Shanghai banks investigated for links to Fanxin
The city’s banking watchdog has demanded a thorough investigation into Shanghai’s lenders to discover if they received commissions to sell wealth management products promoted illegally by an insurance agency.
Shanghai Fanxin Insurance Agency, the city’s largest insurance intermediary, had been selling unauthorized wealth management products, and its former general manager Chen Yi, fled with an alleged 500 million yuan ($81.7 million) of company money but was tracked down and brought back to China earlier this week.
To bring the risk under control, the Shanghai bureau of the China Banking Regulatory Commission has required major Chinese banks in the city to conduct thorough screening to see if they promoted or sold products offered by Fanxin, the department said.
An initial investigation found lenders in the city strictly followed regulators’ rules on being commissioned to sell wealth management products, and did not form partnerships with agencies such as Fanxin or sell the company’s products.
Very few wealth managers at the banks have been found to have recommended Fanxin’s products to private customers, the regulator added, promising punishment for related personnel if they did sell the products.
Industrial Bank, a jointstock commercial lender headquartered in Fuzhou, Fujian province, denied any links to Fanxin, as it is the focus of the largest scandal to hit China’s insurance sector in recent years.
The bank said it never reached a business partnership with Fanxin and had not discovered any of its Shanghai employees had sold Fanxin’s products in private.
Last week, the city’s insurance watchdog found Fanxin was selling an unauthorized principal- guaranteed wealth management product that promised a yield of 7 to 8 percent. Meanwhile, its general manager, Chen, was inaccessible for weeks and was reported to have fled to Canada with tens of millions of yuan.
On Monday, the Ministry of Public Security said Chinese police tracked her down in Fiji in partnership with international law enforcement officers.
Authorities have yet to make public more details about the scandal, but different sources have described how Chen, 34, rose from a new employee to the real controller of the city’s largest insurance agency.
According to International Finance News, Chen, a junior college graduate from a local polytechnic, joined CCB Life Insurance Co in 2004 and quickly rose to an important position in the company because of her outstanding sales performance.
While her counterparts were selling 2,000 to 3,000 yuan insurance policies, she was selling policies worth 10,000 yuan, the newspaper said on Thursday.
In 2009, Chen joined Fanxin and was promoted to a major executive in two years. On Oct 19, 2011, she was named the company’s executive director and general manager.
Sources said Chen was the major shareholder of Fanxin, and the other shareholder was her mother, Lin Caiying.
The newspaper said her flight was carefully planned — before her departure, she cut all contact with the company. Public materials show the general manager and person legally responsible for Fanxin was changed to Su Xueping as of February.
The newspaper also claimed Chen fled with the deputy general manager of Fanxin, Jiang Jie, who she hired one year ago. In the news release on Monday, the Ministry of Public Security said Chen was caught in Fiji. It declined to verify on Thursday the reported capture of both Chen and Jiang in the island nation.
Sources also said a group of attractive female salespeople helped Fanxin grow to a major life insurance broker. Founded in 2007, Fanxin claims to have sold more than 480 million yuan in insurance policies in 2012 alone.
“The Fanxin saleswomen may have no experience in the insurance sector, but most of them look like models,” International Finance News quoted an unidentified source as saying.
“They were dressed in miniskirts when visiting customers, and the value of each of their insurance policies ranged from hundreds of thousands of yuan to more than 1 million yuan.”