China cracking down on illegal underground forex trading in bid to control capital flight
- Beijing cracking down on use of unregulated underground banks to buy or sell foreign currency to maintain stability of the exchange rate and its slowing economy
- Prison term of up to five years and a fine for ‘severe’ offence, jail term of more than five years and fine or confiscation of property for an ‘extremely severe’ violation
China is cracking down on individuals and corporations who buy or sell foreign currency on the black market as the government seeks to control capital flight and maintain the stability of the yuan exchange rate and its slowing economy.
According to the joint judicial interpretation by the Supreme People’s Court and the Supreme People’s Procuratorate, effective from the start of February, illegal forex trading activities would be a criminal offence, with those involved charged with engaging in an illegal business operation.
A cumulative transaction volume of 5 million yuan (US$737,000) or illegal profits of 100,000 yuan (US$14,749) would be deemed a “severe” offence and be subject to a prison term of up to five years and a fine of up to five times of the profits.
An “extremely severe” violation, defined as cumulative transactions of more than 25 million yuan (US$3.69 million) or 500,000 yuan (US$73,745) in illegal profits, would be subject to a jail term of more than five years and a fine of up to five times of the profits, or confiscation of property.
The thresholds for prosecution would be halved if the violator had a criminal record, had received administrative punishment in the past, or had refused to cooperate with authorities to trace illegal capital flows.
