Date
13 December 2017
Criminals can easily find people who are willing to lend their bank accounts for illegal transactions. Photo: AFP
Criminals can easily find people who are willing to lend their bank accounts for illegal transactions. Photo: AFP

HK money laundering cases surge: bad guys use old tricks

Hong Kong saw a 40 percent jump in the number of suspected money laundering cases to 33,000 in 2013 from the previous year. The sharp growth could be due to a number of factors, including banks stepping up efforts to identify dubious accounts and transactions, China’s crackdown on graft, and the rise of new channels and financial shenanigans.

According to the city’s Joint Financial Intelligence Unit, the value of assets frozen in last year’s anti-money laundering drive topped HK$873 million (US$112.59 million), while the amount recovered was about HK$640 million. At least 140 people were convicted.

But as always, catching the brains behind the crime is difficult. For a small sum, criminal groups and individuals can easily find people who are willing to lend out their bank accounts for illegal transactions.

Last year, a 23-year-old mainlander named Luo Juncheng {羅俊城} set a new record in money laundering when his bank accounts yielded HK$13.1 billion. Investigation showed that he opened the accounts at Chiyu Bank in the territory and subsequently received thousands of deposits and transfers between 2009 and 2010, with most of the funds funneled via the internet.

In another widely reported case this year, a 22-year-old mainlander, Zhao Danna {趙丹娜}, went missing while awaiting trial for allegedly laundering HK$10 billion using eight Bank of China accounts. As a consequence of her disappearance, her two guarantors may lose the HK$30 million bail.

Of course, mainland China is not the only source of dirty money coming to Hong Kong, but it is likely to be the main contributor.

For various reasons, including tax evasion and the need to hide proceeds from bribery and all sorts of crimes, many officials, business owners and other individuals from the mainland must turn staggering amounts of money into ostensibly legitimate capital or other assets. The Washington-based Global Financial Integrity puts the number at US$3.79 trillion during 2000-2011.

With its free flow of capital, the presence of financial institutions from all over the world, and geographical convenience, Hong Kong offers the ideal venue to wash their dirty money clean.

It is estimated that mainland money laundered in Hong Kong can be as huge as 10 percent of the territory’s gross domestic product.

Chinese authorities impose rigid restrictions on outbound capital flow, so how does the money get channeled to Hong Kong?

There are a number of ways. One is cash trafficking — mainland travelers cross the border carrying thousands of US dollars, and deposit the money into local accounts. Some even employ parallel traders to do so.

Another method is through foreign exchange companies. Many of these currency exchange shops have bank accounts in the mainland, mostly opened in Shenzhen near the border, to offer customers cheap cash remittance services with a charge of 3-5 percent of the amount.

Yan Lixin {嚴立新}, a researcher at the China Center for Anti-Money Laundering Studies, told China Business News that international trade and overseas investment are two of the most well-trodden paths.

Money laundering through trade with Hong Kong is usually done by mis-invoicing or falsifying import and export records. Mainland companies using this method usually pay a higher price for goods imported and apply to the State Administration of Foreign Exchange for extra quota to remit the money overseas.

Hong Kong’s red-hot property market in previous years served as another channel. Since many realty agencies have mainland accounts, buyers can first deposit the money into these accounts, travel to Hong Kong with their two-way permit and get the money back in US dollars. No one seems to bother where the money came from, whether it’s clean or not.

– Contact the writer at [email protected]

CG

 

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