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15-07-2014, 11:23 PM
Banks halt yuan swap scheme
THE AUSTRALIAN JULY 16, 2014 12:00AM
Scott Murdoch
China Correspondent
Beijing
A NUMBER of large Chinese banks have temporarily closed a scheme that allowed wealthy residents to park cash overseas in locations such as Australia to skirt Beijing’s tough capital control rules.
The Bank of China was last week accused of running a yuan remission program that covertly sent money overseas in defiance of restrictions that permit only $US50,000 ($53,380) a year be transferred by citizens outside of China.
It was claimed the scheme could potentially allow money laundering but the allegations were fiercely denied by the Bank of China, which is the nation’s largest lender.
An investigation by China Central Television, the national broadcaster, said Australia had been a major beneficiary of the “You Hai Tong” schemes operated by several major commercial Chinese banks.
It was alleged that wealthy mainland China residents were channelling cash into Australia by applying for a Significant Investor Visa, which fast-tracks permanent residency and allows capital to be transferred offshore.
Under Australian regulations, investors must place at least $5 million in Australian bonds, funds or a small business, and government figures show 90 per cent of SIV applicants are based in China.
It was reported yesterday that the remittance schemes operated by Bank of China, the Industrial and Commercial Bank of China, and China Citic banks had been temporarily closed.
The scheme was approved by Chinese regulators two years ago but have not been commonly promoted by the banks until recently. The People’s Bank of China, the central bank, is reportedly investigating whether the scheme is being wrongly used to aid money laundering.
The scheme was launched only in Guangdong province to allow Chinese individuals to carry out cross-border yuan remittance through branches located in the region. A trial program was reportedly kept quiet by the PBOC because no decision had been made to roll it out nationwide.
The CCTV investigation has proved damaging to Bank of China, which has been forced to defend its reputation.
The Wall Street Journal last night reported that the scheme allegedly allowed citizens to transfer unlimited amounts of yuan overseas which was then exchanged into foreign currencies. Under Chinese rules, yuan usually has to be converted before it is moved offshore and transactions are capped.
The Bank of China has argued the scheme was not illegal because the service was limited to wealthy clients who were participating in emigration investment programs.
“The program itself is neither illegal nor improper as it’s been approved by the central bank but the question is if any particular bank has gone too far by offering clients services they are not supposed to,” a senior banker told the WSJ.
THE AUSTRALIAN JULY 16, 2014 12:00AM
Scott Murdoch
China Correspondent
Beijing
A NUMBER of large Chinese banks have temporarily closed a scheme that allowed wealthy residents to park cash overseas in locations such as Australia to skirt Beijing’s tough capital control rules.
The Bank of China was last week accused of running a yuan remission program that covertly sent money overseas in defiance of restrictions that permit only $US50,000 ($53,380) a year be transferred by citizens outside of China.
It was claimed the scheme could potentially allow money laundering but the allegations were fiercely denied by the Bank of China, which is the nation’s largest lender.
An investigation by China Central Television, the national broadcaster, said Australia had been a major beneficiary of the “You Hai Tong” schemes operated by several major commercial Chinese banks.
It was alleged that wealthy mainland China residents were channelling cash into Australia by applying for a Significant Investor Visa, which fast-tracks permanent residency and allows capital to be transferred offshore.
Under Australian regulations, investors must place at least $5 million in Australian bonds, funds or a small business, and government figures show 90 per cent of SIV applicants are based in China.
It was reported yesterday that the remittance schemes operated by Bank of China, the Industrial and Commercial Bank of China, and China Citic banks had been temporarily closed.
The scheme was approved by Chinese regulators two years ago but have not been commonly promoted by the banks until recently. The People’s Bank of China, the central bank, is reportedly investigating whether the scheme is being wrongly used to aid money laundering.
The scheme was launched only in Guangdong province to allow Chinese individuals to carry out cross-border yuan remittance through branches located in the region. A trial program was reportedly kept quiet by the PBOC because no decision had been made to roll it out nationwide.
The CCTV investigation has proved damaging to Bank of China, which has been forced to defend its reputation.
The Wall Street Journal last night reported that the scheme allegedly allowed citizens to transfer unlimited amounts of yuan overseas which was then exchanged into foreign currencies. Under Chinese rules, yuan usually has to be converted before it is moved offshore and transactions are capped.
The Bank of China has argued the scheme was not illegal because the service was limited to wealthy clients who were participating in emigration investment programs.
“The program itself is neither illegal nor improper as it’s been approved by the central bank but the question is if any particular bank has gone too far by offering clients services they are not supposed to,” a senior banker told the WSJ.