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China Uncovers Its Largest Ever Case Of Money Laundering

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

05 December 2006


The Chinese authorities have reportedly uncovered the largest case of money laundering yet reported in the country.

Shanghai Securities News revealed last Friday that the 5 billion yuan (US$630 million) money laundering operation had been discovered by chance during an investigation into the falsification of business names by government agencies, including the Shanghai office of the central bank.

While details of the alleged crimes are currently scant, it is believed that the case involves an "underground" banking operation conducting illegal remittance, foreign exchange and other services.

The Chinese authorities are stepping up their legislative efforts to crack down on money laundering, after investigations carried out in 2005 uncovered more than 50 cases of serious money laundering involving a total of 10 billion yuan (US$1.15 billion).

According to a report by the People's Bank of China, the majority of the cases uncovered, around 61%, were centred in the coastal provinces of Zhejiang and Guangdong which it said were prime spots for smuggling contraband. These cases involved underground banking, embezzlement of public funds, drug smuggling, and illegal lotteries, among others. Illegal foreign exchange bureaus are also a popular industry for money launderers. Last year, there were 283,400 reports on suspicious renminbi funds and around 2 million suspicious foreign exchange transactions.

While money laundering is already illegal under Chinese law, new legislation seeks to clarify anti-money laundering regulations and plug existing loopholes in the law.

Draft rules posted in July will mean that banks have to report cash transactions of more than 50,000 yuan, or the foreign currency equivalent of $US10,000. Individuals will also be required to use their real names when opening a deposit account.


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