: https://finance.yahoo.com/news/how-to-avoid-phishing-scams-79488548827.html

Facebook: https://www.facebook.com/help/166863010078512?helpref=faq_content

Facebook: https://www.facebook.com/notes/aqib-mehmood-official/12-steps-to-avoid-phishing-scams-/581509021960999/

Google:  https://support.google.com/mail/answer/8253?hl=en

Google:  https://support.google.com/websearch/answer/106318?hl=en

Microsoft:  https://docs.microsoft.com/en-us/office365/securitycompliance/anti-phishing-protection?redirectSourcePath=%252fen-us%252farticle%252fanti-phishing-protection-in-office-365-75af74b2-c7ea-4556-a912-8c48e07271d3

I truly believe, whether for your personal benefit or to assist your employer, that reviewing some of these websites would be useful.

Second, if the horses have already bolted from the barn or you are feeling some of the “good samaritan” vibe, you have many private avenues offered by the Guardians of Cyber World to make a report.  I do not wish to make light of the importance of such reporting.  You may not have solved a problem for yourself, but reporting a website designed for phishing may save someone else…and I believe good deeds often come around full-circle to everyone’s benefit…call it karma.

Yahoo!:  https://safety.yahoo.com/Security/REPORTING-ISSUES.html

Facebook:  https://www.facebook.com/help/217910864998172

Google:  www.support.google.com/faqs/answer/2952493?hl=en

Google:  www.safebrowsing.google.com/safebrowsing/report_phish/?hl=en

Microsoft:  www.support.microsoft.com/en-us/help/930167/how-to-report-a-phishing-web-site

Microsoft:  https://docs.microsoft.com/en-us/office365/securitycompliance/submit-spam-non-spam-and-phishing-scam-messages-to-microsoft-for-analysis

Last, but certainly not least, governments in every corner of the globe are offering educational opportunities and reporting sites.  Frankly, I was extremely happy to see my tax dollars being spent fairly wisely on an important subject!

Hong Kong:  https://www1.erc.police.gov.hk/cmiserc/EGIS-HK-Web_NEW_UI/ereport_details?report=CBR_CRIME&fontSize=100

Australia:  https://www.acorn.gov.au/learn-about-cybercrime/email-spam-and-phishing

UK:  https://www.actionfraud.police.uk/report_phishing

USA:  www.irs.gov/privacy-disclosure/report-phishing

USA:  www.consumer.ftc.gov/articles/0003-phishing

USA:  www.us-cert.gov/report-phishing

Remember the nursery rhyme “The bear went over the mountain / To see what he could see / The other side of the Mountain / Was all that he could see.”

Well, this time the naughty bear went over the mountain and Microsoft apparently stopped him from seeing anything.  I hope you take the time to learn about this dangerous bear and others so you too can smack their little snouts!

I-OnAsia has an extensive bespoke “Anti Phishing Educational Awareness Programme” for all levels of management and all areas of sensitivity. For a consultation please contact us without delay on – info@ionasia.com.hk

The CEO’s Ruminations

As I put my chubby thumbs and forefingers to keys, I could not avoid ruminating about The Donald’s never-ending tweet-screaming at the discredited Russian “collusion” investigation; London Mayor Sadiq Khan’s feeble attempt to explain news that the city’s death rate from knife and gun crime had overtaken that of New York; Japan suffering dozens of sad and, I would have thought, unnecessary deaths from temperatures exceeding 40C; New Zealand’s interim-PM misusing some apparent downtime to whine about Australia “copying” the Kiwi flag; Zimbabwe celebrating a perplexing non-Mugabe era; European tourists mooning the ancient ruins of Machu Picchu; and, well, you get the picture.

The world truly is a tad barmy…

Chew on that thought for a moment…

I-OnAsia eschews ad hominen attacks whilst opening an office in Canada

Whilst The Donald spewed and the Suave Justin politely deflected, I-OnAsia quietly planted a flag in the luvly town of Kelowna, British Columbia, Canada.

Our new office is managed by the no-nonsense Corrine Reid.

Corrine earned a BA in business administration, which prepared her not to suffer any BS during her career in senior positions of the usually all-male world of large sports associations.

She will be responsible for the growing business ties between Canada and Asia. I believe government and private joint initiatives, such as The Canada-Asia Trade and Investment for Growth Program, will create opportunities for Corrine to market I-OnAsia’s myriad of investigative services.

In addition, Corrine will manage our existing business in the western USA, particularly from the growing markets of Portland and Las Vegas.

What happens in Las Vegas may stay in Las Vegas, but Corrine is just the professional to overcome the opaqueness…unless, of course, the client is seeking an alternative solution!

The CEO’s Ruminations

While celebrating or bemoaning (depending upon your perspective) the 21 years since resumption of sovereignty or handover or takeover of Hong Kong to China (depending upon your politics), I had time to contemplate the soon to be enacted Cross-boundary Movement of Physical Currency and Bearer Negotiable Instruments Ordinance of Hong Kong (the “Ordinance”). No doubt the luvly bubbles of Krug pulsating down my palate inspired me to put chubby fingers to keys in anticipation of what I have dubed “No Cash Day” on 16th July.

