BOC service still running

CCTV report alleged capital transfer program is being used for money laundering

The Guangdong office of the Bank of China (BOC) said on Thursday afternoon that it has not yet suspended a controversial service, which a State television station alleged in a report is being used for money laundering.

In a report aired Wednesday, the China Central Television (CCTV) said a capital transfer service called "You Hui Tong" of the BOC, one of China's Big Four State lenders, helps Chinese nationals transfer capital amounts exceeding national limits to the bank's overseas accounts.

In response, the BOC released a statement on Wednesday saying that the CCTV's report "contains misunderstandings" and its accusations are "inconsistent with facts."

"The service can still be carried out. We don't know if it will be taken down later," the source, who is a manager at the Guangdong office and declined to be named because he was not authorized to speak to the media, told the Global Times on Thursday. "The BOC may publish new statements soon."

However, news portal sina.com.cn said Thursday that several local branches in Guangzhou and Zhuhai, both in South China's Guangdong Province, have halted the "You Hui Tong" service.

Chinese nationals are limited to $50,000 per year per person in foreign currency purchases at domestic banks, but the BOC service can help them bypass that rule, CCTV said.

Zhou Xiaochuan, governor of the People's Bank of China (PBC), the central bank, said at a press conference Thursday morning that "it will take a while to figure out what has happened" in the BOC case.

China CITIC Bank, controlled by the powerful CITIC Group, provided the same foreign exchange service, the South China Morning Post reported on Thursday, citing an unnamed source as saying. But BOC and CITIC offered the service after they got the green light from the local branch of the PBC, the source was quoted in the report as saying. "It is definitely not an illegal business," the source said in the report.

However, an employee at the Anzhen branch of CITIC Bank in Beijing told the Global Times on Thursday that the lender does not offer any such services. "The customer can only report his income at the State Administration of Foreign Exchange (SAFE) and apply for a quota higher than $50,000," said the employee, who declined to be named.

Other banks, including the Agricultural Bank of China and the Industrial Bank, told the Global Times that they have never offered such services.

News portal 21cbh.com reported that SAFE inspectors had visited the BOC on Wednesday, while yicai.com cited a source from the SAFE saying that the agency did not do so. The SAFE did not answer repeated calls from the Global Times on Thursday.

Zhu Lixu, a Shanghai-based analyst with Xiangcai Securities, told the Global Times that the central bank and SAFE should be in charge of foreign exchange-related products.

"You Hui Tong did give Chinese nationals an opportunity to launder their money. The regulators should be blamed for failing to catch it before the program was approved," he said.

However, Zhu said it is unfair to allege that the program is a tool for money laundering. "The money has to be 'dirty,' which means it was earned illegally from corruption or drug dealing, for it to be laundered," Zhu said. "So if an entrepreneur transfers his legal earnings abroad using the program, it's not money laundering."

However, the CCTV report, which stirred up heated online debate, has been under fire in all aspects from accuracy to journalism ethics since it was aired.

Interviewees cited in the report voiced their dissatisfaction. Liu Weiming, an analyst with CITIC Bank, who was quoted in the CCTV report, said in a statement posted on Weibo Thursday that he never made any comments on the "You Hui Tong" program.

"I did the interview a month ago on the topic of the reform of the yuan's exchange rate formation mechanism and cross-border liquidity," Liu said, adding that CCTV's reporting was misleading and "severely violated the basic principles of journalism of being accurate and objective."

Zhong Wei, chief economist of Ping An Securities, who was also quoted by CCTV in the report, also released a statement Wednesday saying that he did an interview with the station three weeks ago on immigration and overseas investments.

"I'm deeply concerned with the report's distorted presentation of my comments," Zhong said. "CCTV and academics have no right to take over a judge's responsibility and claim that certain financial services have violated the law."