Underground banks siphon HK$245 billion out of Chinese province in a single year ... and that’s just the tip of the iceberg
At least 207 billion yuan (HK$245 billion) was channelled out of Guangdong last year in illegal money transfers – seven times as much as in 2014.
The money was sent in 83 cases of illegal transfers discovered by Guangdong security officials, with some of it being channelled to Hong Kong and Macau.
In one case a wanted corrupt official had sent 12 million yuan to Macau to use as gambling funds, Xinhua reported.
Experts warned the cases were just the tip of the iceberg, and that the depreciation of the yuan and the mainland’s anti-graft campaign would hasten the flows of illegal money.
Huang Shouying, head of economic crime investigation at the provincial public security department, said Guangdong was a national hotspot for underground banks.
Shenzhen and Zhuhai remained two of the most important locations for such activity due to their proximity to Hong Kong and Macau.
READ MORE: Beijing targets China’s vast web of underground banks in crackdown on corruption
Guangdong had apprehended 231 suspects in 79 locations on suspicion of making the 83 transfers, worth 207.2 billion yuan.
Thirty-two of the 83 cases involved transfers made in Shenzhen and accounted for more than 100 billion yuan.
Deputy head of economic investigation with Guangdong police Wu Yi said 700 million yuan had been transferred by suspects acquiring foreign currency cheques from overseas businesses on the mainland.
In another common approach, a client who deposits Chinese yuan into a suspects’ account on the mainland would withdraw a similar amount in foreign currency upon arriving abroad. As of 2008, over 300 clients have transferred more than 2 billion yuan using this method, Xinhua reported.
Police said underground banks charged a commission of three to five per cent from clients to channel money overseas.
In one case, Li Huabo, former section director of the finance bureau in Poyang county of Jiangxi (江西) province, had transferred 12.81 million yuan with the help of an underground bank in Foshan city of Guangdong.
Li fled to Singapore in 2011 and was extradited back to China last May after serving a 15-month jail sentence. Li was on a list of 100 fugitives published by the Central Commission for Discipline Inspection last April.
Foshan case officers said the underground bank had pocketed about 30,000 yuan as commission for laundering 12.81 million yuan for Li to gamble in Macau.
Cracking down on underground banks is part of President Xi Jinping’s wide-ranging anti-graft campaign.
The illicit business is becoming more widespread as a weak yuan creates a strong demand for foreign currency.
READ MORE: Concerns over a collapse in China’s underground banking sector resurface
In November, an underground banking network in Zhejiang (浙江) that had carried out illegal foreign exchange transactions worth 410 billion yuan was uncovered.
Guangdong Academy of Social Sciences professor Li Youhan said the discoveries were just the “tip of iceberg”.
The sentiment was shared by Professor Lin Jiang of Sun Yat-sen University who estimated at least 500 billion yuan had been channelled out of China last year alone and that at least half of that had come out of Guangdong.
“This was only a very conservative estimate. The reality is probably much more than this,” Lin said.
“The situation should have improved in recent years with the nation relaxing foreign currency controls, thereby providing more channels for legitimate private business to exchange foreign currency. However, we are expecting to see the crackdown against underground banking intensify due to the national anti-corruption campaign.”
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