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Reference Material: U.S. Experts: Confiscation of Chinese Officials' Laundered Assets in the U.S. is Only a Matter of Time

October 10, 2003 |  


Recently, the Immigration and Customs Enforcement (ICE) department founded by the U.S. government attracted wide attention. The ICE has begun investigating assets belonging to foreign officials whom they suspect of public corruption. The ICE has the authority to seize the officials' financial assets laundered in the United States. It was learned that this action is aimed at helping foreign governments with money leaking into other countries, protecting the U.S. financial system, and suppressing corrupt officials. The ICE has opened nine investigations into allegations of foreign money laundering in six Latin American countries. For China, U.S. "anti-money laundering" experts claimed that it's only a matter of time before their embezzled assets are confiscated in the U.S.

U.S. ICE group founded

According to a report in the South City Newspaper, in August 2003 the Bureau of Immigration and Customs Enforcement (BICE) of the Department of Homeland Security (DHS), together with the U.S. Judicial Department and State Department set up a special task force in Miami named Immigration and Customs Enforcement. It has the power to confiscate corrupt government officials' assets that come into the U.S. through money laundering. Currently, the group is conducting investigations in Miami.

The report states that after September 11, in order to more effectively prevent terrorist activities, the U.S. Congress passed the "Patriot Act." This Act is not only aimed at fighting terrorism; article 315 also addresses money laundering by foreign officials, and empowers ICE to confiscate these officials' property in the U.S. After the Act was created, several agencies thought it necessary for a centralized agency to focus on such work, and that is how the ICE was founded.

Dean Boyd, the spokesman for BICE said the U.S. does not welcome money from corrupt foreign officials, "Because this money is not good for the stability of the U.S. economy." Michael McDonald believes that corrupt foreign officials have the potential to cause great damage to the U.S. economy because these officials usually purchase U.S. real estate properties at high prices with the purpose of converting cash into non-liquid property. This practice can cause adverse effects for the real estate market in the U.S. Besides, the money put in the bank by these officials creates the illusion of financial stability for the local area, while endangering the local financial system.

Reference: http://www.moneylaundering.com/news.htm

In the U.S., the evidence required for confiscating assets is much looser than for criminal cases. Therefore, the ICE Task Force has made smooth progress. If their attempt is successful, the work will spread to more cities. Regarding the punishment affecting corrupt Chinese officials, it's only a matter of time.

Corrupt foreign officials on the run can't enjoy life in the U.S.

According to the report, statistics published by the Supreme People's Prosecutor and Department of Public Security of China show that currently more than 4,000 suspected corrupt officials have escaped to foreign countries carrying more than five billion Yuan* with them. Among them, officials of high ranks involved in more serious cases often escaped to developed Western countries such as the U.S., Canada, and Australia. Experts say it's hard to estimate how much in public assets were taken by the corrupt officials, since economic recession and business losses can be used to cover up money laundering. Also, there is the fact that many Chinese government-owned companies in foreign countries are in the red.

The representative Chinese officials in the U.S. are all "gigantic eaters." Dong Mingyu, the former CEO of Henan Province Clothes Export and Import Co. is currently living in New Jersey enjoying a comfortable lifestyle. Xu Chaofan, the former head of China Bank Kaiping Branch in Guangdong Province transferred 483 million U.S. dollars to the U.S. and Canada and successfully escaped. This is the greatest bank corruption since the Party took over in 1949. In 2002, Jiang Jifang, the former head of the Henan Province Tobacco Franchise Bureau escaped with one million Yuan. In April 2003, Yang Xiuzhu, former deputy chief of Zhejiang Province Construction Department escaped with her family. According to Phoenix Weekly, she purchased at least five luxury real estate properties in prime areas of New York City.

The report also said these officials often chose large U.S. cities, because they like luxuries and enjoying themselves, and they have high living standards and are not used to remote or small cities.

Edison a suburban town in New Jersey, one hour away from Manhattan, New York, is almost like a Chinatown. At least 100,000 Chinese live there. The housing prices there have climbed quickly over the past two years. Dong Mingyu, the former CEO of Henan Province Clothes Export and Import Co. who escaped ten years ago is living there. When a deputy department head came to the U.S. for "medical treatment," he bought three houses in Edison, New Jersey.

Similar incidents took place in the housing market of Los Angeles. Recently, housing purchases by Chinese have increased by about 40%, and they all are for houses worth more than 500,000 dollars. They often pay cash. In some luxury areas with many Chinese people, the housing prices have almost doubled.

Business trade is an important channel for money laundering. Many Chinese companies invest huge amounts of money in the U.S. stock market, and they report losses if their company loses money, while they personally receive large amounts in trading fees. Many corrupt officials set up companies in the U.S. with fake dealings through agents or family members who immigrated to the U.S. According to related statistics, more than 1,000 Chinese companies invested in the U.S., while the Chinese government has on record only 218 investments. Therefore, many of these companies investing in the U.S. are not regulated by the Chinese government.

Currently, the total amount of leaked Chinese assets has reached over 200 billion U.S. dollars. Statistics from the State Administration of Foreign Exchange show that during 1997 and 1999, more than 130 billion U.S. dollars were invested in China, while money leaking to foreign countries during the three years reached 52 billion dollars. In 2000 alone, 48 billion dollars went abroad.

The South City Newspaper quoted the New York Times as saying that the ICE Special Task Force is opening nine investigations into allegations of foreign money laundering in six Latin American countries. This includes Arnoldo Alem, the former president of Nicaragua. They are also investigating a widening scandal in the Dominican Republic over allegations that banking officials embezzled hundreds of millions of dollars and gave lavish gifts and payments to government officials. Agents in Miami in recent months have seized about $5 million from Florida bank accounts and real estate holdings that they believed were laundered by the former president, his family, and associates. The U.S. government will propose dividing the laundered assets with the countries involved.

According to U.S. laws, people who provide leads to asset confiscation cases can be awarded up to 25% of the confiscated asset. Therefore, if the ICE Task Force makes smooth progress in Miami, it's predicted that many people will report suspicious assets to them.

Michael McDonald is a retired veteran of the IRS (Criminal Investigation). He directed complex criminal financial investigations in organized crime and money laundering cases and is currently the editor of the http://www.acams.org website. Concerning the Chinese government, McDonald said, "Confiscating assets of corrupt Chinese officials is only a matter of time. I don't believe any corrupt officials from any countries are exempt from this action. If the U.S. discovers illegal assets transferred to the U.S. by corrupt Chinese officials, I believe the U.S. will work closely with related agencies in China and trace it down."

It seems that the time when the U.S. cracks down on corrupt Chinese officials is not too far off. If China can find a way to cooperate with those countries dubbed "haven for corrupt officials" and international anti-money laundering organizations, it will be increasingly difficult for corrupt officials to escape to foreign countries.

* Yuan is the Chinese currency. The average monthly salary of an urban worker in China is 500 Yuan.