Regulators step up crackdown on illegal forex trade

Chinese regulators have stepped up their efforts to clamp down on foreign exchange crimes, including underground banks, by punishing dozens of banks, companies and individuals for illegally selling or purchasing foreign currencies.

The State Administration of Foreign Exchange (SAFE) has recently published a list of 20 foreign exchange crimes that it has uncovered and punished. Seven of the cases involved banks, including branches of major banks such as Bank of China and China Merchants Bank.

Regulators have also stepped up their efforts to punish individuals who violate foreign exchange rules by illegally selling and purchasing foreign currencies.

In the SAFE list, seven individuals were punished for illegally moving assets overseas, including an individual from Hong Kong. The individual, who was only identified by his surname as Chen, wired 17 million yuan to an account run by an underground bank in an attempt to transfer the money overseas to purchase real estate asset. Chen was fined 1.53 million yuan.

China has rolled out efforts to rein in money laundering and illegal financing. Several government departments released a management guideline in mid-October for internet financing, noting that online financial institutions should report any single-day transaction above 50,000 yuan to the government within five days.

The government’s efforts to tighten the wall against currency flows come at a time when the yuan is showing a downward trend against a stronger US dollar amid fluctuating global financial markets.

Dong Dengxin, director of the Wuhan University of Science and Technology’s Finance and Securities Institute, told the Global Times on Thursday that exchanging currencies for personal purposes like tourism and overseas study is closely watched by government regulators and it’s very hard for individuals to bypass the law.

But he said that some individuals buy overseas currencies via business channels, such as by forging a trade contract and then exchanging currencies in the name of cross-border trade.

“But the government has also started to crack down on those moves. In the past, companies or individuals only needed to put on record their overseas contracts, but now the government will also check the authenticity of those investments,” Dong said.