China publishes gallery of alleged financial fugitives

FCA china-financial-fugitives

China’s Ministry of Public Security has released information about economic fugitives (pictured) who were believed to be at large in other countries, including Australia. China Ministry of Public Security

The Communist Part of China’s crackdown on corrupt officials has created a wave of economic fugitives, who are fleeing China to escape trial. The Ministry of Public issued the photos above of alleged economic fugitives from China, many of whom are thought to be in Australia.

The Chinese diaspora is widespread. Since President Xi Jinping began his campaign to root out corruption from the Chinese Communist Party, stories of alleged financial criminals fleeing China to live with relatives in other countries have cropped up in the media. Last year, the focus was the US, thought to be a safe haven from extradition. Now the focus is Australia, another country which has an extradition treaty with China, but which has yet to ratify it.

In March this year, China reportedly gave the US a list of allegedly corrupt officials, thought to be in the US and asked for help in tracking them down. The Chinese government launched Operation Foxhunt  in summer 2014, in a bid to track down suspects on-the-run beyond China’s borders.

Back in February 2014, Financial Crime Asia reported on the expected surge of fugitives to Australia. Canada had apparently been the migrant’s destination of choice, until it scrapped an investment immigration programme for Chinese citizens after noticing a marked increase in the number of applications by wealthy Chinese Mainlanders.

In 2013, China’s anti-corruption body, the Central Commission for Discipline Inspection, investigated 51,000 people for corruption, bribery, embezzlement and abuse of power. It claimed a total of 30,420 officials were punished for violating new party rules aimed at avoiding pomp and ceremony, according to a report in the Sydney Morning Herald.

How to spot an economic fugitive

Government officials are politically exposed persons and, thereby, subject to enhanced due diligence measures by banks and other regulated institutions in Australia, Canada and other jurisdictions. Whether the alleged criminals will be subject to extradition or not for the crimes they may or may not have committed, their inclusion on the ‘wanted list’ is enough to merit further enquiries by financial institutions.  The photo gallery above presumably gives the names of the officials in Pinyin. Any list monitoring software worth its salt will be able to translate the names into the Latin alphabet and should be able to identify whether any of the names above correspond to accounts held at a financial institution.



China: Spectre of Corruption Haunts Huawei

(Beijing) – More than 100 company employees at Huawei Technologies, China’s biggest telecoms equipment maker, have been implicated in allegations of graft, triggering tightened internal scrutiny on its employees and sales agents. FCA - Huawei China

At an internal meeting in Beijing on September 4, Huawei executives highlighted the company’s urgent attempt to fight against corruption in deals involving rebates in corporate businesses.

According to the company, as of August 16, Huawei detected 116 employees on suspicion of corruption in cases which were linked to 69 sales agents of the company. Four employees have been handed over to the judicial system.

Several of Huawei’s agents told Caixin that one of Huawei’s branch heads was detained during a trip, and many of his subordinates are also involved in the case.

“The current figures only refer to cases with detailed evidence,” said one source from Huawei, adding the company has stepped up internal reviews on corrupt activity and promised harsh punishment for misconduct.

Facing lukewarm growth in device sales and business with telecom operators, Huawei has focused on the corporate network business. In 2013, corporate business reported 15.2 billion yuan in revenue, a year-on-year increase of 32 percent.

However, aggressive competition among sales agents in corporate deals and the reward power of sales managers to offer rebates has shaped opportunities for corruption.

A Huawei staffer said corruption usually occurs in giving product rebates to sales agents. Huawei has a complicated rebate system with large gaps in varying rebate levels.

The bigger the rebate, the larger the profit margin for agents, said the source. “To get more rebates, some agents bribe Huawei employees while other employees even ask for a bribe.”

Sources told Caixin that among the 69 agents accused of bribery by Huawei, 53 sent bribes solicited by company employees.

In addition to the corporate network business, other divisions of Huawei are taking more precautions against corruption. Recently, Yu Chengdong, chairman of Huawei’s device department, issued an internal email to his employees warning that some of the department’s staffers had been found taking bribes from agents.

Huawei’s device department has products ranging from mobile phones, tablets to broadband devices and corporate network equipment. In 2013, revenue from device sales reached 57 billion yuan.

