War on underground lenders ‘ finds $ 148b in illegal transactions’

China has uncovered more than 1 trillion yuan ($ 148 billion) worth of illegal transactions by underground banks this year, the official Financial News reported on Thursday, citing a senior official at the foreign exchange regulator.

The State Administration of Foreign Exchange ( SAFE) will step up investigations into capital outflows and intensify a crackdown on underground banks to foster sound development of the country’s foreign exchange market, Zhang Sheng hui, a senior director at the SAFE, told the newspaper.

So far this year, the SAFE has uncovered illegal capital outflows worth $ 8.43 billion, and with the help of police has busted 56 cases of illegal trans- actions via underground banks, Zhang said.

The SAFE also penalized three banks for inadequate compliance measures, which involved companies using fake trades to buy foreign currency, said the newspaper, which is affiliated with the People’s Bank of China.

Earlier this month, the Xinhua News Agency said that police in South China’s Guangdong Province had busted under ground banks that handled around $ 35 billion in illegal money transfers this year.

The yuan has sharply weakened against the US dollar this month, having breached a psychologically important mark of 6.7 on October 10.