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State-Backed Bank Card Is the Door to Smuggling Money Out Of China

State-Backed Bank Card Is the Door to Smuggling Money Out Of China

In a recent Reuters report, it was revealed that a new form of smuggling money out of China is growing at a rapid pace.

Unionpay cashback scheme

A clever scheme allowing Chinese citizens visiting Macau to withdraw more money than allowed by Chinese Customs.

Using a state-backed payment card, China UnionPay, which operates like a debit card, Chinese citizens are traveling to Macau and making false purchases. Store holders in Macau then provide these ‘shoppers’ with a fake receipt as well as Hong Kong dollars in cash.

According to a jewelry store in a Macau casino, many customers will make a large purchase such as $1.5m of gold bullion and they then sell this straight back to the store for cash. By doing this, Chinese nationals have found an easy way to avoid the limitations of how much money they can take out of their country which is currently a maximum of $3,200 a day.

According to Reuters, over $202 billion is illegally passing through Macau annually. What is really interesting though, is that since 2008, mainland authorities have been aware of this scam but have not done anything about it.

This could be because both illegal and legal capital flight is a vital part of the economy in China. Wealthy Chinese have been investing their money into offshore tax havens, overseas housing and emigration investment schemes for years. By using the UnionPay cash back practice, China is able to track this type of capital flight simply by the names listed on the card.

It seems though that this scam goes beyond the borders of Macau and credit industry experts have shown that the Chinese are pulling the same scams in Japan, South Korea and Taiwan.

OCA News Editor

Jenny McKinnley is OCA’s financial correspondent. After spending years on the trading floor in both NY and London, she offers insight from the inside out on world financial news and events.

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