February 13 2016
China’s vast underground banking network processed more than 1 trillion yuan ($152 billion) in transactions last year, according to media reports Saturday, citing the country’s foreign exchange regulator.
Zhang Shenghui, the head of the State Administration of Foreign Exchange’s inspection division, told the state-run Xinhua News Agency on Friday that his department had participated in breaking up more than 60 underground banks suspected of doing more than 1 trillion yuan in transactions last year. The regulator also asked legal banks to increase their oversight of any suspicious activities.
Although Chinese citizens are officially allowed to convert 50,000 yuan ($7,653.90) a year, authorities have detected several ways to defeat the control, including “smurfing” where large sums are broken down into a series of smaller transfers using the bank accounts and foreign-exchange quotas of a range of individuals. Some underground banks are also known to use non-resident accounts and shell companies based in Hong Kong.