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The Bank Card That Withdraws Money From China

posted 12 Mar 2014, 05:11 by Mpelembe   [ updated 12 Mar 2014, 05:11 ]



"I pretty much just hung out at these pawn shops just observing the sort of daily flow of business that was taking place. And then you'd see people going in and just swiping their Union Pay cards and then getting this money out. So actually it really kind of interested me that they were using UnionPay. So looked, I tried to delve a little further into looking at this entity. What is it?

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"It's actually a massive Chinese corporate entity on a scale with other heavyweight Chinese corporations like Huawei, Tencent, but most people haven't heard about it. Through the years it's been notoriously opaque in its operations. They rarely grant media interviews. They don't publish their revenue figures and profit figures. Their shareholding is murky. But basically it's an association of Chinese banks that collectively form this payment processing network that is UnionPay. So it's partly state-backed. It's a state-backed monopoly.

"Based on internal documents from the Macau Monetary Authority, I've made some calculations and roughly 45 billion U.S. dollars were transacted in these pawn, jewellery, and watch shops in Macau. Several hundred of them. And to put that figure into context, it's a massive figure. It's even larger than Macau's entire gaming revenue for that same year which was $38 billion (USD).

"And what's more, these transactions are not recorded in Macau's official retail sales statistics. So I mean, to my mind that can only seemingly point to one thing: that there's a cover up going on. That they don't want people to know about this.

"After I'd done most of the legwork in Macau and elsewhere, I finally went to UnionPay with these questions, just asking them what's going on.

"I've got so much on them that they can't ignore the findings. It's not a new issue per se and it's actually been spoken about by People's Bank of China, central bank officials, as far back as 2008. I got an internal memo from a PBOC official from '08 where the report was - it was actually specifically titled, 'The money laundering risks of China UnionPay in Macau' or roughly something along those lines.

"At some point they will have to address why they haven't imposed simple limits on these transactions or taken a more proactive role to crack down. But they always, they have claimed - there was someone that spoke to us off the record, an UnionPay executive. He was saying that actually there are difficulties in enforcement. There's a cross-border dimension. They have to cooperate with the Macau authorities and sometimes Macau doesn't want to do certain stuff. But in terms of having the data on how much is transacted through these merchants, it's all there. So if there's a really ramshackle little pawn shop that's churning over billions a month, and they're not asking tough questions and they're allowing that to continue for years, clearly there's something wrong.

"In one day, they could shut down all these pawn and jewellery shops because what they're doing is illegal. All I know is that so far they haven't done that. And if they do that, that would mean tens of billions of renminbi less, tens of billions of U.S. dollars less capital flowing into Macau potentially a year."