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December 29, 2006

Money Laundering in China: The Case of Huang Guang-rui (Part 3)

[Editor's Note: This is the final installment of our series on money laundering in China. Read Part 1 here. Part 2 here.]

“Wipe Clean” and “Wring Dry”

“Wiping clean” follows soaking -- allowing dirty money to distance itself from its unlawful origin. After the dirty money has entered the banking system, [they move it in and out of] accounts in as many different locations as possible or holding companies [they] establish, creating a complex web of financial transactions that render helpless any auditor and moving the dirty money farther and farther away from the criminal boss [of the original enterprise].

When Huang Guang-rui would set up a false account, the deposit usually came in and went out on the same day or the following. Huang Xi-tian and the others would split up and deposit money in the accounts set up by Huang Guang-rui. Huang Guang-rui would then move it on the same day or the following into the accounts of Gao Zhan-kun, Wang Li-Mei and others, leaving a small balance in the [transmitting] account.

Thereafter, the money would be transferred to Huang Guang-rui’s Hong Kong Xinxing International Trade Company and YongXing International Trade Company accounts. Once wrung dry, the dirty money had been washed clean, becoming money Huang Xi-tian could make use of without worry,

An important middle man, called “A-Nan,” who exchanged RMB for Hong Kong dollars and has not yet been made part of this case, moved Huang Guang-rui’s RMB across the border, completing the important step of wringing the money dry.

Actually, before the end of 2000, Huang Guang-rui didn’t know who A-Nan was. Later, he was introduced to A-Nan, who, through his gang, made money off of the forex spread across the border. But in the beginning, when the amount of RMB was small, A-Nan was never directly in touch with Huang Guang-rui.

The turning point came after 2002. The amount of smuggled money that was wired had become rather large, so Huang Guang-rui began direct contact with A-Nan so that [RMB could be] exchanged into Hong Kong dollars.

Between them, Huang Guang-rui and A-Nan established a fixed fee schedule. Huang Xi-tian and Huang Chu-dong called Huang Guang-rui to ask the daily rate (not the official rate, higher than the bank’s officially announced rate, and based on the supply of Hong Kong dollars at the time of the transaction), and paid Huang Guang-rui in RMB based on the rate Huang Guang-rui had provided. Huang Guang-rui would pay A-Nan based on the rate provided by A-Nan, making money off the forex spread.
　　
Changed into Hong Kong dollars, A-Nan would then transfer, via underground money-lending networks, to the Hong Kong Xinxing International Trade Company and YongXing International Trade Company accounts.

Judiciary organs have said that, since A-Nan has not been made part of this case, the exact methods of those who use underground money-lending networks to move money across border remain a mystery. Moreover, the details of the transacations between Huang Guang-rui and A-Nan are impossible to prove, as there is so little evidence.
　 　
Huang Guang-rui said that he only wished to give RMB to A-Nan. He guessed that A-Nan, in order to exchange currencies, may have had a relationship with a joint venture factory, to which A-Nan would have provided RMB in cash, in return for the joint venture (or foreign invested factory) would have placed the equivalent in Hong Kong dollars into the Hong Kong accounts.

In addition, Huang Guang-rui disclosed the activities of several other underground money lending networks – which directly exchanged RMB for Hong Kong dollars in cash and then moved it out into Hong Kong accounts. Chinese who gambled and won Hong Kong dollars on horse racing or the lottery in Hong Kong would give over their cash to A-Nan, who would then pay RMB to them in China. Outside of China, criminal elements who received smuggled goods would take Hong Kong dollars and within China pay RMB at a certain rate to people of a similar ilk.

Just like Huang Xi-tian and the others who profited from laundered, smuggled cash, there was still the originator of the smuggling – a Vietnamese trader name Zhang Ze-chun　　

For ease of moving money from one account to another, Huang Guang-rui and Zhang Ze-chun settled accounts via cellphone messaging that would send money from the Hong Kong accounts to Huang Xi-tian, and then to Huang Guang-rui. Block amounts of 500,000 or 1 million Hong Kong dollars were moved into Zhang’s Hong Kong accounts. The money arrived the same day. Zhang only shipped product once he had the money in hand.

By means of this cycle, the laundered cash entered the “wringing dry” stage, or perhaps one might say it had reached the “return of capital” stage. Just like legal capital, the laundered money was moved out to other destinations.

Well over 100 million RMB, dirty money earned through the smuggling efforts of Huang Xi-tian and 15 of his brothers and sisters, had been washed clean.　　　　　
　 　

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Posted by: rnp at August 10, 2007 2:21 PM

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