Friday, November 2, 2007

Money Laundering Case In Spotlight

As China’s economy continues to sizzle, financial crimes have become a prime target for the law enforcement folks. Many discussions out there deplored the seemingly ubiquity of money laundering activities in China. To sharpen tools used against such crimes, the Anti-money Laundering Law (“AMLL”) was adopted in 2006 and has become effective as of January 1, 2007.

In terms of the scope of authority granted responsibilities imposed by the AMLL, Michael Sylvester at Flaming Hoops Blog nicely summed it up for us:

The Law on Anti-Money Laundering … establishes, for the first time and in a comprehensive manner, the anti-money laundering supervision and management system in China, and defines the AML responsibilities and functions of the competent authority of the State Council, relevant agencies and organizations under the State Council; it imposes anti-money laundering obligations on designated non-financial institutions, and clearly defines the scope of financial
institutions that shall undertake anti-money laundering obligations, their obligations as well as legal liabilities in the case of violation of the Law; as for the anti-money laundering investigation measures, it establishes the terms of such exercise, the agencies to carry out investigation, approval procedures and time limit of investigation; it also stipulates the fundamental principles of international anti-money laundering cooperation.

Recently the government successfully prosecuted a significant money laundering case, using the AMLL. According to this report, the defendants, consisting mostly of Taiwanese individuals, illegally obtained money by stealing banking information from Internet shoppers. Then they transferred such funds into their accounts in a Shanghai Industrial & Commerce Bank branch. Afterwards, to avoid suspicion, defendants acquired multiple debit cards to disperse their “dirty” funds; then they withdrew cash totaling 1.08 million Yuan from ATM machines and bank tellers, all of which was subsequently transferred to another bank account set up by their ring leader. Unbeknownst to them, their activities did not escape the eyes of the newly-established anti-money laundering network, a consortium among commercial banks, the People’s Bank (central bank), the police, and procurators (prosecutors).

The defendants got their jail time and monetary fines. But, I do not think that is the end of this case. It looks to me that the government is going after violators, and in the absence of detailed statistics regarding suspected and prosecuted violations, it is hard to comment on the effectiveness of the anti-money laundering monitoring system currently in place. Nonetheless, a small success is still a success.

And the fact that the defendants are Taiwanese individuals is curious to me. Does it signal that the Chinese government is not afraid of putting “foreigners” behind bars for financial crimes?

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