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.



How much do APAC’s regulators earn?

Regulators’ salaries across Asia Pacific vary enormously:some supervisors earn fortunes and others hit the pay scale at the average to low end.APAC REGULATORs - SALARIES

Some governments believe that paying politicians and civil servants high salaries should reduce the likelihood of them accepting a bribe, offered in cash or disguised as a gift. Others argue that financial regulators will be less likely to jump ship and work for a bank if they are paid competitively by the government. Some countries pay their banking regulators on the same modest scale as other government employees , pitting them against some of the highest paid people in the country – bankers.

Last April, we found out how much the head of the Hong Kong Monetary Authority brings home; Norman Chan Tak-lam was set to earn HKD$9.41m(USD1.2m), making him the highest paid central bank chief in the world.  As the HKMA is also the banking regulator, this makes Chan Tak-lam the biggest earning regulator in the world. Chan Tak-lam’s counterpart in Beijing, Shang Fulin, the head of China Banking Regulatory Commission, earns an estimated  CNY11,271 (USD1,800) per month.

The accompanying infographic details more of APAC banking regulators’ earnings.

Comparing regulators salaries with those of bankers reveals a stark difference. Since the global financial crisis took hold in 2008, we have seen a distinct change of attitude towards financial institutions. Blatant rule breaking by banks – whether money laundering, sanctions busting or tax evasion – is being punished in high-profile cases as regulators finally start to show their teeth. However, the impact on the individuals responsible have been unremarkable; a move to a less high-profile role in the bank, or early retirement as opposed to job loss or, as some have called for, criminal prosecution.

Rather than going after the bankers who allowed criminality to go unchecked at banks, or those who made good from the financial crisis, there is an element of maintaining the status quo vis a vis bankers’ salaries that is out of step with the movement to make change for the better in the financial sector.

In the post global financial crisis and post public bailout economy, can banks justify paying million dollar bonuses?

In February 2015, Ross McEwen, the head of RBS, went on record to defend bonuses for bankers in spite of government bailouts and losses:

“I need to be fair paying for our people so I can actually keep them onboard.”

Although McEwen has opted to hand back his personal GBP1m (USD1.5m) share award to the bank he will still take home an expected GBP2.7m (USD4m) in 2015. Peter Sands, the outgoing boss of Standard Chartered also waived his bonus in 2015.

Looking at Asia Pacific, four of China’s largest five banks made the Banker’s Almanac list of top ten biggest financial institutions. This includes Industrial and Commercial Bank of China, China Construction Bank Corporation, Agricultural Bank of China Limited and Bank of China. China Development Bank Corporation languished at no. 21 on the list.

“According to the half-year annual reports of the listed commercial banks, the average annual payment before deductions for the chairmen of the five biggest Chinese commercial banks was around 2 million yuan ($325,600).”Source:The Global Times 2014.

Piyush Gupta, CEO of DBS bank, Singapore’s largest, made SGD9.2m (USD 6.6m)
The CEOs of United Overseas Bank and Oversea Chinese Banking Corporation were not far behind.

Chief regulators salaries fall far short of those earned by their peers at regulated entities.
It’s unlikely they will ever be measured on the same scale. Regulators, in an ideal world, would be motivated by doing the right thing for the right reasons. That is certainly the message that some regulators are putting across. But banking is all about money, and the more you earn, the higher your status.

First published on the International Compliance Association blog in March 2015. 

Australia bans reporting on corruption case, launches new ant-graft centre

The Australian Federal Police are the proud new leaders of a national anti-corruption centre. According to The AustralianThe Fraud and Anti-Corruption Centre, to be announced today, involves officials from government agencies including the tax office, Customs, Defence and the Department of Foreign ­Affairs and Trade working alongside federal police officers. FCA - Australiaflag

Meanwhile, another branch of the Australian executive has ‘blindfolded’ the Australian public by placing a super-injunction on a multi-national corruption case. The Supreme Court of the state of Victoria has banned Australian media organisations from reporting on the case which reportedly involves officials from Malaysia, Indonesia, Vietnam. The gag follows the secret indictment seven senior executives from subsidiaries of Australia’s central bank, the Reserve Bank of Australia (RBA), Wikileaks reported.

“The case concerns allegations of multi-million dollar inducements made by agents of the RBA subsidiaries Securency and Note Printing Australia in order to secure contracts for the supply of Australian-style polymer bank notes to the governments of Malaysia, Indonesia, Vietnam and other countries.”

The suppression order in full is here.

Australia: cash smuggling ex-banker jailed

A judge in Sydney has sentenced a former Bank of China employee to four months behind bars for attempting to shift AUD800,000 (USD751,000).

The court used Australia‘s anti-money laundering laws to prosecute the woman and an unnamed co-accused who had used a password to collect the cash from a third party at a Sydney railway station. There were no details of money laundering as we know it, but the judge did comment on the woman’s personal financial situation.

Source: The Age


Australia: Tiered rules proposed for mobile wallets, #Bitcoin

FSI panel suggests graduated framework.

