China breaks up $64bn un­der­ground bank­ing

Kuwait Times - - BUSINESS -

BEIJING: Chi­nese au­thor­i­ties have un­cov­ered the coun­try’s big­gest un­der­ground bank­ing case in­volv­ing trans­ac­tions to­talling more than 410 bil­lion yuan ($64 bil­lion), of­fi­cial me­dia re­ported, part of a drive to com­bat il­le­gal cap­i­tal out­flows. The in­ves­ti­ga­tion, which started in Septem­ber and fo­cused on the costal prov­ince of Zhe­jiang, found that dozens of Hong Kong-reg­is­tered shell com­pa­nies forged more than 1.3 mil­lion fake trans­ac­tions to trans­fer money off­shore, the of­fi­cial Peo­ple’s Daily re­ported yes­ter­day.

China started crack­ing down on un­der­ground banks in April and has so far un­cov­ered more than 170 cases of money laun­der­ing and il­le­gal fund trans­fers, in­volv­ing more than 800 bil­lion yuan ($125.34 bil­lion). The cases come as cap­i­tal out­flows reach hun­dreds of bil­lions of dol­lars, trig­ger­ing alarm in some cir­cles. A hun­dred sus­pects from eight gangs were de­tained in the lat­est case, the of­fi­cial Xin­hua News Agency said. The prin­ci­ple sus­pect used non-res­i­dent ac­counts to fa­cil­i­tate more than 14,000 coun­ter­par­ties for the trans­fer of bil­lions of yuan off­shore, the news­pa­per said. Twenty-one coun­ter­par­ties’ bank ac­counts il­le­gally trans­ferred more than 1 bil­lion yuan over­seas, the Peo­ple’s Daily said, adding that the sus­pect used the in­abil­ity of some on­shore com­mer­cial banks to iden­tify non-res­i­den­tial ac­counts to help his op­er­a­tion.

Clients were asked to trans­fer yuan to do­mes­tic ac­counts and the money was then trans­ferred to non-res­i­den­tial ac­counts the sus­pect con­trolled. Those ac­counts were then used to buy for­eign cur­rency with forged trade trans­ac­tions, and di­rectly fun­neled the cash to off­shore banks in Hong Kong and else­where, the news­pa­per said. The Peo­ple’s Daily said one of the off­shore banks used to re­ceive for­eign cur­rency was HSBC Hold­ings. HSBC told Reuters it could not com­ment on in­di­vid­ual cases but it has “zero tol­er­ance” for money laun­der­ing. The un­der­ground bank­ing op­er­a­tion prof­ited as much as 1.53 mil­lion yuan a day, with an av­er­age profit of 2 mil­lion yuan per month, the news­pa­per re­ported cit­ing po­lice.

An­other sus­pect reg­is­tered 12 shell com­pa­nies in the north­west­ern prov­ince of Ningxia and il­le­gally ob­tained 38.6 mil­lion yuan of ex­port in­cen­tives from the lo­cal gov­ern­ment by us­ing an un­der­ground bank to re­port fic­ti­tious trade trans­ac­tions, the Peo­ple’s Daily said. — Reuters

COLOMBO: Sri Lankan Fi­nance Min­is­ter Ravi Karunanayake ar­rives at the par­lia­ment build­ing to present the 2016 bud­get in Colombo yes­ter­day. — AFP

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