Alien Abduction and other short stories

July 2024

A as in Alien Abduction

One day, heading back to the office from my hot chocolate break, I caught sight of 2 young people horsing around, laughing and speaking loudly in Korean in the most uninhibited, carefree way. I had seen them around, they were in our office the day before. The girl in particular reminded me of the Korean girls from my dorm at Smith College. I had forgotten my staff card and had to wait for the receptionist to buzz me in. So the 3 of us started chatting. I mistakenly thought they were College students but the girl burst out laughing and said she taught at xxxxxxx (a prestigious college in Massachusetts). All very well except for one tiny insignificant detail - we didn’t serve clients with US nexus. The reason is rather simple - the bank couldn’t prepare the documents for US tax filing. When the receptionist returned to buzz us in, I was surprised to notice she gestured the 2 American Korean guests into a meeting room. What on earth are they doing in our office? Later that week, I saw them among a large group being escorted out by my teammate.  

I eventually told my colleague in private that the 2 young people I spoke to were plainly Americans; at least the girl was. Faculty members of select US schools by default spend 8 months in the US in any calendar year. My colleague gasped and asked me how I came to know (that they were Americans). Apparently she could only guess from their demeanour; she was never introduced to them (!!!) and they had no role in the banking relationship. Every time this client group showed up, they would come in for a whole week of marathon meetings. There were always 6-10 in that group; they would arrive more or less together; then go off for coffee breaks and lunch break. These 2 young people would always join in as understudy at some point, usually after morning coffee break, occasionally after lunch break, replacing 2 of the people in the group who would drop out for the day. Since they are not (officially) part of the banking relationship, they aren’t in any bank records. And they would pull this alien abduction act every single day to keep the number of meeting participants constant. Apparently the receptionists would count and record the number of guests each time they arrived / departed. Did the 2 receptionists notice the change in decibel level if not in average age? My colleague had no idea. My jaw dropped. I was speechless. I sincerely wished my colleague well - I asked her if she was worried. She inherited this account and was just maintaining status quo. She didn’t feel she was in a position to ask questions. And clearly this was a big client.  

B as in Binge Shopping

When this colleague was on business trip or on vacation, I would back her up and take care of her clients’ instructions. Once when she was away for work in Korea, I received faxed remittance instructions to wire money from a personal investment company (PIC) account to Neiman Marcus. Awwwww. What girl doesn’t enjoy a spot of shopping? I firmly believe it’s our constitutional right and the ultimate bastion of female privilege. A girl like me would logically start a pleasant conversation with the client about the purchase. And only a girl like me can make “tell me about the loot” sound like chick flick trailer gossip rather than anti-money laundering interrogation. But this wasn’t actually my client. I wasn’t supposed to call the client or anyone for that matter to indulge in my favourite discussion. Damn. Compliance threatened to block this third party transfer without a “purpose”. So I called my colleague to figure out what the money was for. She plainly said she had no idea (she had never heard of Neiman Marcus) and she didn’t feel she could ask as the account holder was obviously merely an employee who also had no idea. Well, at least this was Neiman Marcus, so we knew it was simply shopping. I told her I would inform Compliance colleagues in Hong Kong what Neiman Marcus was all about. And frankly I was probably the best person to introduce Compliance to the world of legendary luxury retail destinations. Private banking clients shopping around the world - they were satisfied with my explanation and all was well. 

Shortly after doing the free advertising for Neiman, I remembered a particular conversation I had with a security guard at Bergdorf Goodman in New York. My parents used to keep an apartment within walking distance of Bergdorf and I would go for a stroll every single day in lieu of exercise. I loved the bustling scene and the atmosphere during the sales season. I bought an ultra whimsical handbag with hand painted birds and feathers on the outside and a bird perched upside down inside the bag. 2 days after I bought it, the entire collection was marked down 25%. I groaned. The sales associate asked me to bring it back so she could refund it and let me buy it again at the discounted price. This was Brave New World to me, coming from Hong Kong where Big Stores normally would ride roughshod with us. So when i finally got it all sorted i was happy as a lark and raved about the experience to the security guard who smiled indulgently. He was evidently proud of working at a customer-driven store and proceeded to tell me stories of customers getting refunds 1-2 years after the purchase, no questions asked. I remember the story vividly as a definitive benchmark of old world customer service. 

