Tax Evasion Syndicate Spirited $50bn Out Of China

by Mary Swire, Tax-News.com, Hong Kong

19 September 2001

A Chinese crime ring which transported HK$50m a day from the mainland into Hong Kong in order to evade taxes has been smashed by a co-operation between the Hong Kong and Chinese authorities.

Hong Kong's Independent Commission Against Corruption (ICAC) said the syndicate, which included senior bank staff, smuggled up to $50 bn over the past five years, using couriers to smuggle Chinese currency, Hong Kong dollars and other currencies from Guangdong and Fujian into Hong Kong.

The cash is supposed to represent the undeclared profits of mainland businessmen as well as the proceeds of criminal activity, which would end up in respectable Hong Kong bank accounts under different or nominee names after laundering, before being transferred onwards into overseas bank accounts.

The syndicate would have needed help from a bank, and among the 39 people arrested are a senior manager, a manager and an officer of the Po Sang Bank, as well as 14 directors, shareholders and staff of a Tsim Sha Tsui-based money-changing firm. A truck was impounded and the money-changer's firm raided last week, with agents seizing from both a total of $8.5 million. About $70 million has been frozen in bank accounts. The bank officials are accused of camouflaging the deposits as internal transfers of money already existing in the banking system, thus avoiding the SAR's 'suspicious transaction' reporting rules.

ICAC's operation, under the code-name 'Operation Owl', was carried out with the assistance of the legal authorities in Beijing and Guangdong. The Po Sang Bank also gave its full cooperation. The $50 billion in suspected laundered funds, in 29 different currencies, is about $5 billion more than the Po Sang Bank's total assets. The activities of this ring, and perhaps others like it, may help to explain the enormous figures reported for international capital transfers in and out of Hong Kong in the last two years, for which no convincing explanation has been given by the authorities.

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