Chinese Police Have Reportedly Uncovered $30 Billion in Illegal Banking Activity

Chinese 100 Yuan notes are counted at a
Chinese 100 Yuan notes are counted at a bank in Shanghai on April 11, 2008. China's central bank set the yuan at 6.992 against the USD, the first time the currency has broken through 7.000 since a peg with the US unit was scrapped nearly three years ago. This means the yuan has now risen about 18 percent against the USD since July 2005, when it was cut loose from a peg to the greenback. AFP PHOTO/Mark RALSTON (Photo credit should read MARK RALSTON/AFP/Getty Images)
Mark Ralston — AFP/ Getty Images

Chinese police have this year uncovered $30 billion worth of illegal banking activity, involving 158 cases of underground banks and money laundering, the official Xinhua news agency reported the Ministry of Public Security (MPS) as saying late on Tuesday.

A special task force, jointly launched by the MPS, central bank, and foreign exchange regulator, uncovered illegal banking services in 192 locations, the report said.

Beijing started a crackdown on underground banks in April last year and uncovered over 170 cases of money laundering and illegal fund transfers involving more than 800 billion yuan as of last November.

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China has been dogged by reports of rogue managers of P2P – shadow banking platforms – and has been criticized by local and overseas investors for being soft on money laundering, prompting authorities to take action.

The crackdown included the investigation on the country’s biggest underground banking case that handled $64 billion worth of illegal transactions.

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Although the crackdown has curbed underground banking to some extent, illegal activities using those “grey capital” networks are still spreading and becoming more elusive, the report said.

Underground banks are channels for transferring money obtained through illegal activity, including public funds embezzled by corrupt officials, it added.

“Criminal activities by underground banks are still rampant. There is increasing collusion among underground banks in different regions,” Xinhua reported.

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