Sun, Aug 06, 2017 - Page 7 News List

How China’s biggest bank became ensnared in a sprawling money laundering probe

ICBC, at the direction of the Chinese Communist Party, is a flagship in China’s quest to become a global banking giant. However, an investigation into money laundering has led to diplomatic complications

By Angus Berwick and David Lague  /  Reuters, MADRID

These networks also sent funds via money transfer firms in Spain and by smuggling large amounts of cash by road to other European countries from where it was transferred to China.

On the strength of the wiretaps, money transfer records and other evidence, police last year arrested the seven ICBC executives in Madrid, including branch manager Liu Wei (劉煒) and ICBC European division general manager Liu Gang (劉剛).

Authorities accused the bank of laundering money for several criminal networks in Spain and seeking to conceal this role.

The seven employees who are suspects in the money laundering case are out on bail. They have had their passports confiscated and are awaiting further legal proceedings in Spain, a High Court spokesman said.

BANKING LICENSE

For now, none of the suspects have been formally charged. Under Spanish law, a person is named as a suspect under investigation for a particular offense — and can be detained for up to four years — until an investigating judge decides whether to press charges.

If convicted for money laundering, the bankers could be jailed for up to six years. If the bank is found to be complicit, it could lead to a hefty fine. In the event of a trial, the bank would have to endure a public airing of its alleged links with suspected criminal networks in Spain and China.

However, the bigger danger for the state-run ICBC is that its European banking license could be withdrawn. ICBC is concerned the investigation could affect its European headquarters in Luxembourg, people with direct knowledge of the case said.

This includes the risk that Luxembourg’s financial supervisor could ask the European Central Bank to withdraw ICBC’s banking license if the supervisor believes there is sufficient evidence the bank failed to comply with mandatory anti-money laundering provisions, these people said.

ICBC is a flagship in China’s quest to become a global banking giant. At the direction of the Chinese Communist Party, it and other Chinese state-run banks have aggressively expanded into offshore markets.

For ICBC and the other giants, the money-laundering accusations could stymie their expansion plans. In Italy, state-controlled Bank of China was fined this year for involvement in a separate money-laundering case.

The bank said it had bolstered its internal checks and that the settling of the case did “not imply any admission of guilt.”

For European countries the investigations pose the risk of diplomatic conflict with Beijing that could affect business relations with the world’s second-biggest economy.

A Spanish Civil Guard serious crime unit spokesman said police were working with authorities “in many other countries,” without elaborating.

In the police raid last year on the ICBC branch, dubbed Operation Shadow, officers swarmed through the lemon-colored building on Paseo de Recoletos, a wide, tree-lined boulevard in central Madrid, filled with art galleries, museums and palaces. All staff were ordered not to touch their telephones or computers, former ICBC employees said.

In the summary of accusations against ICBC released in May, Spain’s anti-corruption and organized crime prosecutor’s office said the alleged criminals carried thousands of euros in cash at a time into the bank’s Madrid branch, stuffed in rucksacks and boxes.

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