Forex fraud ring shut in Shenzhen, paper says
Shenzhen police have busted a major foreign-exchange fraud ring involving more than HK$2 billion in transactions, mainland media reported yesterday.
The announcement of last month's bust came just days after the mainland banking authorities' decision to lift cash-withdrawal limits at banks in the city, which were designed to stop illegal transactions.
The Southern Metropolis News reported yesterday that seven men were arrested in Shenzhen last month for allegedly using fake foreign-trade contracts to persuade several local banks to hand over HK$2.03 billion for an equivalent amount of yuan between November last year and September.
The report said the authorities discovered in June that the gang had set up 11 dummy companies, and forged import and export documents so they could buy foreign currencies from Shenzhen banks.
The scam was possible because the yuan is not fully convertible. Only firms with import and export licences can buy foreign currencies from official banks. Black-market dealers can charge much more for overseas currencies than legitimate channels.
As part of the operation, police shut down 25 bank accounts and froze about 3.5 million yuan in deposits.
Shenzhen is the centre of the mainland's trillion-yuan illegal foreign-exchange industry because of its close links with Hong Kong.
It grabbed national headlines last month when the authorities announced the closure of an underground bank that had operated out of a Shenzhen flat for at least seven years and handled at least 4.3 billion yuan in the previous 18 months. It had clients in 31 provinces and cities, including subsidiaries of China National Petroleum Corp and Sinopec.
Earlier last month the central bank ordered the city's commercial banks to limit cash withdrawals by individuals to 30,000 yuan a day, 50,000 yuan a week and 200,000 yuan a month.
The move was aimed at stemming a flood of illicit and speculative cash, estimated to be in the billions of yuan, into Hong Kong's stock and property markets. Companies also faced cash restrictions.
The ban was lifted soon after Premier Wen Jiabao said the tactic was inappropriate.
The two recent cases illustrate how the illegal forex business is flourishing in Shenzhen amid the mainland's capital-account restrictions.
