Five foreigners were among 41 suspects detained for illegally dealing in vast amounts of foreign exchange (forex), Beijing police said yesterday.
It is the first time that so many foreigners, all of whom were from Libya, have been caught in a crackdown on underground banks; and police said that many more, not necessarily from the same country, were involved.
More than 35 million yuan (US$4.3 million) of illicit money was seized in the raids, which were described as "recent." But police said the amount is only a small part of forex handled by the three underground 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 the illegal banks was money laundering, reportedly enabling corrupt officials or tax evaders to convert their renminbi into hard currencies and keep it abroad or have it sent back as gifts.
The Beijing Municipal Public Security Bureau said yesterday that investigations found that a number of foreigners had 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 three underground banks were located in the Yabaolu area of east central Beijing, said Zhu Guoyou, a senior official with the bureau's economic crime investigation division.
Zhu said Yabaolu has become a hub for illegal forex dealings in the capital, 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 heralded a massive sweep against illegal forex services, which was a "quite serious" problem in Beijing.
Fu said all the information that led to the operation was provided 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 October 25, 2005)