Flood of 'Dodgy' Chinese Cash has Agencies on Edge

Australian authorities are worried about the tide of money coming from southern China, including illegal funds linked to organised crime and wealthy ­people with secret offshore ­accounts.

Other operations associated with washing money through drugs, counterfeit goods, illegal migration and capital flight were also a concern, according to ­money laundering expert John Langdale from the Department of Security Studies and Criminology at Macquarie University.

"There's a whole lot of dodgy stuff going on," Dr. Langdale said of the Pearl River Delta, a ­region dubbed "the world's factory".

Its efficiency and global links, including shipping to every major port in the world, also made it ­attractive for the production and shipment of drugs via syndicates and couriers, including heroin from Myanmar and amphetamine-type stimulants.

This was the most internationally oriented region in China, also featuring high-­performing financial intermediaries such as Hong Kong's banks and specialist law firms, and Macau's casinos, which have the biggest turnover in the world.

Dr. Langdale, who will present new research at a conference of the Sydney chapter of the Association of Certified Fraud Examiners on Thursday, 29 September, said that 30 percent of the business of law firm Mossack Fonseca – whose ­clients' dealings were revealed in the Panama Papers – came out of the delta.

"Most of that business," he said, "is in facilitating wealthy and politically connected Chinese people to send money offshore, usually through shell companies in Hong Kong, towards the British Virgin Islands, the Cayman ­Islands and other offshore ­markets." He said the Australian Taxation Office and Austrac, Australia's financial intelligence agency, "have a concern about the thousand Australian people who are clients of Mossack Fonseca in Hong Kong".

Most, he said, "are perfectly legal" – but the Australian Crime Commission believes that 80 may be involved with organised crime, including bikie gangs. "And they are just one law firm." Dr. Langdale said Hong Kong operated the world's second most secret finance centre after Switzerland. "That's what they do, and they do it well. It facilitates the offshore movement of Chinese capital, most of it legal of course, and some of it speculating against the renminbi,'' he said.

Dr. Langdale, who has briefed Austrac three times this year, said: "The Australian authorities are very concerned about this flood of money coming out, because they have little idea what is legal and what is illegal.

"Our biggest problem is establishing its provenance. Following the money trail is vital, but often falls between many systemic cracks." Most, he said, seemed to be money seeking a "safe haven", brought out by wealthy people "nervous about their future, and possibly wanting their children to gain foreign passports. And Australia is a capital-short country".

An extradition treaty with China has been drafted but not ratified. In the meantime, some of the allegedly corrupt targets of Chinese authorities had left ­"voluntarily", Dr. Langdale said.

The Australian Federal Police has an office in Guangzhou, at the centre of the delta, to enable ­easier co-operation with the ­Chinese authorities on drug transfers, money laundering and other criminal activities. The capital coming to Australia via the delta, though, was "small bickies" compared with that headed for places such as Singapore and North America.

Jurisdictions: