Paper Trail Shows Millions Laundered

From Money and Investment, page 17, issue no. 379 August 4 2008
Translated by Ren Yujie
Original article: [Chinese]

Only eight years after mysterious, lightning-quick transactions shuttled millions of yuan through his trading accounts did Yu Yinzeng realize that he might have been part of a money laundering scheme.

Instead of focusing on stock investments as he used to be, Hangzhou-based investor Yu had been for the last three years pre-occupied with a dispute between him and the sales department of Hangzhou Qingchunfang under the Caitong Securities.

Yu suspected the latter might have used his account for money laundering.

Looking back through his old account records, Yin noticed two sets of massive, rapidly-executed deposits and withdrawals.

"Had I not reviewed the old records, I would never know such transactions ever existed," Yu said.

The transactions could be traced back as far as 2000, when Yu opened two stock accounts at the Hangzhou Caitong Qingchunfang branch. It was in one of these accounts, number 13104565, that Yu noticed unexplained transactions.

On December 26, 2001 at 8:52:46 am, five million yuan was deposited, and just half a minute later, withdrawn.

Three months later, on the morning of March 26, another 4.69 million yuan was deposited in the same account and withdrawn 27 seconds later.

"I was unaware of them until I read the old transaction information. That was not my money," He said.

The EO discovered that Yu did not sign the deposit or withdrawal slips, and the handwritten characters on them were not in Yu's handwriting.

But if not Yu, then who?

The EO has learned that the first five million yuan transactions came from the Shanghai Xiangyang South Road branch of Caitong Securities. A Bank of China fund transfer receipt showed the deposit was carried out on December 26 through bank telegraphic transfer.

Thereafter, the money was transferred to the head office of Zhejiang Industrial Commercial Trust Investment via a check deposit. Besides the withdrawal slip, other documents included a checkbook stub of the 5-million-yuan under the name of Yu and the check request slip which did not have Yu's signature.

But no-one knew who the owner of the money was. Industry insiders wondered why the 5 million-yuan were not sent to the head office of Zhejiang Industrial Commercial Trust Investment directly, but transferred through the securities house.

One source familiar with the case told the EO that the deposit slip for the 5-million yuan was filled by Da Lu, the vice manager of the securities house, and Zhang Yiming, the finance manager of the securities house, dealt with related auditing documents. He Jiankai, the general manager of the securities house, signed on the check request slip, the source added.

If this is the case, the broker had passed money through a client's account without their consent. He added that it had long been a favorite means of laundering money by securities brokers.

The Securities Association of China has pointed out that among the nine ways by which securities brokers launder money, topping the list was the passing funds through customer's accounts.

An insider source revealed that the illicit transactions might be covering the tracks for returns on investments made with guaranteed deposits.

Before the China Securities Regulatory Commission (CSRC) implemented comprehensive controls on the securities industry, its supervision on of securities houses was weak and localized. In order to escape local authorities' jurisdiction, some brokers would launder money through other localities.

The source added that after the funds were transferred to the head office, they would be distributed to individuals as bonuses.

When contacted, Caitong Securities declined to make public statement, as the dispute might later involve legal proceeding.