Beijing reiterates calls to combat underground banking
The Ministry of Public Security has announced a state-wide crackdown on underground banking to block the funnelling of ‘grey funds’
China’s Ministry of Public Security said on Monday that it would launch a three-month crackdown on underground banking to curb money laundering and illegal funds transfers as unstable markets stoke fears of capital flight. The announcement, published on the Ministry’s official website on Monday, quotes Deputy Minister of Public Security Meng Qingfeng as urging security units throughout the country to work closer with the People’s Bank of China and State Administration of Foreign Exchange on the investigation works for the crackdown.
“Some ‘grey funds’ have been transferred through underground money shops across the border, which not only poses a serious risk to our foreign exchange management but also disturbs the order of financial and capital markets and threatens our financial safety,” Mr. Meng was quoted as saying on the Ministry’s website.
Worries over China’s economic slowdown and possible interest rate rises by the U.S. Federal Reserve have led to a wave of capital outflows this year.
Chinese law prohibits individuals from transferring more than US$50,000 out of the country per year but the underground banking industry has thrived in recent years as a channel for sending money out of China. This latest crackdown announced by the Ministry mirrors a similar effort announced by Beijing in April. The Mainland’s central bank spoke at the time of its intended efforts to act against underground banks, offshore company accounts and other means of moving money gained from corruption – measures that some analysts saw as increasing the cost of money transfer for some junkets here.
In the Monday announcement, the Ministry noted that the April campaign – a cross-departmental collaboration with the central bank and State Administration of Foreign Exchange – found 66 underground banks responsible for illegally funnelling more than 430 billion yuan (US$67.5 billion).
with Reuters
