Sharp rise in number of illegal forex deals

PUBLISHED : Friday, 25 August, 2006, 12:00am
UPDATED : Friday, 25 August, 2006, 12:00am

Guangdong and Zhejiang provinces account for 61pc of suspect transactions

Almost 12 times as many 'suspicious' foreign exchange transactions were recorded on the mainland last year than in 2004 amid intensifying government efforts to crack down on illegal fund flows, the People's Bank of China reported yesterday.

In a detailed annual report by the central bank's China Anti- Money Laundering Monitoring and Analysis Centre, a total of 1.988 million suspicious foreign exchange transactions were reported last year. In addition, 283,400 suspect yuan transactions were reported, representing a sevenfold increase from 2004.

Money laundering has flourished on the back of the country's rapid economic growth and has become a main target of Beijing's anti-corruption efforts. The report partly attributed last year's sharp increase to stepped-up government crackdowns and growing awareness among domestic banks.

'The central government and the PBOC have made a lot of effort to rein in money laundering in the past year,' Beijing Institute of Technology economist Hu Xingdou said, adding that the National People's Congress was also accelerating the legislative process. The NPC has been debating an anti-money-laundering law this week, even though money laundering is already a criminal offence.

Xinhua yesterday quoted Yu Guangyan, an official of the NPC Standing Committee's Budgetary Work Commission, as saying the proposed law 'will help quickly detect illegal money transfers, deter upstream crimes and cut financing of new crimes, and maintain the security of financial markets'.

Professor Hu said the central bank had internal regulations requiring officials to report on big transactions and suspect trading.

Money laundering flourished mainly in the prosperous coastal regions in the east, northeast and south. The report found it was most rampant in the provinces of Zhejiang and Guangdong, which together accounted for 61.4 per cent of the country's suspect currency transactions. Guangdong accounted for 40.5 per cent.

It also pointed out that concessionary terms offered by local governments to lure foreign capital had helped the spread of money laundering. The southwest, including Yunnan, was also a hotbed of money laundering, given its increasing border drug trade with Southeast Asia.

The central bank and the State Administration of Foreign Exchange passed 3,195 cases of suspected money laundering to the police and other relevant departments for further investigation last year.

Police cracked more than 50 cases involving more than 10 billion yuan during the year. They involved underground banking, illegal foreign exchange bureaus, the embezzlement of public funds, drug smuggling and illegal lotteries.

Even though the number of cases solved was similar to 2004, the amount of money involved was much higher, the report said. It did not give any figures.