By Stanley Lubman

In the midst of turmoil in the Chinese stock markets, one serious problem that may appear is increased currency outflows created by current and potential investors who would rather move their assets to foreign countries viewed as safer havens. Money laundering should be under close surveillance.

Chinese involvement in money laundering has been growing. “China leads the world in illicit capital flows," according to the 2015 International Narcotics Control Strategy Report (INCSR) of the Bureau of International Narcotics and Law Enforcement Affairs of the U.S. State Department, which monitors international money laundering. The report not only states that China is a leading source of illegal money transfers, but that it consistently fails to cooperate with other countries in resolving cross-border money laundering.

In addition to enumerating conventional methods of illegally transferring cash, the Report also notes that Chinese authorities have identified “the adoption of new money laundering methods, including illegal fundraising activity, cross-border communications fraud, and corruption in the banking, securities and transportation services.” It goes on to report that “Chinese authorities have also observed that money laundering schemes continue to spread from the developed coastal areas…to underdeveloped inland regions.”

Against this background, some recent developments are grounds for concern: Italian prosecutors are seeking to indict the Bank of China (BOC) for laundering billions of euros via a branch of the Bank in Italy. The Bank and government officials have refused to cooperate.