China’s war on underground banking shows no sign of slowing down

china-war-underground-bankingChina’s war on underground banking is having great success, particularly in the province closest to the world’s top gambling hub, Macau.

According to the Guangdong provincial Department of Public Security, police in China’s most populous province cracked 83 cases involving underground banking transactions between April and December 2015, seven times the number of cases than police recorded in all of 2014.

Huang Shouying, director of the Department’s economic crime investigation bureau, told China Daily that police had exposed 79 illegal banking sites, detained 231 suspects, seized RMB 37.1m (US $5.6m) in cash and froze 3,491 accounts containing RMB 665m ($101m).

Shouying said underground banks were channels for “online gambling, telephone fraud, moving suspected drug trafficker’s money in and out of the mainland and domestic corrupt officials sending their bribes abroad.” That last category includes a pair of officials from Jiangxi province who used a Guangdong underground bank to send RMB 12.8m to an account in Macau last June.

Beijing announced its crackdown on underground banking in April, and renewed its efforts in August. The crackdown isn’t limited to Guangdong, as police in Zhejiang and Liaoning provinces made mega-busts of underground banking networks in November.

The crackdown has made life hell for Macau casino junket operators, who rely on the underground banks to transfer cash from the mainland to the casinos. But while Beijing has little love for the junkets, they may be merely collateral damage in Beijing’s larger war against capital flight, particularly as China’s economy continues to crumble.

Getting money to Macau isn’t strictly a Chinese problem. Over in China’s ‘renegade province’ Taiwan, a Macau-bound gambler lost his bet even before he left the country.

On Friday, as the man was preparing to board a TransAsia Airways flight to Macau, Taiwan Customs officers discovered HKD 300k ($38,600) in his coat pocket. Since the man had failed to declare the cash, Customs relieved him of all but HKD 82k, the maximum amount allowed to be taken out of the country under Taiwanese law.

The man, who claimed to have been unaware of the law, was understandably miffed at losing so much cash and decided not to board his flight after all. Helpful hint: next time, get really high-denomination bills, then stuff ‘em up your back passage. But wrap them in plastic wrap first, otherwise the casinos won’t accept them. Trust us on this one.