A Giant Embezzlement and Money Laundering Scheme in China: Details

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A local bank in China has uncovered a significant embezzlement and money laundering scheme involving two of its former executives, a former shareholder, and several other suspects.

This group reportedly utilized cryptocurrency to launder funds, highlighting a growing concern over the misuse of digital assets for illegal activities. According to a report by Chinese news outlet The National Business Daily, the illicitly converted funds amount to 1.8 billion yuan ($248 million). 

An Embezzlement of Millions in China

The court documents revealed that a 44-year-old suspect, identified by the surname Chen, helped the former executives of Bank of Huludao in China in laundering at least 250 million yuan ($34.4 million) through his bank accounts.

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The details of this elaborate scheme date back to August 2020. Li Yulin, the former party secretary of Bank of Huludao, and Li Xiaodong, its former acting president, along with two other suspects, were implicated in embezzling 2.6 billion yuan. This embezzlement was purportedly disguised as efforts to resolve non-performing assets. 

By the following month, these individuals had allegedly converted over 1.8 billion yuan into foreign currency and transferred these funds to company bank accounts in Hong Kong under their control.

Involvement of Crypto

The sophistication of their operations is underscored by their use of cryptocurrencies. In September and October 2020, the suspects engaged in purchasing cryptocurrencies through WeChat groups, including one notably named “Longmen Inn.” These cryptocurrencies were then sold abroad using various vendors, with the proceeds being converted into U.S. dollars and transferred to bank accounts owned by Hong Kong-based companies.

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On August 3, 2022, the police arrested Chen at one of his residences. He truthfully confessed his crime and was found guilty of money laundering, receiving a prison sentence of 2 years and 3 months. Additionally, he was fined 2 million China’s yuan. The cases against the other former executives are being handled in separate legal proceedings, with outcomes yet to be fully disclosed.

Need for Robust Regulations

The Bank of Huludao case has significant implications for the banking sector and the broader financial ecosystem in China. The country previously banned crypto trading, mining, or any related operations in 2021.

The use of cryptocurrencies in such schemes further emphasizes the need for stringent regulations and robust monitoring systems to prevent financial crimes.

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