The Neiman Marcus transfers brought back memories of my Bergdorf experiences. For a start, the 2 are part of the same luxury retail group. The inventory differs; locations differ but corporate policy would likely be aligned. My guess was Neiman would also be willing to refund any purchase, no questions asked. 

I grew slightly uncomfortable about the wire transfers. This happened almost exclusively when my colleague was away. At first I thought “wow they must be snapping up big baubles”. Being a fan, I knew (1) Neiman branches were only in the US (2) they had just started e-commerce but didn’t offer international shipping (3) e-commerce was limited to a small range of products and not offered for big ticket items (4) the only way to spend the kind of money this client was spending would be to shop in person in the US or via their personal shoppers who could order one-off items for customers  (5) the payment instructions always coincided with my colleagues’ business trips to Korea (6) the amounts were never round sums, which is unusual as marked (not discounted) prices were usually round sums but I guess they could have enjoyed discounted prices. The truth is, by now I suspected my colleague’s client was sending money to a personal shopping service account at Neiman Marcus, only to refund whatever they bought and withdraw the money out, using Newman like an ATM. I wasn’t sure if Neiman customers could deposit money into their store account. But I knew for a fact that Harrods in London encouraged customers to deposit money into their personal shopping account (to protect the store from bad debt as personal shopping accounts were payable at month end). I was wiring money from Hong Kong investment company accounts to Neiman Marcus in the US; I had the obligation to ask questions / report if Neiman wasn’t the beneficiary. Neiman, on the other hand, had no obligation to declare who was making those purchases; and if Neiman was receiving the money on behalf of someone else, I would never find out.  

C as in Cookie Monster

One day I picked up an incoming fax that looked like neither spam nor fax; it read like a fax that came through the wrong number. Someone sent for xxx units of sugar to be delivered to his office. I assumed someone dialed the wrong number and tossed it in the bin. A colleague heard me reading it and picked it up from the bin; she explained that it was actually my client’s fax instructions. I stopped dead and read it again. My colleague pulled out a file to show me an ancient client letter, approved and signed by previous market head and also head of Compliance (who was still around at the time this story took place), detailing the code to the client’s outward remittances. The client would send coded wiring instructions for third party transfers. Sugar and flour were units of money to be wired out. Office or factory were the recipients of transfers. If the fax was intercepted, it would only appear to be a bakery ordering supplies. Someone invented this Cookie Monster wannabe to hack the bank’s third party transfer checks and controls. 

To say I was shocked would be a gross understatement. If you sent coded messages to operate a bank account, you must be up to no good. Any sensible grade schooler would agree. I refused to do it and insisted on bringing this ghastly Cookie Monster business to the market head but he was out of town for management meeting and would not return till the following week. Even the Compliance head was away on this management meeting. All the senior bankers were on business trip. The other people on my team had all dealt with this client group before and they all agreed that there was nothing I could do except to execute the instructions. The rationale was simple, the client agreed with the bank on this Cookie Monster Secret Code way back which all the right people signed off on. The client might sue the bank if I unilaterally decide to kill it. I was petrified and sat on it for a whole day. I was scared to death. Eventually I caved in. I felt powerless. 

The funny thing was, all the other colleagues had looked after this account before. I immediately figured it was transferred to me because I was new; and because they all wanted to be rid of Cookie Monster. One colleague who was always the most supportive, reassured me if the powers that be including Compliance all gave blanket approval for coded messages there was no reason I should feel uncomfortable - since Compliance would be accountable if shxt hit the fan.

D as in Don’t You Know Mrs Bernanke?  