Huawei’s total revenue amounted to 239 billion yuan last year, an increase of 8.5 percent from the previous year.

Source: Caixin

China’s corruption probe affects Canadian oil reserves

The FCPA and UKBA may have extra-territorial reach built into their statutes, but clauses are not stopping the long arm of the Chinese legal system from disrupting industry beyond its borders. FCA - oilsands

Reporters from the WSJ have reviewed emails detailing a shake up at the top of China National Petroleum Company‘s (CNPC) Canadian operations and a billion-dollar oil sands project is on the blocks as a result. Canadian officials have commented that “there is no reason to believe that any Canadians are involved or being investigated.”

Bank of China accused of laundering?

The Chinese state broadcaster has accused the Bank of China of money laundering, according to this report in Forbes .

BoC Tower, Hong Kong

BoC Tower, Hong Kong

Bank of China has gone on record to deny the allegations – “BOC said CCTV’s story based on the undercover investigation “contain discrepancies with and misunderstanding of the facts.”

Having a closer look at Macau and the gambling ships which float just outside China in international waters to see where the rest of the money is going.

China: Gov funds used to buy vineyards, Vegas trips

An audit report from the Chinese government has revealed how funds were misappropriated to buy vineyards in France and to pay for trips to Las Vegas.

Viva Las Vegas

Viva Las Vegas

In 2012, the French financial intelligence unit – Tracfin – reported cases of Asian and Eastern European criminal gangs buying vineyards in South West France as channels to launder money. The growing appetite for wine in Asia lends itself perfectly to financial crime. Local banks in Asia are unlikely to know whether a transaction related to buying a vineyard or even shipments of European wine are over or under priced. Wine is valued differently in different parts of the world, due to demand, supply and import taxes which can be particularly high in Asia.

If the audit report is correct, it looks like it was not only criminal gangs cashing in on the rising popularity of wine-drinking in China.


China reveals 300 corruption cases


US IRS agents pay a visit to Macau

Agents from the US Internal Revenue Service travelled to Macau – the favourite haunt of China’s avid gamblers – in May. Read this report from Brett Wolf at Reuters for an update.

Source: Reuters

Doctor exposes China’s medical corruption epidemic

MIANYANG: Ordering an unnecessary pacemaker, urging a woman to be hospitalised for a sore throat — a doctor’s allegations of corruption spotlight troubles so endemic in China’s healthcare system that patients frequently turn violent. 

Lan Yuefeng, a former hospital ultrasound chief, ignited fury when she accused her hospital of exploiting the sick by routinely overprescribing medicine and treatment. 

“I think it’s pretty common, and I think it’s really sad,” she told AFP

Lan was put on leave two years ago but has continued showing up to work in Mianyang, in the southwestern province of Sichuan, earning domestic media attention and the nickname “corridor doctor”.

But her colleagues have ostracised her, going on strike to protest her dragging down the state-run facility’s reputation and voting this month that she should be dismissed. 

Yet ordering excess drugs and treatment, and taking bribes from patients and drugmakers, are open secrets in China’s over-burdened health sector.

The failings of the system provoke so much anger that reports routinely emerge of patients attacking and killing medical personnel.

In April a 45-year-old man unhappy with his circumcision stabbed a doctor to death in the eastern province of Jiangsu. Three months earlier a man was sentenced to death for killing an ear, nose and throat specialist in neighbouring Zhejiang.

Nearly two-thirds of hospitals reported violence between patients and healthcare providers in 2012, up from about half five years earlier, domestic media cited the China Hospital Association as saying last year.

Hospitals each averaged 27 incidents against staff, from threats to killings, up from 21 over the same period, it said.

Meanwhile 80 per cent of Chinese said accessing a doctor was hard and 95 per cent said care was expensive, the Horizon Research Consultancy Group found last year.

The costs are  rising partly because hospitals depend on selling drugs and medical services for nearly 90 per cent of their income, said Yanzhong Huang, a senior fellow at the Council on Foreign Relations in the US and author of Governing Health in Contemporary China.

“There’s a strong incentive for the healthcare providers to provide over-treatment, over-service, in order to maximise revenue,” he said.

“Their bonuses are actually associated with that. It’s not just the hospitals, it’s the  ..


