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China Cracks $64 Billion Underground Bank

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China said it cracked the nation’s biggest “underground bank,” which handled 410 billion yuan ($64 billion) of illegal foreign-exchange transactions, as the authorities try to combat corruption and rein in capital outflows that have hit records this year.

More than 370 people have been arrested or face lawsuits or other punishment in the case centered in eastern Zhejiang province, the official People’s Daily reported on Friday, citing police officials. The case brought the total for underground banking and money-laundering activities to 800 billion yuan since April, the newspaper said.

The probe began in September last year and the police took almost a year to sort through more than 1.3 million suspicious transactions, the state-run Xinhua News Agency reported separately. The authorities froze more than 3,000 bank accounts, Xinhua said.

Global Flows

The case highlights the nation’s struggle to control capital outflows that have helped to send real-estate prices soaring from Vancouver to Sydney — even when Chinese citizens are officially limited to converting $50,000 of yuan per year. Some people may be moving the proceeds of corruption, while others may be concerned about the outlook for the economy and the potential for the yuan to weaken.

“The government wants to stem outflows and stabilize the yuan’s exchange rate, but the outflows cannot be stopped unless people change their expectation on yuan depreciation,” said Xi Junyang, a finance professor at Shanghai University of Finance & Economics. Besides illegal banking operations, “a lot of money is leaving the country by legal means,” Xi said.

China’s capital outflows may have climbed to a record $194 billion in September before cooling to $62 billion in October, according to a Bloomberg gauge which also takes into account decisions by exporters and direct investment recipients to hold funds in dollars.

‘Smurfing’

The tactics used by Chinese citizens to defeat the controls include so-called smurfing, where large sums are moved by breaking them down into a series of smaller transfers using the bank accounts and foreign-exchange quotas of a range of individuals.

In the Zhejiang case, a suspect identified as Zhao Mouyi used a different method, setting up more than 10 companies in Hong Kong from 2013 and transferring more than 100 billion yuan through so-called non-resident accounts, which are used by offshore companies in China when they are transferring money abroad, according to the newspaper’s report.

Taking advantage of a “loophole” relating to non-resident accounts — which has since been filled by banks — Zhao circumvented the capital controls by directly transferring yuan overseas and then exchanged the money into foreign currencies at banks including HSBC Holdings Plc in Hong Kong, the People’s Daily said. Zhao then allegedly transferred it to his clients’ accounts, the report said, citing the local police.

Suspicious Transactions

HSBC declined to comment on the report. The Hong Kong Monetary Authority also declined to comment on the specifics of the case, while saying that banks in the city have “stepped up their internal controls to report suspicious transactions.”

  • Methods of bypassing China’s currency controls include:
  • making transfers using Hong Kong money changers
  • carrying checks from underground banks across the border to Hong Kong
  • smuggling cash through customs
  • making payments abroad using credit or debit cards and then returning merchandise for cash
  • getting an overseas mortgage based on savings held within China

The underground banking crackdown is “an attempt to reduce the capital outflow pressure,” said Hou Wei, a banking analyst at Sanford C. Bernstein & Co. in Hong Kong. The government is “determined and very serious” about defending its currency reserves and the exchange rate, the analyst said.

Taiwan, Australia

In another case highlighted by the People’s Daily on Friday, an investigation of an underground bank in Fujian this year uncovered a network spanning Hong Kong, Taiwan, Australia and Saudi Arabia — and a senior executive at a state-owned enterprise who allegedly tried to move 18 million yuan abroad, the newspaper said.

The authorities have made a series of moves to control legal and illegal capital flows, including capping withdrawals at overseas automated teller machines.

The People’s Bank of China has given verbal guidance to onshore lenders to stop offering cross-border financing to offshore banks, people familiar with the matter said this week. The monetary authority has also told overseas banks to halt onshore bond repurchases, two of the people said.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Air Passengers Drop as Domestic Airlines Resume Operations

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air peace

Number of Air Passengers Drop as Domestic Airlines Resume Operations

The number of air passengers dropped despite Governor Babajide Sanwo-Olu lifting the curfew imposed to address looting and destruction of properties in the state.

The busiest airport in the country, Murtala Mohammed Airport, resumed full operations on Monday, however, passengers are cautious about flying, especially because of the tense situation across the nation.

Some of the officials of the Federal Airports Authority of Nigeria as well as those of domestic airlines confirmed that domestic passenger volume had been on a slow start since they commenced full operations.

Okwudili Ezenwa, the spokesperson for Dana Air, said “We are hoping that by next week, everything should have settled down because right now, people are still trying to be sure of their movements.

