Chinese police have uncovered seven large underground banks this
year, involving money laundering of more than 14 billion yuan
(US$1.75 billion).
Forty-four people have been arrested in Guangdong, Shanghai,
Beijing, Inner Mongolia, Liaoning and Heilongjiang, and 58 million
yuan has been seized or frozen, said Han Hao, deputy director of
the economic crime investigation department of the Ministry of
Public Security, on Tuesday.
Authorities in the business hub of Shanghai have broken a five
billion yuan (US$633 million U.S. dollars) money laundering case,
according to Han.
A suspect from Singapore and three other people have been
arrested. The Singaporean is accused of operating an underground
bank in Shanghai, making remittances, providing foreign exchange
and other banking services between Singapore and China. The
operation was active in 25 large and medium sized cities in China,
Han said.
"Money laundering is mainly conducted through the financial
system, underground banks, online banks, cash smuggling,
investment, international trade and security and the futures
market," Han said.
"The fight against money laundering will help control other
crimes closely connected with it, such as organized crime, drug
trafficking, terrorist activities, smuggling, corruption and
financial fraud."
But he did not give the exact figure on how much money was
laundered in China every year.
Cai Yilian, deputy director of the anti-money laundering bureau
of People's Bank of China (PBOC), or central bank, said, "We
haven't had all the statistics, since anti-money laundering
operations started very late in China."
According to some international organizations, including the
International Monetary Fund, money laundering accounts for three to
five percent of GDP, Cai said.
Anti-money laundering has been given increasing attention by
Chinese authorities. In October this year, the national legislative
body adopted the country's first anti-money laundering law, which
expanded the definition of money laundering to include corruption
and bribery, and gave the central bank greater power in
investigations.
The law is expected to come into effect on Jan. 1, 2007.
The law demands financial and some non-financial institutions to
maintain records of clients and transaction records, and to report
large and suspect transactions.
They are also empowered to freeze capital for 48 hours, so as to
prevent corrupt officials from shifting illicit earnings, Cai
said.
"Previously we were only allowed to pass information to police
departments, which then had the authority to block money flows,"
Cai said.
The PBOC is the center of the anti-money laundering campaign.
Its provincial branch offices are authorized to investigate
suspected fund transfers of financial institutions.
According to the China Anti-Money Laundering Monitoring and
Analysis Center, an office under the central bank set up in 2004,
683 alleged money laundering cases had been reported to the police
by the end of 2005. They involved 137.8 billion yuan (17.2 billion
US dollars) and more than one billion US dollars.
China is also increasing professional training of agents to
fight money laundering. The Ministry of Public Security and the
People's Bank of China have jointly held training classes and
seminars to raise the awareness of the criminal activity.
Next year, the ministry will further cooperate with the bank to
amend and improve regulations on the transfer of evidence and
suspicious cash deals, Han said.
China has actively participated in international cooperation
against money laundering by exchanging information, tracing illegal
money transactions, researching effective countermeasures as well
as offering police services and training programs, he said.
Since 2002, China has helped foreign police investigate or solve
more than 400 money laundering cases.
Meanwhile, international assistance has also greatly facilitated
Chinese police investigations.
"In recent years, police departments have frequently detected
illegal earnings transferred to Hong Kong and Macao in some
smuggling, financial fraud and tax-related cases," Han said.
He listed the notorious smuggling operation by the Yuanhua Group
uncovered in coastal Xiamen City, east China's Fujian Province, and
the corruption case involving three bank heads in Kaiping City,
south China's Guangdong Province.
Both of the cases involved large sums of illicit money
transferred abroad from Hong Kong, which has closely cooperated
with the mainland in fighting money laundering and other economic
crimes and later provided important evidence in solving these
cases, Han said.
Three former heads of the Bank of China Kaiping branch were
found to have abused their posts and diverted almost 600 million US
dollars they embezzled to the United States through Hong Kong's
underground banks.
Yu Zhendong, one of the former bank heads, fled to the United
States but was extradited in 2004, which was hailed as a large step
forward in judicial cooperation between the two sides. Earlier this
year, a court in Guangdong sentenced Yu to 12 years in prison for
misappropriating funds.
The government is also considering new measures to block
possible channels for illegal money transactions through
foreign-invested banks permitted to operate Renminbi businesses in
the country.
Cai Yilian said branches of foreign banks should receive the
same supervision as domestic banks and contribute to the fight
against money laundering.
Foreign banks shall keep the identities and other materials of
their customers on file and record their transactions. They are
also obligated to report suspicious cash deals, Cai said.
China opened Renminbi businesses to foreign-invested banks on
Dec. 11, in accordance with its commitments to the World Trade
Organization. From February next year, Chinese citizens can make
deposits at foreign banks. But this has given rise to concerns
about the complexity of supervision.
"It is indeed a new subject for us, and I believe that the
enhanced international cooperation will help solve the problem,"
Cai said.
(Xinhua News Agency December 21, 2006)