Thirty-two people have been arrested for allegedly defrauding the government of HK$140 million through its SME Financing Guarantee Scheme in the first joint operation between the ICAC and the police targeting such a scam.

The anti-graft agency accused 25 of them of bribery, while the force arrested the other seven for fraud using false documents.

The case – which came to light after a report lodged with the ICAC by a resident – involves 28 applications submitted by 22 small and medium enterprises for the 100 percent special concessionary guarantee for loans of up to HK$9 million and the 80 percent and 90 percent products for, respectively, loans of up to HK$18 million and a credit guarantee of up to 10 years and HK$8 million and a guarantee period of eight years.

Intermediaries are suspected of arranging for dummy SMEs, some of which are alleged to be no more than shell companies, of applying for the scheme, which is designed to help non-listed companies hit by the pandemic, from June 2022 to May this year.

Grace Yee, principal investigator from the ICAC's operations department, said on Friday that the intermediaries had allegedly offered between five percent and seven percent of loan amounts to the dummy SMEs and pocketed the rest.

"The intermediaries were suspected to have offered bribes amounting to at least about HK$500,000 to frontline bank staff for assisting dummy companies to open bank accounts and apply for loans by using false supporting documents," she said.

Bank staff would allegedly speed up the loan-approval process and turn a blind eye to forged documents.

Even though 13 frontline staff from 10 local banks were among those arrested, Yee emphasised the industry as a whole is very clean and the city's financing system is robust.

Chief inspector Ricky Ho from the commercial crime bureau's fraud section said those arrested are alleged to have submitted the same documents with some variations to two to three banks.

Officers from the law enforcement agencies seized more than HK$200,000 in cash, company and bank documents, as well as electronic devices in the operation.

Both the ICAC and police have not ruled out more arrests.