Lai See

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

PUBLISHED : Tuesday, 11 December, 2012, 12:00am
UPDATED : Tuesday, 11 December, 2012, 2:55am


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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.


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