In our business, we frequently meet new clients through our existing clients; and in a town like Hong Kong where everyone knows everyone else, through reverse enquiry. People we meet socially are often potential clients. My mentor at my first job used to tell of stories from good old days when she would run into old acquaintances while crossing the street in the CBD and got a reverse enquiry about deposit rates and opened an account right there and then. But one thing we are skeptical about is the “walk in” client with no referral. 

One day, I had to entertain a walk-in. The gentleman intended to open an account to custodise his bonds and then draw down a loan for other uses. He proceeded to show me the physical certificates. Should I roll my eyes or smile indulgently? I couldn’t make up my mind. By now I was staring at a collection of alleged bond certificates. I was old enough to have clapped eyes on share certificates though admittedly not at work. I had never heard of physical certificates of bonds; if they existed they would have to be registered otherwise no one could receive coupon payments. This gentleman pointed out that they were signed by Ben Bernanke. To pique my interest, he showed me a photograph of himself with a Caucasian woman;  proudly declaring, “surely you must know who this is!” I promptly replied I hadn’t the faintest idea. He went, “Don’t you know Mrs. Ben Bernanke?” Of all things, I wasn’t prepared to be gaslighted. I was half amused at this con of a lifetime and half annoyed at this man’s attitude. I put on my serious face and told him a client of his league (he was talking about a billion though I wasn’t paying attention to what currency he meant) and stature (a close friend of the Bernankes no less!) should open an account with HSBC (the largest international bank based in Hong Kong), put the bonds there and obtain a bank loan from them to invest in a diverse investment portfolio with me. Bingo! I thought that should be enough to send anyone packing. But no, he went on and on. I must have been tired and couldn’t keep up a poker face; as he resorted to tell me that as a devout Buddhist, he never lied. Too bad I was a devout agnostic, I never gave religious con artists time of day. 

E as in Endless (Shareholder) list 

Sometimes younger colleagues would ask me how I built rapport with elderly clients. I would point out the glaring demographics in private banking clients in Hong Kong  - 60% are male, aged 60-100 and US-educated. My dad’s obsession with the correct Martini, so elusive in Hong Kong and in Europe (he even ordered it on safari in Kenya) was what made clients think no one understood them the way I did. You either get it or you don’t. Many people still feel nostalgic about prawn in lobster sauce, lobster Cantonese and perhaps a joint or two in grad school, but nothing resonates with men like Martini. It’s a phenomenon no one can explain. Just like whenever I meet a girl who has a crazy Martini dad story to share, I feel no one understands me like this new friend.

The Martini test not only serves as a top notch ice breaker and finishing line boost, it also tells me how “American” people are. Those who get frustrated and insist they make their own martinis, without exception, have (or used to have) US citizenship or alien resident status. Then the question is - did they give up their US (tax) status at some point? If they did, they would inevitably b*tch about the arduous process if it was a recent event; or if they gave up long ago they would express relief at not having to share any more money with Uncle Sam. And these emotions are profoundly authentic. 

Sometimes the obvious US ties are snowed under by a complex company structure - with proper documentation of a legit operating investment company older than me and an endless list of shareholders. If there is no sign of US person involvement, Compliance and other business control functions will be satisfied. But does everything add up to present a logical holistic picture? I’m always a little more cautious whenever I have a layered corporate structure in front of me. Who is the (declared) ultimate beneficial owner and does he have immediate family with obvious US nexus? They *all* do. Then does it appear they have some tax efficient structure set up for the next generation? I’m happy as long as they have something set up; if it’s professionally done, great. Even if the setup is not robust enough to be watertight at least they are working on it. What’s worrying is when a family appears not to have a setup geared towards US taxes when they do have US nexus and all I can see is countless companies with an infinite number of shareholders who are close friends. Who is the ultimate decision maker(s) - who is the person asking each question the gatekeeper relays to me? What is the gatekeeper’s relationship with everyone else? Have I met all of the authorised signors? What about their dynamics? And most important of all, why keep an ancient investment company when you could easily wind it down, buy a new one off the shelf, simplify the shareholder structure and reduce admin cost? If it makes more sense to close a company but it still exists, then I know I haven’t been told the entire story. 

