timberland ossipee How China’s biggest bank became ensnared in a
on Aug. 8, 2012, two Chinese living in Spain a banker and her client held a blunt phone conversation.
Wang Jing was a senior officer at the Madrid branch of the state controlled Industrial and Commercial Bank of China. The client, Xu Kai, was an alleged top figure in an international money laundering group that was suspected of using the bank to transfer illegal income to China. The network was allegedly using multiple accounts in the name of Chinese residents of Spain, in some cases without their permission, to make the transfers. But there had been a hitch.
Earlier that day, banker Wang said, a woman had come to the branch to complain that transfers were being made from her account without her knowledge. Wang chided Xu, telling her to make sure that account holders used in the scheme were on board.
“You have to look out for yourself and make sure these people are obedient,” Wang warned. More complaints would lead to “problems” for the bank, Wang added.
In fact, the bank already had problems. Big problems. Spanish police were listening.
Wang’s warning to Xu is documented in confidential court filings that include wiretap transcripts from a series of police investigations starting in 2009 into Chinese organized crime in Spain.
The wiretaps and findings from police investigations ultimately led Spanish investigators to the front door of the Industrial and Commercial Bank of China, or ICBC the world’s biggest bank by assets. On the morning of Feb. 17 last year, dozens of police officers burst into the bank’s Madrid branch and arrested Wang Jing and four other senior managers. Two more executives were arrested after the raid.
In a statement released in May last year, Spanish prosecutors said the giant Chinese state run lender was a conduit for laundering tens of millions of euros in illegal funds from tax fraud and smuggling by “Chinese criminal organizations.” The sums laundered were so large, the prosecutors said, that “the damage to the socio economic order and the national economy is clear.”
But beyond news of the arrests and a summary of allegations in the statement, little information has been revealed about the case.
Now, thousands of pages of confidential case submissions reviewed by Reuters, and interviews with investigators and former ICBC employees, provide the first detailed account of the alleged racket and show that the probe reaches high into the state run bank’s European operation. These clients are alleged to have accumulated mountains of cash, much of it from avoiding duty and tax on the sale of consumer goods imported from China. They could not spend it or bank it in Spain without raising suspicion, so they opted to send it to bank accounts in their homeland.
The wiretap transcripts show how ICBC allegedly helped them do it: Bankers accepted forged documents to conceal the source of the funds, failed to report suspicious transactions and even tipped off the smuggling groups ahead of inspections at the bank, police say in the court filings.
Law enforcement officials in Spain are preparing to expand their probe, Reuters has been told. Prosecutors plan to ask the judge in charge of the case to summon ICBC’s Luxembourg based European administrative board for questioning for the first time, according to two Spanish officials involved in the investigation. The Luxembourg unit of ICBC holds the lender’s European Union bank license and is responsible for supervising the Madrid branch.
A spokesman for ICBC in Europe, Sun Feng, said the case file was sealed by the court so the bank could not comment on it.
“ICBC Spain Branch has been insisting on operating within the law and regulations, and has continuously strengthened the internal control of anti money laundering,” Sun said in a written response to questions for this article. All but Wang Jing, who commented very briefly, declined to discuss the case.
“Inside the bank, I am the lowest level employee,” said Wang Jing, who declined to discuss the wiretap transcript of her phone conversation with Xu Kai. Wang referred all questions to ICBC. Xu Kai, who was arrested and released on bail in late 2012, fled to China. Money transfers to China soon accounted for an estimated 95 percent of the Madrid branch’s business, according to a Spanish judicial official.
The wiretap transcripts document ICBC managers in at least 30 conversations with six leaders of Chinese networks in Spain, who police believe were seeking new avenues to launder money. These included conversations in which ICBC staff discussed how to avoid detection when moving money to China. On occasion, the staff warned of transfers that might attract unwanted attention.
After listening in on the Aug. 8, 2012, phone conversation where Wang Jing warned Xu Kai, the police concluded from a series of wiretap conversations that Wang, “from her privileged position as an ICBC employee, was not only aware of the activities carried out” by suspected money launderers, but also was “actively collaborating” with them. The police pointed in their report to the advice she gives Xu on “how the transfers must be made and how she must control the people working for her.”
The wiretap transcripts also document conversations between suspected Chinese money launderers in Spain and ICBC employees in China.
Officials involved in the investigation spoke to Reuters on condition of anonymity because the probe is ongoing and Spain’s High Court has imposed secrecy orders on the proceedings.
Between 2011 and 2013, the officials said, ICBC’s Madrid branch transferred about 225 million euros to China, most of it for suspected criminal networks. These networks also sent funds via money transfer firms in Spain and by smuggling large amounts of cash by road to other European countries from where it was transferred to China.
On the strength of the wiretaps, money transfer records and other evidence, police last year arrested the seven ICBC executives in Madrid, including branch manager Liu Wei and the general manager of ICBC’s European division, Liu Gang.
The seven employees who are suspects in the money laundering case are out on bail. They have had their passports confiscated and are awaiting further legal proceedings in Spain, according to a spokesman for the High Court.