The Government inquiry investigating regulation of Australia’s financial services industry has shied away from proposing strong regulatory action on virtual currencies and mobile wallets, suggesting a “graduated” regulation framework.FCA-BitcoinAustralia

The issue of virtual currencies, and Bitcoin in particular, has been plaguing governments the world over in recent years.

The Australian Taxation Office has been considering how it will tax the crypto-currency but recently pushed back the deadline for its ruling for a second time, seeking further expert advice.

In submissions to the current Financial System Inquiry, Australia’s largest banks complained of an uneven playing field being created as a result of unregulated new entrants into the payments space, compared to the heavy legislative burden authorised deposit-taking institutions (ADIs) are required to adhere to.

The big four banks all highlighted concerns that new, unregulated competitors – such as mobile wallet providers like PayPal and Google and alternate currencies like Bitcoin – risk upsetting consumer confidence in the stability of Australia’s financial system.

Westpac told the inquiry [pdf] that while it supported the entrance of new players in the market, all financial services needed to be subject to the same prudential regulation in order to avoid risks associated with disruption of service.

The bank urged the Reserve Bank to reconsider its recent decision to remove a series of requirements that non-ADIs were required to meet in order to participate in the payments system.

To date, new payment mechanisms and alternate currencies operating outside of the regulated payments system proposed little risk as they did not represent a “material portion” of Australia’s transaction activity, according to a submission by the National Australia Bank [pdf], but they may do so in the future.

But NAB warned that regulation will be required when these alternatives grow to a point where they are storing large amounts of value or processing material transactions.

At that point, the NAB suggested the Reserve Bank of Australia step in and do whatever it takes to stem the effect on the wider financial system and national economy.

CommBank [pdf] went as far as to call the uneven playing field a “risk to customers’ finance and personal information”, as well as the stability of the overall banking sector.

“While innovation in the system must be encouraged, allowing new players to enter an uneven playing field distorts the market. This may discourage entities which invest in the safeguards mentioned above from making the investments that have to date improved the system for customers while maintaining its stability.”

The bank was specifically concerned with the rise of virtual currencies including Bitcoin, highlighting the recent collapse of the largest Bitcoin exchange Mt Gox as one of the dangers posed by digital currencies.

“While Bitcoin is a cost efficient system, its conversion rate volatility, the recent bankruptcy of a major Bitcoin exchange, security challenges and facilitation of payments for illegal activity creates instability and poses a risk to the payments system and the economy.”

CommBank lobbied for such currencies to be closely monitored and regulated where necessary, and urged the Government to afford the same level of supervision to all members of the financial services sector, regardless of technology platform or service provider.

Suncorp [pdf] similarly urged the Government to make sure new entrants were appropriately regulated to maintain the “safety and soundness” of the payment system.

But the inquiry panel opted against offering any strong responses to these concerns, suggesting the nature and scale of the risk posed by these new entrants would first need to be established.

The panel urged [pdf] the Government to strike a balance between innovation and stability, which could best be achieved through a graduated framework approach.

Such a framework would set compliance requirements on a tiered approach based on the individual provider’s risk profile and scale.

“Failure to apply equivalent regulation may result in an uneven playing field and regulatory arbitrage. It may also incentivise those within the current regulatory perimeter to lower their own standards of compliance to compete.

However, applying the full weight of prudential or conduct regulation to small players and new start-ups, regardless of the materiality of the risk they represent, may stifle valuable innovation unnecessarily.”

– Interim Financial Services Inquiry report

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Source: ITNews

Australia: NSW super-squad to chase top crims

New South Wales police say a newly formed squad will hit elite organised criminals where it hurts by cracking down on money FCA - super heroeslaundering and tracking the proceeds of crime.

The state’s Asian Crime Squad, Organised Crime Targeting Squad and Casino and Racing Investigation Unit have merged to become the Organised Crime Squad, which is backed up by the NSW Crime Commission and federal law enforcement agencies.

NSW Police Commissioner Andrew Scipione said the squad’s brief was to pursue criminals at “the top of the food chain“.

“It’s all about the money,” Mr Scipione told reporters on Tuesday.

“We will see a fully dedicated money-laundering unit that will go after those that are laundering money (and) unexplained wealth.

“I don’t think many of these crime syndicates have amassed their money simply because they’re good savers.”

Squad commander Detective Superintendent Scott Cook said his 100-strong team was already pursuing lines of inquiry ranging from gambling to drug trafficking.

“The focus for us is going to be criminal networks, not an individual group at any moment in time,” he said.

“We’re going to work with other agencies, as well as the NSW Crime Commission, to make sure that we cut everyone off – the lawyers, accountants, other professionals – doesn’t matter who they are, they might find themselves down at the Crime Commission answering questions.”

NSW Crime Commissioner Peter Hastings QC said the new squad was a response to increasingly sophisticated crime syndicates.

“There are increasing and disturbing signs of enhanced sophistication amongst some criminal groups,” he said.

