Authorities in the U.K. have frozen dozens of bank accounts belonging to Chinese nationals studying in the county, citing money-laundering concerns.
The National Economic Crime Centre (NECC) said it would seek to freeze 95 bank accounts containing an estimated £3.6 million (U.S.$ 4.7 million) in funds “suspected to be either the proceeds of crime or intended to be used for criminal purposes.”
It said the accounts were held mainly by overseas students studying in the U.K. who may be unaware that their operation of their accounts was”potentially illegal.”
“If the investigation can prove that the funds are the proceeds of crime or were intended to be used in unlawful conduct, they will subsequently be forfeited,” the NECC said in a statement on its website.
It said some international fund transfers from China bore the hallmarks of “smurfing”; an expression that refers to frequent, small deposits made to avoid scrutiny.
“In this operation, international transfers from China were declared as financial support to an overseas student but then used by criminals for non-student related activities,” it said, saying that the goods were used to buy goods that were then sent back to China with no obvious connection between the payee and the person ordering.
The Chinese Embassy said it was trying to seek “verification” of recent media reports of the operation.
“We advise the relevant Chinese citizens to cooperate actively in theinvestigation and assert their legitimate rights and interests through legal means,” the embassy said in a statement on its website.
“The Chinese Embassy in the UK will provide assistance if necessary to the relevant Chinese citizens within the purview of its responsibility,” it said.
Capital flight connection?
A China-based bank employee, who gave only her surname Sun, said thepayments could be connected to capital flight from China.
“This is very likely, but you would need to look at the family background of the kids involved,” Sun said. “If their parents run a company, then it could indicate that their parents are using their children’s accounts to send money overseas for certain investments.”
Current regulations cap the amount of money each Chinese citizen cansend out of the country to U.S.$50,000, Sun said.
“This [limit] applies to anyone over 18, but the key thing is that large amounts of money of uncertain origin is likely to give rise to suspicions of money-laundering overseas,” she said.
China recently criminalized underground foreign exchange transactions, in a bid to crack down on individuals and corporations who try to find ways around the foreign exchange restrictions.
Anyone linked to a cumulative transaction volume of five million yuan(U.S.$737,000) or illegal profits of 100,000 yuan (U.S.$14,749) could face up to five years’ imprisonment and a hefty fine, Hong Kong’s South China Morning Post newspaper reported last month.
Cumulative transactions over 25 million yuan (U.S.$3.69 million) or500,000 yuan (U.S.$73,745) in illegal profits, could see heavier penalties still, including the confiscation of property, the paper said.
The thresholds for prosecution will be halved if the violator has a criminal record, or refused to cooperate with authorities to trace illegal capital flows, it said.
The Global Times newspaper, which has close ties to ruling ChineseCommunist Party mouthpiece the People’s Daily, said several Chinesestudents had asked the embassy for assistance after their bank accounts were frozen.
The students were targeted by the NECC after they privately exchangedmoney through WeChat, which could violate both U.K. and Chinese law, the paper said.
“Many overseas students like to use these groups to exchange money forconvenience,” it said. “But few of them are aware that they could be illegal.”
The paper said it had found “many money exchange groups” on the popular social media app WeChat offering far better exchange rates than those typically offered by banks.
It cited a Chinese citizen who graduated from the University of Leeds as saying that he had privately exchanged a total of 200,000 yuan(U.S.$29,800) to pound sterling using WeChat.
Reported by Qiao Long for RFA’s Mandarin Service. Translated and edited by Luisetta Mudie.