HONG KONG — Luo Juncheng, a delivery worker and school dropout from Guangdong Province in China, was 19 when he opened an account at the Bank of China subsidiary Chiyu Bank in Hong Kong in mid-2009.
Over the next eight months, he moved more than 13 billion Hong Kong dollars, or $1.7 billion, through the account, making nearly 5,000 deposits and more than 3,500 withdrawals in the largest money-laundering case on record in the territory.
Mr. Luo is now serving a 101/2-year jail sentence for illegal money transfers. But his conviction raises wider concerns: how he got away with it for so many months despite the red flags that should have been raised by his transactions and why no other arrests have been made despite evidence at the trial that he did not act alone.
His conviction is one of the few in Hong Kong for money laundering, despite the city’s reputation as a hub in money transfers, both legal and illegal, carried out by wealthy Chinese. Experts estimate tens of billions of dollars are laundered in Hong Kong every year, much of it crime-related or drug-related money funneled from China or the gambling haven of Macau.
Another conviction was that of Lam Mei-Ling, a 61-year-old illiterate public housing tenant, sentenced to 10 years for her role in a separate money laundering case.
“Lam and Luo were both just cogs in a much bigger money machine,” said Steve Vickers, chief executive of Steve Vickers Associates, a risk mitigation and consulting organization.
“Prosecuting these two for their roles, without any connection to a substantive criminal offense, is well wide of the mark from a policy and legal point of view; it’s just like killing two chickens in front of the monkey,” he said, referring to a Chinese proverb about punishing the weak to frighten the powerful.
One year ago, Hong Kong passed a tough law to go after people who launder money and the banks that help them do it.
Before that, the authorities did not have the power to institute criminal proceedings against banks for ignoring or assisting in money laundering. Also, the difficulty of proving complicity in laundering meant that the Hong Kong authorities pursued individuals rather than financial institutions.
Successful prosecutions have so far been brought only against those, like Mr. Luo, at the bottom of the laundering chain, although Carson Yeung, a tycoon and owner of the English soccer club Birmingham City, will stand trial this month.
“It seems that larger and larger sums are being converted in money laundering,” said Judge Esther Toh, sentencing Mr. Luo for the record amount of money he had “cleansed.”
A spokeswoman for the Bank of China in Hong Kong said in an e-mailed statement that the bank would not comment on individual cases but that the group, which owns Chiyu Bank, “complies with all the relevant laws and regulations of Hong Kong.”
The police department’s Joint Financial Intelligence Unit and the Hong Kong Monetary Authority also would not comment on individual cases but said they took the issue of money laundering seriously and would investigate reports of suspicious transactions and control failures.
The trials of the handful of people convicted of money laundering show that they transferred large amounts of money, seemingly with little restrictions, before they were caught.
An African man, who used various passports and names, was arrested in a jewelry shop in 2009 on suspicion that he had used a false credit card. He was sentenced to 38 months in jail for laundering 10 million dollars through four bank accounts, court documents show.
Ms. Lam testified at her trial that she had made transfers on behalf of an unidentified woman from her hometown of Dongguan, in southern China, who used to baby-sit her daughter before becoming a factory owner.
Article source: http://www.nytimes.com/2013/04/09/business/global/money-laundering-law-in-hong-kong-doesnt-catch-the-chiefs.html?partner=rss&emc=rss