By Ouyang Xiaohong (欧阳晓红)
Economic Observer Online
Nov 22, 2011
Translated by Song Chunling
Original Article: [Chinese]

The State Administration of Foreign Exchange (SAFE) has uncovered almost 2,000 cases involving illegal money transfers in the first half of this year according to a high-level official with the agency. These cases are said have involved more than $16 billion, and both the number of cases and the amount of money involved has increased by about 25 percent compared to the same period last year.

These "hot money" transfers are offer done under the cover of fake contracts, or settlements that are made in exchange for supposed land purchases. According to Deng Xianhong (邓先宏), the deputy director of SAFE, "fines and confiscations already reached 260 million yuan in the first half of 2011, while the total sum for the whole of 2010 was only 243 million yuan."

Deng told the EO's journalist that the administration is made aware of these suspicious transactions through three ways – checks carried out by the administration, anonymous tips and also clues from other department such as the police, customers or the audit and tax administration.

Investigations into the illegal transfer of "hot money" has expanded this year and investigators have been helped by the introduction of a new auditing system that helps them track and flag suspicious activity.

When suspicious tranfers are flagged by the automated system, the administration will conduct an in-depth investigation.

According to the amended foreign exchange management regulations that were introduced in 2008, SAFE will confiscate the illegally transfered money and will also issue a fine valued at 30 percent of the amount of funds that had been illegally transferred.