China Busts Underground Banks With $23 Billion Transactions

Beijing police raided more than 10 underground banks that were together involved in $23 billion of transactions as authorities tighten their controls on the movement of money across China’s borders.

Police in the Chinese capital busted the groups on Sept. 18, with 59 people arrested, after they handled almost 140 billion of transactions over the “past few years,” the Beijing Municipal Public Security Bureau said in a statement on its official microblog today. It didn’t give a more detailed time frame for the transfers.

China, which limits the movement of capital as part of controls on the value of its currency, has tightened checks on the flow of cash to crack down on money laundering and close loopholes used to evade regulations. The foreign exchange regulator said in September it uncovered $10 billion in fraudulent trade that had increased pressure from hot money and provided an illegal channel for criminals to move funds.

The underground banks, most of which were family-run and operating out of homes, used online and mobile payment devices to buy or sell foreign exchange and illegally transfer funds abroad, according to the Beijing police statement. The police said they would continue to crack down on crimes that threaten China’s economic and financial security.

Borrowed Accounts

Today’s statement included two examples of how the underground banks transferred money.

In February, during the investigation of a separate case, police discovered that a man identified only by his surname Yao had transfered more than $5 million abroad in a year. Yao frequently bought $50,000 of foreign exchange using different bank accounts that had been borrowed, rented or purchased, according to the police statement. Chinese citizens can only legally buy $50,000 of foreign currency a year.

The other example provided by police was of an individual identified only by the surname Yin, who had registered a company in Hong Kong in 2013 for trading metal ware. This business generated U.S. dollars, which Yin used to facilitate money transfers, according to the statement.

— With assistance by Yuling Yang

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