State TV accuses bank of money laundering

CCTV ran a show accusing Bank of China of offering money laundering service to wealthy clients

A labourer works beside a logo of Bank of China: report has prompted speculation that the government is getting ready for a new campaign to tighten up capital outflow controls. Photograph: Reuters

A labourer works beside a logo of Bank of China: report has prompted speculation that the government is getting ready for a new campaign to tighten up capital outflow controls. Photograph: Reuters

Tue, Jul 15, 2014, 01:30

It’s not common for the state-owned Chinese Central TV (CCTV) to blow the whistle on an equally powerful government-owned monolith, especially when that institution is Bank of China, the fourth-largest of the state-owned commercial banks.

But that’s what happened last week when CCTV ran a show accusing Bank of China of offering money laundering service to wealthy clients trying to get out of the country.

The report has prompted speculation that the government is getting ready for a new campaign to tighten up capital outflow controls, and a broader shake-up of the financial and banking sectors.

The report showed an undercover reporter being briefed by a Bank of China employee in the southern province of Guangdong on how to channel large sums of money overseas.

Bank of China linked to immigration agencies to hide the origin of clients’ money and helped them send funds overseas for investment immigration.

However, banking sources insist the practice is not illegal and is carried out by other major banks. The South China Morning Post reported that Citic Bank was also involved in similar transactions.

Strict controls

As part of efforts to internationalise the yuan, China has tried to make it easier to move capital in and out of the country, but there are still strict controls in place.

Using the bank’s “Youhuitong” system, customers who want to migrate to North America, Australia and parts of Europe can shift the currency, which is often more than the $50,000 (€36,600) Chinese citizens are allowed to take out of the country each year.

‘Critical reports’

The report was a surprise, as it comes just weeks after the country’s media watchdog, the State General Administration of Press, Publication, Radio, Film and Television (SAPPRFT) issued a directive banning media outlets from making “critical reports” against major government institutions without approval.

The report said Bank of China was “blatantly offering money laundering services” and said a single branch in Guangdong had channelled six billion yuan (€710 million) out of the country this year.

In a statement, the bank denied it had broken foreign-exchange rules or provided money laundering services, but said the CCTV report contained “discrepancies and misunderstandings of the facts”.

“Bank of China introduced a cross-border yuan transfer service in 2011 that only allows money to be moved for immigration and overseas property investment purposes,” the lender said. The company has strict and robust operational procedures for its cross-border yuan transfer business, it said.

Both Bank of China and CCTV are “central enterprises” which come under the remit of China’s cabinet, the State Council. China is tightening up financial regulations, and is currently staging a nationwide crackdown on insider trading in the mutual fund industry.

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