Money Matters | You can always bank on China for the most amazing scams

China’s banking industry is hardly a stranger to fraud. But what makes a recent 3.92 billion yuan swindling case at Agricultural Bank of China shocking is not the size of the scam but the sheer crudity of the scheme as well as the number of people likely to have been involved in it.

The bank said the scam was related to its “business of notes held under resale agreement”. In lay terms, a note is a promise of payment issued by one bank that can be encashed at a discount at another bank.

The Beijing branch of the bank loaned out billions of yuan through notes only to find out one hazy morning that the papers had disappeared from the safe. Instead, snugly wrapped inside the brown envelopes were piles and piles of old newspapers.

Now, how could that happen? Chinese banks have learnt some expensive lessons from past failures and the regulators have imposed some severe guidelines to prevent their recurrence.

Each note carries its own serial number. Each transaction, and therefore the number, must be keyed into a computer system that can be viewed by all banks. The notes must be locked up and counted regularly.