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Breakingviews: China To Turn Up The Heat On Western Banks?

posted 22 Jan 2014, 07:51 by Mpelembe   [ updated 22 Jan 2014, 07:51 ]


Reuters Business  Report - REUTERS REPORTER, TARA JOSEPH

"Following the money trail Peter, we know there is a vast amount of wealth leaving China, you can feel it in the streets here in Hong Kong, we just don't know which banks are helping to facilitate it."

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"That's exactly right, the Chinese authorities also, despite the strict capital controls, theoretically strict capital controls in place, must be aware that money is leaking out, probably some ways encourage it. But what they haven't really done is done anything to try to crack down on it or to scrutinize the institutions that might be involved and I think my view is, if that were to change, if the Chinese were to become more sensitive about money moving offshore and who is involved in moving it, that could be uncomfortable for some big Western banks."


"Like you say, we're seeing a lot of Western firms being made examples of in China so the Western banks could really come under scrutiny especially with so many more reports about senior officials etcetera and their money flowing out."

REUTERS BREAKINGVIEWS, ASIA EDITOR, PETER THAL LARSEN"That's right, I think the awareness, the scrutiny of the wealth accumulated by the Chinese elite is growing all the time. We've heard this latest report, kind of, on offshore structures in the British Virgin Islands and relatives of senior leaders involved in that. And I think the optimistic view is from the banks' point of views is essentially say, all the Chinese leadership are involved in this some form or another, it's not in their interest to trying to track down on this. But I think we're seeing internal investigations in the Communist Party into corruption. It's very easy to see that that might lead to the next question being, ok you accumulated all this wealth, what do they then do with it, how do they get it out the country, who helped them get it out. And the obvious thing to do at that point, even though loads of financial institutions both Chinese and international might be involved, the obvious thing to do would be to make an example of a non-Chinese or a couple of non-Chinese institutions, and that's what's worrying some senior bankers."


"Presumably Western banks are then bracing themselves for this. How do they launch any type of PR campaign to combat it?"

REUTERS BREAKINGVIEWS, ASIA EDITOR, PETER THAL LARSEN"Well, I think it's less a question of PR campaign, I think it's more question of making sure that they have all their regulatory, kind of, protections in place. They're asking questions about the source of the money, when people open new accounts, they are paying close attention to who they are doing business with. This is kind of a new issue really for them because most of the scrutiny, most of the regulation has come so far from the West, particularly from the United States on money laundering and its been about anti-terrorism and tax evasion, Chinahasn't really been that concerned about it so far. And that I think is the danger, if something everybody knows is happening suddenly becomes something that the Chinese authorities want to make it an issue out of, then there's going to be a lot of material for the regulators to work with."


"So Western banks bracing themselves if China really starts to crack down on money laundering."