Beijing Names and Shames Ten for Foreign Exchange Violations Linked to Cross-Border Gambling
China’s foreign exchange regulator has fined ten mainland citizens almost US$900,000 for illegal currency trades made for the purposes of offshore gambling.
In an announcement on its website, the State Administration of Foreign Exchange (SAFE) named and shamed the perpetrators. The illegal transactions were made either through underground banks or via domestic merchants’ point-of-sale credit card machines illegally moved outside the country, it said.
SAFE added that the instances were merely “typical cases of violations,” implying a far larger crackdown was underway against those who use illegal foreign exchanges for gambling overseas.
The regulator said its actions had “strengthened the supervision of the foreign exchange market” and promised to “severely crack down on the illegal buying and selling of funds involved in cross-border gambling and maintain a healthy and healthy foreign exchange market.”
Fight or Flight
Beijing has escalated its fight against cross-border gambling in recent years as it seeks to control capital flight and maintain the stability of the foreign exchange rate.
China’s miraculous economic growth since the 1980s has been fuelled by a massive export market that relies on the stability of the yuan against the US dollar. As the Chinese economy has slowed, it has become more important for Beijing to protect its exports, and gambling — already ideologically distasteful to the government — has become part of the problem.
Between 2015 and 2017, massive capital flight exerted severe downward pressure on the yuan, forcing Beijing to exhaust at least 20 percent of its foreign exchange reserves.
Beijing limits the amount that can be transferred out of China for personal use at around US $50,000 per year for each individual. These transactions must be carried out through a foreign exchange account opened with a Chinese bank.
Underground Banks Networks
But controls on the movement of money have created a proliferation of Informal Value Transfer operations (IVTs) across the world, otherwise known as underground banks. In many cases, these are linked to criminal gangs that launder the proceeds of crime.
Last year, China’s Ministry of Culture and Tourism announced it had drawn up a blacklist of foreign travel destinations where casinos were targeting Chinese citizens, thereby encouraging capital flight.
The ministry has so far declined to publish the list, but it’s suspected to include countries like the Philippines, Myanmar, Cambodia, and Vietnam.
“Casinos in overseas cities attract Chinese tourists to go abroad for gambling activities, disrupting the order of China’s outbound tourism market, and endangering the personal and property safety of Chinese citizens,” the ministry said.
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