“Fortunately, a lot of criminals aren’t all that bright. They make mistakes, they become visible and they become apprehended.

“At the same time, there are people out there in the strand of organised crime who do not make mistakes, are not visible.”

The squad formally came into effect in Saturday.

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Australia-China: Corrupt PEPs alert

Corrupt Chinese officials flee overseas, some bound for Australia


Targeted in corruption probe: China's retired domestic security tsar Zhou Yongkang.Targeted in corruption probe: China‘s retired domestic security tsar Zhou YongkangPhoto: Reuters

BeijingCorrupt Chinese officials are fleeing overseas in increasing numbers to countries including Australia as an intensifying crackdown on graft takes hold within the ruling Communist Party, according to a new government think tank report.

The Chinese Academy of Social Sciences, a prestigious government-controlled think tank, urged stricter monitoring of what it termed “naked officials” – those whose spouses or children have migrated overseas and were therefore likely potential recipients of illicit funds from within China.

“The phenomenon of the flight of officials is likely to escalate, particularly under the current anti-graft wave,” said Lu Yanbin, a researcher at the academy and co-author of the report, which was published on Monday. “Corrupt cadres are running out of places to live in this country.”

Corruption crackdown: China's President Xi Jinping Corruption crackdown: China’s President Xi Jinping Photo: Reuters

President Xi Jinping’s anti-corruption chief, Wang Qishan, promised in January that the Communist Party would increase efforts to punish officials who attempt to flee overseas. This has included new regulations which block promotions for those “naked officials” found to have immediate family members based abroad.

“Past experience shows that the most popular destinations [for corrupt officials] are the US, Canada, and Australia,” said Hu Xingdou, an economics professor at the Beijing Institute of Technology. “Australia has already become a major recipient country [of Chinese corrupt officials].”

Australia’s popularity, Mr Hu said, could spike after Canada this month scrapped an investment immigration program that had been in operation for 28 years, after a crush of applications of wealthy Chinese mainlanders. About 45,000 applicants from China have been cancelled as a result, just as Australia ramps up its new significant investor visa program, which requires at least $5 million initial investment.

An estimated 1.2 million Chinese officials have immediate family abroad. Central Party School anti-corruption expert Lin Zhe said there was no guarantee the government’s new regulations would help curb the problem of “naked officials” fleeing, given previous attempts have proved ineffective.

“You can say these laws have reduced the opportunities for naked officials to flee,” Ms Lin told Global People magazine. “But in practice, its effectiveness has been lacking.”

A previous report from the CASS said more than 18,000 officials fled the country between 1995 and 2008, smuggling out assets totalling 800 billion yuan ($145 billion). In one week alone last year, the state-run Economic Observer newspaper reported 714 government officials fled overseas and did not return.

A separate report by the Boston Consulting Group last year said the movement of funds overseas from mainland China each year amounted to 3 per cent of China’s GDP.

This year’s CASS report also warned against senior officials promoting their aides and creating a “secretary gang” that may breed “organised crime and major violations”, in an apparent reference to the former security tsar Zhou Yongkang. At least four of his former secretaries are under investigation for corruption.

Former Zhou aides being investigated include Ji Wenlin, the former deputy governor of Hainan, and Li Hualin, a former senior executive at state-owned oil giant China National Petroleum Corporation.

China’s anti-corruption body, the Central Commission for Discipline Inspection, said it investigated 51,000 people for corruption, bribery, embezzlement and abuse of power, and a total of 30,420 officials were punished last year for violating new party rules aimed at avoiding pomp and ceremony.

With Sanghee Liu

Source: Sydney Morning Herald

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Australia – Regulation holding financial services back from exports

Financial Services Council (FSC) chief executive John Brogden has blamed “out-dated” regulation and taxation for Australia’s FCA - hold backfailure to effectively export its financial services business.

In the FSC’s Budget submission, Brogden pointed out that at 8.7% of GDP, financial services is the largest sector in the economy.

“Our financial services industry is diverse, innovative, scalable and well-regulated. We have world-leading capabilities in funds and private pension management.

“However, regulation has held the industry back from developing into an export industry. The industry has been unable to deliver for Australia beyond our shores. A combination of out-dated regulation and taxation settings has prevented Australia from exporting these skills for managing foreign capital,” he said.

The former Liberal Party politician said that in Hong Kong, 60% of the assets managed belong to foreign investors. Whereas in Australia, only 5% of the $2.2 trillion pool of assets is foreign sourced.

“Countries such as Luxembourg, Ireland, Singapore and Hong Kong promote and attract financial services through targeted regulatory and taxation settings,” Brogden continued

Failing to manage large amounts of foreign money means that Australia also fails to receive the flow-on benefits from higher economic activity, employment and tax collection, Brogden said.

“Instead, we are losing this business to Hong Kong, Singapore and others in our time zone. We urge the government to reform our regulatory and taxation settings to enhance our competitiveness and export opportunities.”

At $2.2 trillion, Australia has the third largest pool of assets under management in the world.

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