Bank of China money-laundering trial to begin in March

AP News
Posted: Aug 05, 2015 2:39 PM

FLORENCE, Italy (AP) — A $5 billion money-laundering trial of the Bank of China and 297 other defendants in Italy is scheduled to begin in March, deputy public prosecutor Giulio Monferini said Wednesday.

At issue is more than 4.5 billion euros ($5 billion) allegedly smuggled out of Italy to China through a money transfer service part-owned by Chinese immigrants.

Prosecutors in Florence said nearly half the money was funneled through the Bank of China's Milan branch, which earned over 758,000 euros in commissions on the transactions. When the hearings begin in March, a judge will decide whether to press ahead with charges of money- laundering and assisting a mafia-like organization against the bank's Milan branch and four of its employees.

The Bank of China has denied wrongdoing. In a June statement to the Hong Kong stock exchange, the bank said it had not received formal prosecution documents but would cooperate with Italian authorities. Lawyers for the money transfer network's owners have said their clients are not guilty.

China's central bank and other government agencies vowed to strengthen money-laundering controls after news of the Italian investigation into the Bank of China broke, the state-run China Daily newspaper reported last week.

The Bank of China is not the only major Chinese bank with overseas branches facing scrutiny. In July, the U.S. Federal Reserve told China Construction Bank to strengthen its anti-money-laundering framework and improve customer due diligence and monitoring of suspicious transactions.

The Italian case showcases the large underground economy that has grown with the Chinese diaspora and flourished in the absence of effective legal and judicial cooperation between China and the West.

Italian prosecutors allege that the money transfer network, Money2Money, operated like a mafia, using threats and coercion to maintain a near-monopoly on money transfers from Italy to China. Money2Money also had an exclusive contract with the Bank of China's Milan branch which stipulated that the bank would not work with any other firm to send money from Italy to China, prosecutors said.

In court documents, prosecutors said the money, which was earned from counterfeiting, prostitution, labor exploitation and tax evasion, was fractioned into small sums to avoid detection and that the bank's management and audit staff failed to report suspicious transactions, helping conceal the source and destination of the funds.

Italian officials told The Associated Press that China did not cooperate with the money- laundering investigation, despite Beijing's efforts to win help from Western governments in repatriating corrupt Chinese officials who have fled overseas with their stolen fortunes.

Italian police were unable to continue their investigation in China, but the AP, in a story published in June, tracked some of the smuggled money to a large government-controlled import-export company that has been accused of repeatedly shipping counterfeit merchandise, some of it to the United States.

The Italian case covers transactions between 2006 and 2010. Legal proceedings had stalled as Italian prosecutors struggled to locate hundreds of hard-to-find defendants, most of them Chinese migrants living in Italy. Monferini said all but around 50 people had been successfully notified of the cases against them.