Money is laundered in a variety of ways, including casinos, real estate, jewelry and trade, to name a few.
In the West, people are surprised to see Chinese tycoons buying $2 million mansions with cash in the suburbs of Los Angeles, or foreign students opening the doors of their Lamborghinis on the streets of Vancouver, and many Chinese faces passing through major luxury stores. Everyone wonders where their money is coming from.
Voice of America consulted with banking and legal experts to answer the questions: How great is the risk of money laundering from China? What are the ways in which criminals launder money? Has China made any achievements in preventing money laundering?
Money laundering, “is the illegal flow of money out of China,” Graham Barrow, a British anti-money laundering expert, told VOA.
In the past, Barrow said, international anti-money laundering efforts have focused on Central and Eastern Europe and the former Soviet Union. Now, however, “the international community is seeing that China – a capitalist society under a communist regime – has created a huge underground money bank and is moving assets offshore, and that has become a big problem. “
Common money laundering routes
First bribery of officials for money laundering. Attorney Gao Guangjun, a lawyer practicing in New York and familiar with the operations of the Communist Party’s Ministry of Public Security, told Voice of America that some corrupt officials buy off bureaucracies to transfer money in the name of national security.
“We know that Ma Jian, the original vice minister of the Ministry of State Security, was arrested on one of the undisclosed charges of helping high-ranking Communist Party officials launder money.”
The second is laundering money with expensive luxury goods. This exists in what we often hear about proxy shopping. Illegal money is shipped overseas in the form of luxury goods and then liquidated. This can also be done through underground money changers.
“People in China who do underground moneychanging can be said to be black and white,” Gao Guangjun said, “which means that if you give him yuan in China, you can immediately receive your cash in the United States, or elsewhere.”
A third form is through a large number of shell companies. Barrow, a British anti-money laundering expert, said they have observed that in Western countries such as the United Kingdom and the United States, some people create shell companies using the same names as their Chinese companies. And criminals are able to move money freely within the same company.
Barrow said the U.K. has identified 30,000 such companies whose legal persons are Chinese nationals and whose names are the same as those of the people’s companies in China, “and we found that all these U.K. companies are dormant and I can’t really think of a reason why one person would need to set up so many companies.”
Chinese Communist Party begins tougher regulation experts: more for ordinary people
Over the past year or two, the Communist Party of China has begun to clamp down on anti-money laundering regulation, with the central bank issuing fines totaling more than $53.9 million to financial institutions for violating anti-money laundering laws in the first six months of 2020, which exceeds the total fines for 2019. Experts believe this is related to China’s membership in the international Financial Action Task Force (FATF).
But in its 2019 assessment of China’s anti-money laundering regulation, the task force noted that the Communist Party of China has imposed too few penalties for money laundering. in all of 2018, China had only 47 money laundering cases involving 52 people.
As the world’s second-largest economy, a figure of only a few dozen trials is unthinkable, Barrow said.
According to lawyer Gao Guangjun, the CCP’s tough regulations target more ordinary people, while high-ranking officials remain difficult to control. They still launder money in a variety of ways, overseas investments, buying houses, are very fast cash transactions.
U.S. Treasury to Launch Investigative Study
China has been listed as a major money laundering country by the U.S. State Department in its 2020 Global Drug Control Annual Report. The report says its “usual money laundering methods include smuggling large amounts of cash, laundering trade, using shadow companies, modifying invoices, acquiring real estate, gambling, and laundering money through illegal underground moneychanges.”
The National Defense Authorization Act requires the Secretary of the Treasury to assess China’s illicit financial risks based on data audited by the U.S. Government Accountability Office.
This report will examine the risks posed by the CCP and Chinese companies, including financial institutions, and whether the CCP’s relatively weak regulatory measures have contributed to these financial crimes.
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