China is ill-equipped to fight money laundering, with poor intelligence gathering, analysis and control, and no single department in charge of the task, the deputy director of the State Administration of Foreign Exchange Control (Safec) said. The Foreign Exchange magazine quoted Ma Delun as telling a national meeting on malpractices in foreign exchange that China's system for fighting money laundering was flawed. 'We do not have a clear line of responsibility and a single department in charge of . . . collecting intelligence, analysing it and conducting supervision and control, with the result that we cannot effectively discover and combat money laundering,' he said. The revelation comes after eight people appeared in a Hong Kong court last month over their alleged involvement in a HK$50 billion cross-border money laundering racket. Mr Ma also said the public did not have adequate awareness of the threat posed by money laundering and the urgency of the need to take action. 'This lack of awareness gives the tools to the criminals, threatening the financial order and security of our country.' He said China had nothing similar in place to regulations issued by the United States Banking Association, which order banks to look out for suspicious behaviour, such as the transfer of funds from private to public accounts and vice versa, the transfer of large amounts of capital to offshore accounts, the refusal of bank staff to take holidays and these employees maintaining extravagant lifestyles. Safec investigation head Li Shenggao said the two main sources of illegal foreign exchange trading were money that wanted to avoid tax, official fees and foreign exchange risk, and that which was being moved offshore. Most of the offshore movement was money being laundered, he said. 'There is very strong demand in the market for illegal trading of money. Without a severe regulatory and supervision system and an intense campaign against this business, it is very hard to stop,' Mr Li said. 'Our main source of information on this is tip-offs from the public. 'Our job is made more difficult by the wider social environment - the fact that state companies do not report their true economic situation, making it impossible for the state banks, customs, tax and other government departments to know what is going on. 'A system of credit is not developed in China and people are used to cash, making the task of supervision more difficult.' The Guangdong branch of Safec published figures last month, showing that since the start of 2000 it had arrested 427 people in 146 operations against illegal foreign exchange trading involving 85.71 million yuan (about HK$80.32 million), with 45 of the raids being in the first eight months of this year. On July 5 this year, the People's Bank of China set up a department to combat money laundering, giving it the responsibility of drafting laws and regulations, and implementing enforcement measures to be taken by the country's banks. This was followed by China's national meeting on the problem, addressed by central bank governor Dai Xianglong. Foreign Exchange said that money laundering was concentrated in the coastal regions and used to handle money obtained from bribery and corruption, cash which should have paid taxes and included other illegally obtained income. 'Of 300 foreign-invested joint ventures in one southern city, more than 100 have Taiwan or Hong Kong criminal backgrounds. They use the money made illegally to invest in real estate or commercial projects, which is a typical way of laundering the money,' it said. In its latest issue, Cai Jing magazine reported that on the evening of August 29, Guangdong police mobilised 450 officers and closed 30 branches of 11 underground banks in Panyu, Zhuhai, Dongguan and Xunde in which they found more than 10 million yuan cash, which was used to pay interest. It said the underground banks were closely connected to money changers in Hong Kong, with yuan here and foreign exchange there and no cash crossing the border. The banks transferred money between them. Many joint ventures in Guangdong use these banks to avoid inspection by customs, tax and the Industrial and Commercial Bureau. They need foreign exchange to import raw materials and yuan to pay wages.