With the Chinese economy expanding at a record pace for years, there's been billions of dollars made by businessmen and billions more skimmed off the top by corrupt officials with much of it illegally taken offshore.
But you won't find many Chinese nationals taking the chance of carrying bags of cash through LAX.
There are better ways to do it and everybody knows it.
"You have a lot of ways to launder money," said Karl Oroz, a former U.S. Treasury agent who worked money-laundering cases.
Among the most popular? Overstating the value of goods shipped to China, allowing the buyer (with the help of a trusted seller) to disguise an overpayment that gets the cash into an overseas bank account.
That's just one money-laundering technique. There are many others, perfected over the past two decades by an estimated 4,000 senior Chinese officials who have taken an estimated $50 billion from state-owned enterprises, according to a report issued last month by China's official Xinhua News Agency.
Numbers like that, along with the increased U.S. pressure in the wake of 9/11, have finally convinced Chinese officials that money laundering is a growing problem that has to be brought under control.
Last year, China began to crack down on banks and adopt regulations similar to the U.S. government's landmark 1970 Bank Secrecy Act, which requires cash transactions of more than $10,000 to be reported to the federal government.
"Everybody's on alert after 9/11," said Kelvin Lee, managing director of East West Bancorp, which does substantial Chinese business.
The import method, commonly referred to as the "invoice trick," is a popular money-laundering technique because it can be used to move large amounts of cash at one time.
For example, with the assistance of an overseas seller, a shipment of pens to China with a real value of $100,000 might be given a cost of $1 million. The Chinese national seeking to illegally move money out of China would then send the full $1 million to the seller by a wire transfer or some other legal method. Now the overseas seller would be in possession of $900,000 more than he is owed, money that could then be deposited in some overseas bank at the Chinese national's direction. Often the true ownership of these bank accounts is obscured by holding companies with multiple layers of ownership.
The trick can also be turned around to move cash into China by overvaluing an export shipment, which would then prompt an overpayment that could be deposited into a Chinese domestic bank.
Another method of moving cash in and out of China involves the use of notoriously corrupt moneychangers in Hong Kong, many of whom have relatives on the mainland who facilitate unreported wire transfers.
There also is a whole industry of Hong Kong couriers who will literally move bags of cash to the mainland.
For decades, the flow of money was out of China and into offshore banks, usually tax havens in the Caribbean where it was held by companies whose Chinese owners were difficult to track down.
But some of the money would circle back to China, where it was invested in mainland projects, taking advantage of regulations that were designed to encourage outside investment.
"It's called round-tripping. You move your money offshore to a tax haven and then move it back in and get preferences," said an attorney familiar with the scheme.
For example, the tiny territory of the British Virgin Islands, which has just 22,000 people, is the second-largest source of direct foreign investment in China, according to China's Ministry of Commerce.
About two years ago, there was a new development: large amounts of cash started to return from offshore to be deposited in domestic banks, apparently out of fear that China would be forced to raise the value of its currency. (The U.S. has criticized China for keeping its currency at an artificially low value in order to promote exports.)
The Chinese government has taken a number of steps to tighten up control over the illegal money flows.
It recently joined the Egmont Group, an informal association of financial intelligence units from several dozen countries that are working together to halt money laundering. And in March 2003, the People's Bank of China, which acts as China's central bank, issued a new set of anti-laundering regulations.
The regulations require cash transfers of more than $10,000 to be reported to the government. They also require banks to ensure patrons use real verifiable names when they open accounts, and threaten bank officials with fines if they don't enforce the rules.
There have been a number of recent scandals involving Chinese public banks in which well over $100 million is suspected to have been embezzled, with Chinese authorities prosecuting the suspected culprits. Experts believe that corrupt banking officials also have taken part in the money laundering.
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