“Passengers are being cautious before they come out. So, things have not balanced. People are not leaving Lagos as such from the airport now; rather, they are being careful.”

He added, “In locations where no curfew was announced, other places will still have to feed such locations. So since we have curfews here and there, ultimately it affects areas where we don’t have curfew.

“But we hope everything settles down well before next week.”

Similarly, Stanley Olisa, the spokesperson, Air Peace, explained that even though domestic flight operations had resumed, passengers were still wary of flying.

Yes domestic flights have resumed out of the Lagos airport but it is something that is only picking up gradually,” he said.

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333,000 Artisans: FG Commences One-Time Payment of N30,000

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FG Begins One-Time Payment of N30,000 to 333,000 Artisans

The Federal Government on Monday said it has commenced a one-time payment of N30,000 to 333,000 artisans under the Micro Small and Medium Enterprises (MSMEs) Survival Fund.

In a statement issued by Laolu Akande, the Senior Special Assistant to the President on Media and Publicity, Office of the Vice President, disbursements were being done to verified beneficiaries of the Artisan Support Scheme.

The statement read in part, “In the first stream of payments starting today, beneficiaries are being drawn from the FCT, Lagos, Ondo, Kaduna, Borno, Kano, Bauchi, Anambra, Abia, Rivers, Plateau and Delta States. They form the first batch of applications for the scheme submitted between October 1 and October 10.

“The MSMEs Survival Fund scheme is a component of the Nigerian Economic Sustainability Plan, NESP, which was developed by an Economic Sustainability Committee established by President Muhammadu Buhari in March 2020.

“The President asked his deputy, Vice President Yemi Osinbajo, SAN, to head the committee which produced and is overseeing the implementation of the plan. “Under the ESP, the Survival Fund is generally designed to among other things, support vulnerable MSMEs in meeting their different obligations and safeguard jobs in the sector.”

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Absorb Exited Npower Beneficiaries, N-power Youths Congress Tells FG

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Absorb Npower Beneficiaries of Batches A and B, N-power Youths Congress Tells FG

The N-power Youths Congress (NYC) has pleaded with the Federal Government to absorb the 500,000 exited Npower beneficiaries of Batches A and B and pay their outstanding allowances.

The National Coordinator, NYC, Comrade Joseph Enam Maga, stated this in Maiduguri during a press briefing held on Saturday at the NUJ Press Center.

He said thousands of exited beneficiaries are yet to be paid since the month of Match.

He, therefore, called on the Federal Government to offset all the outstanding allowances of Batches A and B and create a permanent job for them.

He said “It is a fact undisputable that thousands of beneficiaries have not been paid since the month of March.

“Promises upon promises have been made on this, but yet no positive result has been recorded. Sometimes I wonder what it takes for the data base manager of Npower to rectify this! Something that can be rectified in a couple of hours has lasted for seven good months now.

“Worst still, this is happening within this period of hunger and starvation because of Pandemic. We call on the minister of humanitarian affairs and disaster management to be human enough to respond to our request and give prompt attention to them.

“We equally wish to bring to the notice of Mr. President that Batch B Beneficiaries have not received their devices as was promised and signed at the commencement of the program.

“It is very sad that up to the disengagement of Batch A and B, nobody has come out openly to tell us what happened to our devices.

The coordinator paused to ask why are Nigerian youths being treated like nobody in their country? What have we done to be neglected like this?

“When the Humanitarian Minister was asked why we were disengaged at this critical time in historical epoch that corona virus is terrorizing the whole world, she responded that we were disengaged because it’s a two years programe that we signed.

“Then comes the question: why did Batch A stayed 4years? And if we signed for two years contract that warranted our disengagement, didn’t we equally signed to be given a device that would help us in our different places of primary assignment and equally increase of knowledge? Please we need answers ma. We need answers.

“We, the 500,000 batches A and B of Npower beneficiaries are calling on our government to respond to our demand. We don’t want to believe that it’s only a state of violence anarchy and doom will make a sane government to listen to her Youth’s grievances.

“Look at the Endsars protest for instance, after many lives have been lost and properties destroyed, our government decided to speak up. Niger delta militants were attended to when they resort to arms.

“The insurgents were given amnesty because of their terrorism. But we the innocent 500,000 graduates have been innocently complaining to our government but they paid deaf ears. We are law abiding citizens and we will continue to be law abiding citizens.

“We want Mr. President to understand that a hungry man is an angry man. We have really endured a lot. We need a quick response to our requests. We can’t be used and dumped like refuse. We refused to be used and dumped”, the National Coordinator added.

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