Hong Kong cracks down on illegal money flows from China trade

Wed May 4, 2016 7:12pm EDT
 
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By Saikat Chatterjee

HONG KONG (Reuters) - Hong Kong is conducting a multi-pronged customs, shipping and financial sector crackdown against so-called fake trade invoicing that allows billions of dollars of capital to leave China illegally.

Hong Kong's central bank told Reuters it has beefed up its scrutiny of banks' trade financing operations, while customs officials are doing more random checks on shipments crossing border posts and conducting raids on warehouses to ensure the authenticity of goods, senior officials working in shipping, logistics and banking said. The head of a logistics company said surprise customs inspections at Hong Kong border posts had doubled.

The sources declined to be identified given the sensitivity of the issues.

They said the increased efforts began this year and reflected concerns about billions of dollars in illicit cash authorities suspect are being channeled through Hong Kong following a stock market crash in China last year.

"Examinations and investigations reflect one of the strongest trends we are seeing now in the financial sector," said Urszula McCormack, a partner at law firm King & Wood Mallesons, which helped co-author a report published by The Hong Kong Association of Banks in February that highlighted shipping as a sector where fake invoicing can thrive.

"(Hong Kong) regulators are now in enforcement mode."

China has become increasingly concerned about capital outflows since the middle of last year when Chinese rushed to get money offshore for safekeeping or to invest following the stock market slump and unexpected yuan devaluation.

Hong Kong is the most popular route, analysts say, because of its proximity to China.   Continued...

 
A Hong Kong policeman stands guard at Hong Kong's border with Shenzhen, China April 29, 2016.  REUTERS/Bobby Yip