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GSK scandal triggers debate on high drug prices in China

The bribery scandal involving British pharmaceutical giant GlaxoSmithKline’s Chinese subsidiary GlaxoSmithKline (China) Investment (GKSCI) first came to light 11 months ago.

GSK China's office building in Shanghai. (Photo/Xinhua)

GSK China’s office building in Shanghai. (Photo/Xinhua)

The police found that the British drugmaker offered bribes to boost sales and inflated drug prices to make up for the bribery expenses and help the firm earn huge profits.

Among the irregularities cited was the domestic price of Heptodin — a drug used to fight hepatitis — being quoted as seven times higher than what was being charged in some countries.

Heptodin was being sold for 142 yuan (US$22.76) in China, compared with only 18 yuan (US$2.87) in South Korea, less than 26 yuan (US$4.17) in Canada and less than 30 yuan (US$4.8) in the United Kingdom.

The news agency added that this meant that Chinese patients had to pay much more to buy a box of Heptodin and that “the price of the drug sold in China could be seven times higher than in other countries.”

But the price gap was not valid, as this comparison involved comparing the price of a box of Heptodin in China with a tablet overseas.

Although the error was quickly pointed out by the media and other websites, GSK made no further clarifications on the price differences. But the controversy surrounding the case has triggered a hot debate about the prohibitive high prices enjoyed by the original drugs of the multinational pharmaceutical companies.

“Although the basis for calculation in GSK’s case was wrong, it is a fact that the British company has violated the law,” an insider from the Pharmaceutical Industry Association stated, adding that “maybe we could use the case to solve the long-stalled issue of allowing original drugs to set their own prices.”

The original drugs refer to imported drugs that have passed the patent protection period, but still enjoy the unique treatment of setting their own prices so that price differentials between the original drugs can be more than 10 times that of domestic generic drugs.

“There is no such a thing as original drugs in the international community; there are only patent drugs and generic drugs. Patent drugs enjoy high prices and market status for a short period of time, but after that period, there will be generic drugs. Only in China, these multinational companies continue to set high prices after the patent protection period and enjoy higher than national treatment,” Yu Mingde, president of the China Pharmaceutical Enterprises Association, pointed out.

Yu has been dedicated to the scrapping of such treatment for years. Some are also of the view that this is one of the major factors for high drug prices in China.

Source: WantChinaTimes

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China halts dollar transactions with most Afghan banks –

May 22 (Reuters) – Chinese banks have halted dollar transactions with most FCA - dollarsAfghan commercial banks, the central bank governor said on Thursday, making it difficult for businesses to pay for imports with one of the Afghanistan’s biggest trading partners.

China is a major country that was handling those bank transfers, and now they have told the banks they can’t do it,” governor Noorullah Delawari told Reuters.

The impact on business had been felt immediately, he said. (Reporting by Jessica Donati, Editing by Maria Golovnina and Angus MacSwan)



Source: Reuters

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China: Corruption watchdog visits Roche

Roche had been visited by a unit of China’s competition regulator, the Swiss FCA - Rochedrug maker said yesterday, a part of a widening crackdown on corruption and high prices in the country’s pharmaceutical sector. The reason for the visit was not immediately clear.

Roche said its offices in the eastern city of Hangzhou had been visited by a unit of the State Administration for Industry and Commerce (SAIC), which usually takes the lead in bribery and corruption cases.

“We understand that a local government unit in Hangzhou visited Roche’s offices on May 21, but the specific details are not yet clear. We will co-operate fully with the work of the relevant government department,” the company said.

The British drugmaker has said it wanted “to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens”.

A spokeswoman for the local office of the SAIC said the visit was for a range of issues, but declined to elaborate. She said the office had yet to reach a conclusion on the issues.

Last week Chinese authorities charged executives at Britain’s GlaxoSmithKline over bribery and corruption, and legal and industry sources say the crackdown on the sector is likely to intensify.

“More and more firms have been visited by the SAIC in the wake of the GlaxoSmithKline case,” John Huang, a partner at law firm MWE China, said.

Last year Chinese authorities visited drug makers including Novartis, AstraZeneca, Sanofi, Eli Lilly and Bayer as part of a broad investigation into the sector.

Source: Reuters/IOL

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