• Tue
  • Sep 16, 2014
  • Updated: 1:21pm
Lai See
PUBLISHED : Tuesday, 11 December, 2012, 12:00am
UPDATED : Tuesday, 11 December, 2012, 2:55am

Is Hong Kong the world's capital of money laundering?

BIO

Howard Winn has been with the South China Morning Post for two and half years after previous stints as business editor and deputy editor of The Standard, and business editor of Asia Times. His writing has also been published in the Far Eastern Economic Review, the Wall Street Journal, and the International Herald Tribune. He writes the Lai See column which focuses on the lighter side of business.
 

During a recent conversation with someone of financial disposition, we touched on the subject of money laundering. We spoke of HSBC and its travails but our friend said a more interesting angle was the amount of cash finding its way to Hong Kong from the mainland. The informality of such arrangements makes it difficult to assess the sums of cash involved. But our friend was given some indication when approached by a businessman from the mainland who offered him more than US$10 million in cash to invest in his business.

Our friend was, of course, unable to accept since, under "Know Your Customer" regulations that govern his business, he is required to know where the money comes from. He knows of people that routinely bring suitcases of US dollars into Hong Kong from the mainland with official assistance. One can only assume that some is used to fuel the real estate market, though the special stamp duty may have made that a tad expensive as a way of laundering money.

Jewellery stores are a favourite spot for laundering, we hear. Buyers walk in with suitcases of money and purchase expensive stones. A few days later, they ring back to say the wife doesn't like them and they'd like to return them. At which point the store says, "OK but we'll have to give you a cheque", and the salesman needs to retain his commission. A small price for the service perhaps. Small wonder people say Hong Kong is the money-laundering capital of the world.

 

Ivey-league education

We recently called on Janet De Silva, who is the dean of the Asian campus of the Richard Ivey School of Business, Canada's leading business college. Along with the Harvard Business School, IMD Business School in Switzerland and the Darden School of Business at the University of Virginia, it is one of four leading business schools that specialise in a case-study approach to teaching. It has the second-biggest collection of case studies after Harvard and is the largest producer of Asian and Indian business studies. One of Ivey's prominent alumni is New World Development chairman Henry Cheng Kar-shun.

The changing dynamics of the mainland mean that in addition to being a significant manufacturing base, it has also become a huge and rapidly growing market accounting for an increasingly significant proportion of multinational corporation (MNC) sales. At the same time, local businesses are looking to expand overseas. For all of them, the most pressing of these challenges, says De Silva, is the growing need for talented managers.

In a recent survey by global management firm Booz & Co and the American Chamber of Commerce in Shanghai, "37 per cent of MNCs reported that recruiting talent was their single biggest operational problem in China - a bigger problem than concerns about regulations, lack of transparency or intellectual-property rights", she says. De Silva adds that 44 per cent of executives at mainland companies surveyed by management consultant McKinsey reported insufficient talent as the biggest barrier to their global ambitions. At the same time, China's 816 million labour force will begin to shrink after 2015, intensifying competition for workers. By 2020, it is possible that the mainland may have 228 million fewer workers than are required to operate effectively, according to research by the Manpower Group and the United Nations' Projections of China's Working Population in 2020.

There is therefore a huge need to upgrade skill levels, which creates a significant opportunity for the likes of Ivey. The school focuses on executive MBA programmes or customised executive education programmes. It recently conducted a special five-week programme for 250 executives from Agricultural Bank of China. They were city-level presidents from second, third and fourth-tier mainland cities. Their programme focused on international risk, international finance and international marketing. Given the mainland's dynamics, there must be more where that came from.

 

Lai See break

Lai See takes a break from tomorrow and will reappear on January 8. We would like to thank everyone who has contributed information, tidbits and guidance and wish you all a festive holiday and prosperous new year. We'll do it all again next year.

 

Have you got any stories that Lai See should know about? E-mail them to howard.winn@scmp.com

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This article is now closed to comments

pslhk
Huh, huh
HK, the World’s Capital of Money Laundering!
HK, the launderer?
Who are these HK launderers?
The Chinese hawkers or bank clerks?
Those street corner money changers make HK WCML?
What do they do with the cash?
I presume monies already in the banks may recycle
but they don’t need cleaning,
unless banking is laundering.
Is re-invoicing laundering?
Perhaps big tickets like BIG brand names
whose thousands of dollar a piece items cost about ten dollars to produce?
Any BIG HK brands?
Where do we get the laundering expertise?
Is that why we need expats?
And keep wanting them because locals aren't family,
or are too dense?
Who are the top launderers in this allegedly WCML?
HW, you mislead as you typecast HK, unfairly and wrongly.
Be specific about who and where are your dreamt money launderers.
You're the launderer,
as you try to make HK look capital of dirty money so that
LONDON may look clean
wwong888
mate - you need to see a doctor. where does this animosity towards expats? did your wife run off with one? did you lose your job to one? see a shrink.
pslhk
To answer your last two questions - NO
To answer your “animosity where” question - it’s your own origin
That’s in your response to factual description
If you find the description inaccurate, say how/where/why
It reflects badly on youself if you mis-focus on the person of the inquirer
pgrath1
Hong Kong should compete to become the world capital of "money laundering" by maintaining a banking system that is efficient, respects private property, and protects privacy. It is these things that made Hong Kong great, and abandoning these principles will destroy it.
Otherwise, little Hong Kong will end up embroiled in doing the dirty work for smarmy, collectivist politicians in the USA, EU and elsewhere who want to pass their own domestic problems to others.
 
 
 
 
 

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