Las Vegas Underground Banking Operator Pleads Guilty to Funding Chinese Casino VIPs
Posted on: October 29, 2020, 07:30h.
Last updated on: October 29, 2020, 09:08h.
An illegal underground banker pleaded guilty Wednesday in a federal court in San Diego to operating an unlicensed money transmitting business.
Fan Wang’s operation typically involved supplying Chinese nationals with US dollars, primarily for the purposes of gambling in Las Vegas casinos. The system circumvented China’s restrictions on moving cash out of the country, while also flouting US anti-money laundering controls.
According to prosecutors, Wang was introduced to his customers by unnamed VIP “casino hosts.” Wang would supply clients with hard currency accumulated from “various third parties,” prosecutors said.
Customers would then transfer an equivalent sum in yuan from their Chinese bank accounts to a separate Chinese bank account controlled by Wang.
What is Chinese Underground Banking?
Unnerved by capital flight, Beijing places strict limits on the transfer of funds out of China for personal use. In all but the most exceptional circumstances, the cap is set at US$50,000 per year. These transactions must be carried out through a foreign exchange account opened with a Chinese bank.
Meanwhile, the maximum a Chinese citizen can withdraw from an ATM while abroad using a Chinese bank card is around $14,000.
These restrictions are somewhat style-cramping to the roving high roller, and they have given rise to a form of Informal Value Transfer IVT, otherwise known as underground banks. In some cases, these operations are linked to criminal gangs and to washing the proceeds of crime.
Evidence suggests IVTs are widely used by the Chinese diaspora around the world.
In British Columbia, it is believed that billions of dollars have been washed over the past decade using a system of underground banking that came to be known by the international intelligence community as “the Vancouver Model.”
This involved the smuggling of large amounts of money from China through IVTs. The money was then mingled with cash from the drug trade and lent to Chinese high rollers to gamble with.
Jian Jun Zhu was believed to be one of the biggest underground bankers in British Columbia, until last month, when he was gunned down in a restaurant in a suburb of Vancouver.
Threat to Security
There is no evidence that Wang was involved in any criminality beyond the charges he admitted Wednesday. Nevertheless, US attorney Robert Brewer said in an official statement Wednesday that unlawful financial institutions represented a threat to “the security of our banking system.”
Wang’s case is the fourth prosecution in an ongoing investigation into Chinese underground banking in the US.
The defendant has agreed to forfeit $225,000 to the US government and will be sentenced on Jan. 29.