Money laundering and illicit flows from China – the real estate problem
| Date | 03 January 2017 |
| DOI | https://doi.org/10.1108/JMLC-08-2015-0030 |
| Published date | 03 January 2017 |
| Pages | 15-26 |
| Author | Mohammed Ahmad Naheem |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
Money laundering and illicit ows
from China – the real
estate problem
Mohammed Ahmad Naheem
Seven Foundation, Zurich, Switzerland
Abstract
Purpose –This paper aims to review some of the current challenges that international money laundering
schemes are posing for the Chinese banking sector. Anti-money laundering (AML) systems in China are
relatively new, and customer due diligence checks and other AML systems are underdeveloped in some areas.
Design/methodology/approach –This paper considers the specic issues that laundering money
through the real estate sector poses to the Chinese banking system and other global banks that could be in
receipt of illicit funds from China. The paper also discusses the source of most of China’s illicit ows, which are
believed to be from corruption and nancial crime offences rather than drug or organised criminal gangs.
Findings –The paper uses empirical evidence, including media coverage and academic studies from other
authors working on this issue, and supports the need to develop stronger risk-based systems, as opposed to
rules-based systems, for managing AML risk assessment. Previous work by the author and suggestions from
other authors are both used to suggest a basic framework for AML risk assessment.
Originality/value –The paper concludes by reiterating the fact that China like all other countries is now
operating in an international banking context, in much the same way that international organised crime is also
operating at a global level. It also emphasises that real estate remains a targeted sector for criminals seeking
to launder funds.
Keywords Money laundering, Real estate, Benecial ownership, Politically exposed persons,
China banking system, Trade-based money laundering
Paper type Research paper
Introduction
Money laundering has been a recognised as a problem for the nancial and banking sectors
since the early 1970s, when the USA rst introduced banking legislation (The Bank Secrecy
Act, 1970) in response to the rising concerns about drug trafcking. Money laundering
schemes usually consist of trying to move illicit funds and place them into the formal
nancial system by disguising them as legitimate transactions (Soudijn, 2014). For the
banking sector, it is a global problem and one that all nancial services need to track and
monitor, as laundered money can often be moved across jurisdictions to hide the source or
Please note that this paper was composed and submitted for review to this journal in July 2015.
All the content was correct at that point of time (July 2015). The banking industry is constantly
evolving, and new material from academic research is also emerging. These points need to be taken into
consideration when reading this paper.
The author acknowledges being a recipient of a research grant awarded by Princess Alae as part of
Seven Foundation’s “2020 Banking Vision – building banks of the future” and thanks her for the
continued support and motivation both to himself and other students who benet through her
generosity (www.sevenfoundation.ch). The author also thanks Professor Muhammad Juma‘h (a leading
economist of this era in the world at present, based in Damascus) who has continued to provide valuable
input both through his teaching of the science of economics and for his continued guidance.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
Money
laundering
15
Journalof Money Laundering
Control
Vol.20 No. 1, 2017
pp.15-26
©Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-08-2015-0030
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