China Shuts Down $64B Illegal Transaction Operation


Late last week China confirmed it cracked down on an “underground bank” that was responsible for moving nearly 410 billion yuan ($64 billion) in illegal foreign exchange transactions abroad, Bloomberg reported.

Authorities confirmed the case is centered in eastern Zhejiang province, where more than 370 people were either arrested or will face some form of punishment for their part in the operation.

The official People’s Daily reported that the uncovered operation was responsible for almost 800 billion yuan ($125 billion) in money laundering and underground banking activities since April.

The authorities ability to crack down on such a high-profile case underpins the country’s efforts to control capital outflows, Bloomberg stated, which has reportedly contributed to sending real estate prices soaring globally even though Chinese citizens are limited to how much money they can invest overseas each year.

“The government wants to stem outflows and stabilize the yuan’s exchange rate, but the outflows cannot be stopped unless people change their expectation on yuan depreciation,” Xi Junyang, a finance professor at Shanghai University of Finance & Economics, told Bloomberg, adding that despite the criminal banking operations, “a lot of money is leaving the country by legal means.”

According to a Bloomberg gauge, the country’s capital outflows swelled to a record high of $194 billion in September and eventually settled at $62 billion last month.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.