A little more than two months after her bugged conversation with Wang Jing, a senior officer at the Madrid branch of the state-controlled Industrial and Commercial Bank of China (ICBC), bank client Xu Kai was arrested in August 2012 as part of an investigation, code-named Operation Emperor, a sweeping crackdown on Chinese organized crime.
Xu’s husband, Wang Feng, was also arrested.
Police found 34,530 euros (US$40,656) in cash when they raided the couple’s home, according to a police report on the raid.
Most of the intercepted calls involving ICBC staff were with Xu Kai and Wang Feng.
The husband and wife led a group “dedicated to the massive transfer of money to China,” according to warrants for their arrests.
The couple used secret codes in conversations with bank staff, police said in the court filings.
Money was referred to as “merchandise” and a sum of 10,000 euros was called a “unit.”
Xu and Wang fled Spain after being released on bail in November 2012, investigators said.
International warrants have been issued for their arrest. They face allegations of money laundering, tax fraud, forgery and belonging to a criminal organization.
Reporters were unable to contact Xu and Wang, whom the Spanish authorities say are back in China.
A former lawyer for Wang said he had no contact details for him.
The former Madrid branch head and current general manager of ICBC’s European division, Liu Gang (劉剛), was arrested two days after last year’s raid on the bank when he flew to Madrid from Luxembourg to assist his subordinates, investigators told reporters.
In 2012, Liu had been named one of the 10 most influential Chinese business executives in Spain by the country’s leading business daily.
Liu, who was released on bail in April last year, did not respond to questions sent to him and his lawyers.
Contacted by telephone, Madrid branch manager Liu Wei (劉煒) said he was busy in a meeting and hung up.
The court filings show that ICBC’s management in Spain knew the police were conducting an investigation more than three years before last year’s raid.
As part of Operation Emperor, Spain’s High Court in November 2012 authorized police to investigate the bank in connection with evidence collected in the wiretaps.
Judge Fernando Andreu ordered ICBC to immediately freeze all financial assets linked to the people under investigation, cancel all pending transfers and provide information on these clients to investigators.
ICBC complied with parts of the order, the court filings show.
It promptly wound down the money transfer services it provided the groups, investigators and former ICBC employees said.
However, prosecutors said in the summary of allegations released in May last year that ICBC had failed to comply with court orders requesting information about clients under suspicion.
They also said the bank had deliberately obstructed the investigation by supplying misleading information about its clients, their invoices and the accounts under investigation.
After prosecutors aired the allegations, ICBC Europe’s chairman Chen Fei (陳飛) said in a statement to the media that there had been no trial or verdict in the case, so “no references should be made to the bank’s guilt.”
Well before ICBC came under suspicion, the smuggling groups were already allegedly using other financial institutions to launder undeclared cash.
Spain’s financial intelligence unit, Sepblac, said it detected unusually high amounts flowing to China in 2009, mainly through money transfer companies.
The unit sanctioned two money transfer firms for wiring hundreds of millions of euros to China without following proper authentication procedures, Sepblac reports said.
In blocking the money transfer firms, a former Sepblac official said the agency had unwittingly diverted the networks to ICBC.
“We were directing all that activity to the only place it could get out — ICBC,” he said.
ICBC’s Madrid branch opened for business in the depths of Spain’s financial crisis in January 2011.
At the opening, then-ICBC global chairman Jiang Jianqing (姜建清), an alternate member of the Chinese Communist Party’s powerful Central Committee, hosted a banquet in Madrid. Local officials hailed the investment as a demonstration of confidence in Spain.
Three former ICBC staffers in Spain told reporters the branch was chaotic when it opened.
Many of the staffers were unprepared for conducting business in a foreign country, they said, unable to perform basic risk assessments or read a balance sheet.
Money laundering controls were lax, they said.
One former employee quit out of frustration over what they said was the lack of attention paid by the branch’s leadership to preventing money laundering.