F as in Façade Fabulous  

More often than not, we get the pared-down no-frills version of essentially the same story: a professional (usually a lawyer or accountant) would come to us with a referral of a proper Hong Kong or mainland Chinese client. The client was in every way the Façade Fabulous, a normal private banking client, only they would arrive with the wrong accessories: a sibling visiting from the US who was eager to help out with his personal investments! These tended to be viable fronts for bank accounts with proper documentation. My guess is they were shopping for the most easy-going platform to operate. I would always give them an unrealistically high threshold for opening an account and insist  that general power of attorney (GPOA), limited power of attorney (LPOA) or even investment powers could not be granted to siblings. Most bankers have experienced (and survived) nuclear war caused by POA investment decisions; some have even landed the bank and bankers in court. No, there is no case when you appoint someone to make investment decisions resulting in major losses. But some clients have figured out that if you sue a bank when it’s battling another court case, the bank might just settle to stay out of the limelight. These stories are quite handy when dealing with these tiresome global citizens. One banker once jokingly observed that these Façade Fabulous families made up almost half the clientele at European banks in Hong Kong before the financial crisis. 

G as in Goliath …

Some clients would occasionally call to execute securities order just because they (or their friends!) were optimistic about the particular company or sector. In those cases I usually studied the historical charts and suggested entry and exit levels for them. Once, a client called (on our recorded office land line) and discussed buying shares of a blue chip UK company, which was fine. Until it wasn’t. The client blurted something out that made all my fingers and toes turn ice cold; I turned the phone volume all the way down and went “Hello..? Hello..?” I put the receiver down and on second thoughts, put it on my desk so no one could get through (all the incoming calls would then be routed to my assistant). My client had said, in the most nonchalant way, that they wanted to buy shares of the company because they had heard some news from their father. I nearly had a heart attack. 

I grabbed my cell phone and made a bee line for the Bloomberg terminal, pulled out the list of directors of the company and lo and behold I found their father’s name. I called the client from my cell phone and calmly and slowly explained that this was a dire situation - their father was still on the board as a non-exec director, if they heard anything from their father, they were not to buy the stock at any bank or securities company; not to tell anyone this “news” and not to do anything except forget that they even heard this altogether and gag the father. I didn’t give a reason - I asked the client to tell the spouse the whole story. I trusted that the spouse, being a big time lawyer, would give a more informed and considered answer than a private banker who simply freaked out and said no. Not long after, the client called again to thank me - the legal eagle spouse apparently said I had rescued the client from complete, and total, ruin.  

In truth I was deeply grateful to the client for trusting me at that critical moment. I frankly explained that had the securities order been placed and accepted elsewhere after we finished our phone conversation, we would all be in trouble. The client and the father could be charged for insider trading; and so would whoever processed their order; I would probably be investigated too. Even if I escaped liability for not reporting, I could have my license revoked or suspended, and could lose my job or abruptly end my career in banking as a result. I had a matter of seconds or maybe minutes to decide if and how I could stop the client on that particular transaction. Had it been a US stock, for sure it was illegal to trade on material non-public info. But this was a UK company and we were in Hong Kong while the account was in Singapore. At the time I just wasn’t 100% sure how the law stood (or which law was applicable). Afterwards, with the help of a hot drink and some deep breathing, I realised that the law of all 3 jurisdictions would apply. But there and then I was taking a colossal bet that the client could be dissuaded. I did realise we were not equal parties in this situation. The client could go after the bank for the profits they would have made if it wasn’t illegal. Relative strength matters in litigation. Clients themselves sometimes do not realise that they are actually the Goliath in their banking relationships. Even banks with enough financial muscle to go to court can’t afford the reputational damage. Optics matter. If they could, they would throw the banker under the bus to stay out of the limelight. The client (and the spouse) was shocked when I told them over lunch how the story might have unfurled. But at least this was a story with a happy ending. David (or David’s daughter in this case) didn’t have to fight Goliath; (s)he saved Goliath from inadvertent self-harm. 