Prior to what you no doubt will consider to be a rivetting repartee, how about the World Cup? Japan? Russia? Jolly Ole England? No Germany, Argentina, Portugal or Spain? No Messi or Ronaldo? I almost thought I would wake up, pinch myself and discover China or even Hong Kong in the Quarters with Xi Jiping or Carrie Lam leading the charge. Oh my ears and whiskers…

Back to business. The Financial Action Task Force (the “FATF”), an inter-governmental body with 37 members (35 out of 195 countries), was established in 1989 “…to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.” Despite representing only 18% of the sovereign states on the planet, the FATF states quite unashamedly that it “…has developed a series of Recommendations that are recognised as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction.”

Bottom line: the FATF is an undemocratic, battering ram of global heavyweights – China, Europe, Russia and the USA – seeking to impose “standards” upon the other 82% of financially and militarily less powerful liliputian states.

Alas, Hong Kong is set to succomb to the almighty FATF after successfully withstanding the onslaught of five iterations of the Recommendations since 1990. On or after “No Cash Day”, if you visit Hong Kong with HKD120,000 (or equivalent thereof) or more of currency or bearer negotiable instruments, then you must disclose the same to the relevant Custom’s officer. Singapore, the island state to which Hong Kong is often compared/contrasted, fell prey to the FATF much earlier, and in 2014 decreased the the threshold for reporting to SGD20,000 (USD15,000).

Let’s have a brief, critical look at the most recent, 2012 Recommendations (in particular number 32) and the Ordinance while positing possibilities of legally sidestepping the same.

“In God We Trust…All Others Pay Cash” – Novel by Jean Shepherd

Since the 1800s, “In God We Trust” has been emblazoned upon the currency – coin and paper – of the USA. The Yank novelist had a bit of fun with the phrase while recalling childhood memories. Good read.

Bin that phrase! Many of us may still trust in God, however defined, but cash no longer seems to be acceptable. Many a car park in Hong Kong posts signs clearly stating “no cash”.

Thus, I make a leap to number 32 of the Recommendations with a slightly edited version reproduced as follows:

“Countries should have measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments…should ensure that their competent authorities have the legal authority to stop or restrain currency or bearer negotiable instruments that are suspected to be related to terrorist financing, money laundering or predicate offences, or that are falsely declared or disclosed.…should ensure that effective, proportionate and dissuasive sanctions are available to deal with persons who make false declaration(s) or disclosure(s).”

Yes, even when edited, that is a mouthful. Let’s give it some thought.

First, please do not be fooled by the word “recommendation”. The FATF states quite clearly in its Glossary that “For the purposes of assessing compliance with the FATF Recommendations, the word should has the same meaning as must.” Translation: it is our way or the financial-ruination-highway.

Second and not surprisingly, the Ordinance albeit using fancier language like “conveyance” rather than “transportation” and “import”/”export” rather than “in-bound”/”out-bound”, largely follows Recommendation 32. I gather the drafters felt a need to earn their keep (our tax dollars) by improving on the language. Kudos!!!

Third, while I was perusing the Glossary, I noticed the FATF defines physical cross-border transportation as “any in-bound or out-bound physical transportation of currency or BNIs from one country to another country…including (1) physical transportation by a natural person, or in that person’s accompanying luggage or vehicle; (2) shipment of currency or BNIs through containerised cargo or (3) the mailing of currency or BNIs…”; currency as …banknotes and coins that are in circulation as a medium of exchange”;…and “bearer negotiable instruments”, “…monetary instruments in bearer form such as: traveller’s cheques; negotiable instruments (including cheques, promissory notes and money orders) that are either in bearer form, endorsed without restriction, made out to a fictitious payee, or otherwise in such form that title thereto passes upon delivery; incomplete instruments (including cheques, promissory notes and money orders) signed, but with the payee’s name omitted.”

Hmmm…does that cover diamonds or gold bullion? Nothing specific in the FATF or the Ordinance. The Yanks address the issue in the Customs Declaration Form 6059B if and only if you happen to turn over the form and read explanatory note 13, which uses the language “…$10,000 or more in U.S. dollars or foreign equivalent in any form…”

Hey, what about cryptocurrencies? If I flew into Hong Kong with the username, password and whatever other form of access code may be required (Ethereum calls it a “wallet”), did not disclose my possession of the same and then used that information to exchange my cryptocurrency into Hong Kong in excess of the threshold amount of HKD120,000, would I be facing the Ordinance’s maximum fine of HKD500,000 and two years in prison? What if I flew into the UK (similar FATF laws) and used a Bitcoin ATM?

Finally, is this sort of FATF-compelled legislation really achieving the stated objectives? In 2017, the Hong Kong Tourist Association reported total visitor arrivals of 58,472,157 of which 44,438,839 were from Mainland China. Let’s say 0.1% of our friends from the Motherland each legally imported HKD110,000 into Hong Kong. HKD5 billion or approximately USD630 million!!! (As an aside, I should have thought these figures would make one wonder why Hong Kong is the most expensive real estate market in the world).

Call me crazy, but even if 1% of that money (USD6.3 million) was used for, say, terrorist financing, then I think it fair to say one of the objectives, if not the most important, of Recommendation 32 and the Ordinance easily could have been flouted by naughty actors.

Something to ponder when 18% of the countries of the world with all the power treat the other 82% like naughty children by imposing rules that Little Johnny seemingly can quite easily sidestep.

Shudder the thought but perhaps the members of the FATF have other, undisclosed, objectives, i.e. even greater control by government of the people?

“It is the people who control the Government, not the Government the people.” – Winston S. Churchill

Really Winston!? Perhaps a better time. Just a thought…cheers!