Foreigners busted in illegal forex dealings
By Li Jing (China Daily)
Updated: 2005-10-25 05:51

Five foreigners were among 41 suspects detained for illegally dealing in vast amounts of foreign exchange (forex), Beijing police announced yesterday.

It is the first time that so many foreigners all from Libya have been caught in a crackdown on underground banks; and police warned that many more, not necessarily from the African country, are involved.

More than 35 million yuan (US$4.3 million) of illicit money was seized in the recent raids, but the amount is said to be only a small part of the forex handled by the three "banks," each of which allegedly transferred nearly 1 million yuan (US$123,000) in and out of China each day.

Among the "services" offered by underground banks is money-laundering: typically, corrupt officials or tax evaders convert their renminbi into hard currencies and park the money abroad; or have it sent back as gifts.

The Beijing Municipal Public Security Bureau said yesterday that investigations show a number of foreigners have direct or indirect connections with illegal forex dealings as they are not subject to as many restrictions as Chinese in forex transactions.

According to regulations, Chinese citizens may not remit more than US$10,000 per time and may only convert up to US$8,000 a year for personal use.

All the three underground banks are located in Yabaolu area in the eastern part of downtown Beijing, said Zhu Guoyou, a senior official with the economic crime investigation division of the bureau.

Zhu said Yabaolu has become a hub for illegal forex dealings in Beijing, where scalpers (or "Huangniu" in Chinese) openly ply their trade.

Fu Zhenghua, deputy director of the public security bureau, said the crackdown on the three underground banks heralds a massive sweep against illegal forex services, which is "quite serious" in Beijing.

Fu said all the clues that led to the operation were offered by the Beijing Administration of Foreign Exchange. "We also have many other clues about the illegal dealings of other underground banks."

Liu Chunming, deputy head of the administration, said: "Most of the large forex dealings handled by underground banks have close connections with money laundering."

Beijing's effort against illegal forex services is part of a national campaign started last year.

In February, the Ministry of Public Security said it had busted 155 underground banks dealing in 12.5 billion yuan (US$1.5 billion) nationwide.

(China Daily 10/25/2005 page1)