The SIC, Lebanon's Financial Intelligence Unit (FIU), receives, analyzes, investigates suspicious transaction reports (STRs) and ensures compliance of banks, financial institutions and other reporting entities with the AML/CFT regulations.
Authorities in China have cracked the country's biggest-ever underground
banking network, which handled illegal foreign exchange transactions worth 410
billion yuan ($64 billion), police said Friday.
The bust comes amid a monthslong crackdown on illicit outflows, which
officials say disrupt China's financial management, facilitate corruption and
help terrorists and criminals launder their dirty money.
Over 370 people were detained, prosecuted or otherwise reprimanded in the
case, police in Jinhua city said in a statement on their website. Jinhua is in
Zhejiang province on China's eastern coast, a zone known for its shadowy
Police said one leader of the Zhejiang network was a man named Zhao Mouyi,
who transferred over 100 billion yuan overseas using 850 different bank
accounts and a dozen Hong Kong front companies. It took police nearly a year to
sort through over 1.3 million suspicious transactions, they said.
Since April, Chinese authorities have uncovered over 170 big cases of
underground banking and money laundering worth over 800 billion yuan ($126
billion), the state-run People's Daily reported.
China has tight currency controls, which officially limit individuals to
converting $50,000 worth of currency a year, but they are widely evaded. That
has helped drive capital outflows to enormous levels this year, adding to
strain on the value of the Chinese currency and putting upward pressure on
interest rates, even as the Chinese economy slows. Beijing has also launched a
massive campaign to crack down on corrupt officials overseas who have taken
their fortunes out of the country, part of an effort to shore up the reputation
of the ruling Communist Party.
Brian Jackson, a senior economist for IHS Economics in Beijing, said the
crackdown may be aimed, in part, at staving off capital flight led by insiders
as China prepares for another round of state-owned enterprise reform. That was
a problem when China restructured massive state companies in the early 2000s,
"Today's move could be not only to punish current corruption and reduce
current capital flight, but to also prevent/discourage future asset
stripping," he said in an email. "Emphasis on attempt — hard to say
if it will be meaningful over the longer term since there are many methods to
move money out of China."
Money brokers routinely help individuals and businesses skirt foreign
exchange restrictions and onerous bank bureaucracy. Some use such services to
facilitate legitimate business, but others may be trying to hide illicit
wealth. Transactions can be done in real time, using Internet banking,
eliminating the need for deep networks of trust and familial ties.
Such brokers are easy enough to meet, even in Shanghai, at the branches of
major Chinese banks, including the Bank of China and China Merchants Bank.
One broker, who spoke on condition of anonymity to discuss illegal activity,
said he could make a real-time transfer to a dollar account in Hong Kong for a
fee of roughly 1.6 percent. His minimum was $100,000, twice the official limit,
and said he had done transfers as large as $5 million.
"China's foreign exchange control is pretty useless," said Yin
Zhongli, a deputy director at the Chinese Academy of Social Sciences' Institute
"The biggest concern for the government is opacity," Yin said.
"It's too hard to control, the government cannot get transparent
information and there are a lot of illegal and criminal activities among
clients of underground banks."
The Ministry of Public Security said in September that China's problem with
underground banking was growing "increasingly severe and
"Underground banks have been used for laundering money obtained from
corruption, online gambling, telecommunications fraud, drugs and
terrorism," the ministry said. "It has become an important channel
for financial, securities, and tax-related crimes."