The ex-employee said the bank’s business was especially vulnerable because clients — almost all Chinese — primarily used cash.
The person’s bosses had said that they could not demand an “exhaustive statement” from their Chinese clients about the origin of the funds, because Chinese worked in a different way from Europeans and were not used to that.
The failure to adhere to these standard banking practices unnerved some staff.
“I felt that I was assuming a risk and did not have the support of the branch’s leadership to adequately do my job,” the former employee said.
As ICBC staff were moving into their new branch, suspected Chinese criminal groups in Spain were looking for new avenues to launder money, according to the wiretap transcripts and Spanish financial security officials.
Members of these suspected crime networks expressed confidence they could navigate any obstacle to moving cash.
In a bugged conversation in September 2011, an unidentified employee at an ICBC branch in China told Yang Yongjun, a suspected member of one of the crime networks, that new internal bank rules meant money transfers had to be accompanied by customs documents.
“Everything can be bought with money,” Yang said. “There won’t be any problem with the documents.”
Reporters were unable to contact Yang, who was in China when the Spanish authorities issued a warrant for his arrest on suspicion of tax fraud and money laundering in October 2012.
Police allege the smugglers used multiple channels to move their money.
In late 2011, Spanish police staking out the home of Zhang Jianren, a Chinese businessman in Madrid, watched as a gray Volkswagen Golf Plus with Italian license plates pulled up and parked inside the garage, according to a report filed by police investigators.
Months earlier, they had spotted the same car at this address.
This time, a surveillance camera secretly installed by police inside the garage showed the Golf’s driver, his passenger and the businessman spend more than 40 minutes taking objects from a pair of trolley suitcases and loading them into the back of the car, the report said.
When the Golf drove out, two policemen followed on the R-5 motorway out of Madrid. At a tollgate about 20km southwest of the city, they pulled the car over.
A quick search of the two occupants, brothers Zhan Fengyuan and Zhan Jing, produced 2,770 euros in cash, according to the report.
The brothers, both born in China’s Zhejiang Province and holding Italian identity papers, refused to answer questions about the cash, saying only that they were on their way to Portugal.
However, there were signs that the vehicle had been tampered with. The Golf had been modified to allow access to the gas tank from under the back seats.
After more than three hours searching the vehicle, police recovered another 1.25 million euros in cash — wrapped in plastic bags floating in the tank.
A lawyer in Spain who represented the brothers until 2015 said no criminal charges had been brought against them.
A warrant was issued in 2012 for the arrest of Zhang Jianren, but he was already in China. Reporters were unable to contact him.
Intercepted conversations between members of the suspected criminal networks suggest that ICBC was more accommodating than local banks after Spain tightened money laundering rules in 2010.
“The Spanish banks aren’t processing the transfers when we bring them the invoices, but ICBC processes them whenever we do business with them,” Zhou Jianjun, the senior figure in one network monitored by police, told an associate in a call on April 22, 2012.
“I meet with people from ICBC whenever I want to,” said Liu Cong, the associate.
Liu Cong was arrested on suspicion of money laundering and tax fraud, and released on bail in late 2012.
He did not respond to questions sent by reporters to his home outside Madrid.
Still, the ICBC staff appeared anxious about attracting attention from Spanish authorities.
In one call on May 18, 2012, Madrid banker Wang Jing warned Xu Kai’s husband Wang Feng about an inspection at the branch the following week.
Wang Jing said she was letting ICBC’s clients know they would have to freeze all transfers to China until after the inspection, according to wiretap transcripts.
Toward the end of 2015, just a few months ahead of the raid, concern inside ICBC was high, two former employees told reporters.
Around that time, they said, ICBC’s general management in Spain ordered Wang Jing to go through all client records and transactions from the Madrid and Barcelona branches to “clean them” and fix any irregularities.
Wang, they said, worked from 8:30am to 10pm every day for several weeks collecting and sorting the files.
Additional reporting by Giselda Vagnoni
This is part two of a two-part series. Part one was published yesterday.
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