The reality of every business or platform is the unfortunate fact that there will always be people who are tempted to abuse the platform for personal gains. Some set-ups I mentioned above were technically watertight or at least viable (Binge Shopper, Endless List and Façade Fabulous). I imagine they were contrived by experienced, top notch professionals. Some of them had substantial success operating those schemes at other banks. The main issue was they failed to review their shady schemes - arrangements that worked perfectly when they were conceived would easily be busted when bankers realise they are being fooled, jeopardised or put in a precarious position. Other plans had obvious chinks in the armour but managed to get by (Alien Abduction) and some were downright unrealistic (Mrs Bernanke’s friend and to a lesser extent Cookie Monster).

Of these stories, all but one successfully exploited a bank. Goliath was a non-event only because the client was an amateur who stumbled upon insider information (material non-public information in US lingo) and was not hell bent on completing a criminal endeavour. The client never embarked on the banking relationship in order to achieve a dodgy goal. The nature of the banking relationship was sincere and honest. It was a purely professional relationship that would eventually blossom into an enduring friendship. The temptation was one-off and temporary. The client did not intend to abuse the bank, the banker or the banking industry at large. 

The others were all stories of clients who took advantage of their superior bargaining power and used (or more properly abuse) banks, bankers and the banking sector. They could shop around and leave no stones unturned to find a bespoke arrangement for their specific goals. The cost benefit anaylsis justified their schemes. Power dynamics and relative strength of parties mattered. In a smallish and close knit market, a handful of clients could, and would, snowball enough bargaining power to determine the industry norm. To what extent were bankers involved in designing these jaw-dropping schemes ? I honestly have no idea. The mere fact that they and their bosses didn’t turn down that kind of business tells us they all thought they could get away with it. But can they? 

My first lesson during a stint in New York, while on training in my first job, was a session with the chief compliance officer. He showed us a video of himself testifying (the video was only allowed to be recorded for corporate anti-money laundering training) on a completely blank set of account opening documents for the brother-in-law of a notorious Latin American politician. We all laughed. The CCO was not offended. He conceded that it was only hilarious with the benefit of hindsight. He said he only lived to tell the tale because blank account opening documents were the industry norm back then. And of all the clients who opened bank accounts with blank documents, not everyone would make it to a court. He cautioned us to never do anything that we couldn’t explain in a court hearing 10 or 20 years down the road, regardless of what other bankers or other banks were doing. And he had a point. At the end of the day, no one would take our place in that box in court, when we had to explain why on earth we would lend our assistance to an illegal enterprise. Not an enviable position. 

Realistically, I knew full well these clients were taking advantage (or trying to) of the banks or bankers in their orbit. I was also 100% certain the bank desperately wanted the revenue, or possibly the asset book as well. What was uncertain was what would happen to the bankers who decided to go with the flow / turn a blind eye / help design these devious schemes. Should things sour, no doubt the bankers would be thrown under the bus. After all, whoever owned the client relationship and signed off on the ghastly transactions were obviously the best sacrificial lamb. Then next up for the firing squad would be the manager who condoned or turned a blind eye because he really wanted the revenue. Finally the compliance officer who would definitely escape and let the next compliance officer go to the court hearing. Back then I had no idea how these scenarios panned out; but fast forward to 2024 I can safely tell you banks would throw 1-2 workers (preferably rank and file and / or ethnic minority) to the regulator or law enforcement and protect the managers.  

In a more individualistic culture, no doubt people would feel more comfortable being a whistleblower. In a consensus-driven culture, the whistleblower by default gives up the job and very likely a career. The social sanctions resulting from exposing dodgy dealings make it hard, if not impossible, to remain in a small close knit industry. And banks and some clients take full advantage of that fact. What I failed to perceive as a fresh grad I now know well - catering to the fishy businesses had always been part of the “ecosystem”. The bankers were fed through the system to keep it going. Should law enforcement or regulators bite, the clueless young bankers would go down and the senior mangers who gave blanket approval would often be transferred from one regional office to another regional office: they would never come back to be haunted by their past.