Largest crackdown on China banking fraud

24 November,, Lagos – A gang estimated to be able to earn close to 50,000 Yuan per day from foreign exchange transactions has been uncovered by the Chinese police. This has also led to the clamp down on the country’s largest underground banking case, involving an aggregate of 410 billion Yuan (64 bln U.S. dollars), according to the Ministry of Public Security.

Arrests and account freezes

Since investigation of the China banking fraud commenced in September last year, a total of 100 suspects from eight gangs have been detained. These gangs are known to have operated many shell companies in Hong Kong, majorly involved in foreign exchange transactions and money laundry. Back in December last year, about 3,000 bank accounts were frozen, along with arrest warrants issued for 56 suspects. It has taken about a year for police to sort through the over 1.3 million suspicious transactions.

These gangs ran illegal banking operations, helping customers circumvent the system by aiding them in avoiding China’s strict supervision on foreign exchange trade, according to information from one of the gang bosses. This service earned the gang close to 50,000 Yuan per day. Police officials say more than 370 people have been arrested or face criminal charges in line with investigations on the illegal bank, according to Bloomberg.

The Chinese authorities have been embattled by an “increasingly arduous and complicated” problem as regards unapproved financial institutions, which have been instrumental in promoting money laundering of funds realized by corrupt means, as well as online gambling and fraud.


This activity involves the breaking down of large sums into a series of smaller transfers using the bank accounts and foreign-exchange quotas of a range of individuals. The authorities have been working tirelessly to clamp down on illegal operations as the government tries to stabilize the economy and the value of the Yuan.

Some of the methods used in circumventing China’s currency controls include:

  • Using Kong money changers to make transfers
  • carrying checks from underground banks across the border to Hong Kong
  • smuggling cash through customs
  • getting an overseas mortgage based on savings held within China

As the hand of the law gets firmer, the police has shut down 37 such banks since August, according to the ministry.

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