Bloomberg News has a follow-up article here on last week’s story of how wealthy immigrants from China and Hong Kong use alleged money-laundering services offered by the Bank of China Ltd. to transfer funds to Canada and the US.
Last week, China Central Television broadcast a story alleging that the Bank of China offered a money laundering service to wealthy Chinese nationals whereby vast sums of money were wired to places like Canada in circumvention of China’s $50,000 currency exchange limit.
Following news of the story, transfers of currency from Chinese foreign nationals under the program were suspended in China. The Government of China subsequently asked the Bank of China for all of the transaction records of the immigrants who used the services including details in respect of where they emigrated, how much was removed, how it was removed, and the sources of funds.
According to the Bloomberg News article, HSBC Holdings Plc allegedly said that it offers Chinese clients a foreign mortgage service to avoid the currency conversion restrictions pursuant to which their clients deposit yuan with HSBC in China which is used for collateral for the issuance of a mortgage in jurisdictions such as the US or Canada.
The article does not address the obvious collateral financial crime issues in connection with the transfer of wealth schemes from China to Canada and the US for immigration purposes. Those issues are that even if the transfer of funds was in some manner approved by the Bank of China under a pilot project, or is permitted as a foreign mortgage, the sources of wealth still need to be confirmed as legitimate (in other words the banks need to confirm that none of the billions of dollars transferred or used as collateral are derived from corruption) and the clients need to be vetted as politically exposed persons. Most wealthy persons immigrating to Canada and the US from China are politically exposed persons.
A Vancouver realtor in the Bloomberg News article confirmed that there was an influx of funds from wealthy immigrants from China and Hong Kong to Vancouver that was used to purchase real estate. Real estate agents in Canada, unlike banks, do not have politically exposed person compliance obligations.
The request from the Government of China for the transactional and immigration records of the persons from China who immigrated to the US and Canada with billions of dollars in assets is going to be of concern to those who immigrated because China is apparently in discussions with the US to obtain asset information on its former citizens for the purposes of asset recovery. This may be part of a greater plan among G20 nations to start operating the denial of safe haven program which you can read about here.