DOJ Seeks Seizure of Bank Accounts Allegedly Held Illegally by Chinese Nationals

A Bank of America logo is seen outside a bank branch in Washington, on Aug. 19, 2011. (Saul Loeb/AFP via Getty Images)

The U.S. Department of Justice on Feb. 16 filed a lawsuit in a California court seeking to seize the funds of hundreds of Chinese nationals who held illegal U.S. bank accounts obtained through a criminal ring.

As Beijing tightens the limit on capital leaving the country, many Chinese nationals seek other channels to move funds overseas.

For at least three years, a group of criminals have targeted Chinese nationals by offering fraudulently-opened bank accounts at Bank of America (BofA), according to the court filing (pdf). The criminals consist of a ring of corrupted BofA employees and agents based in California, it said. These acts provided hundreds of unknown or unverified individuals or organizations with virtually-unfettered access to the U.S. financial system.

The funds are currently being held by the U.S. Marshals Service pending the resolution of the suit.

The laws in China place certain limitations on the amount of currency its citizens or businesses may transfer abroad in any calendar year. Despite these controls, large numbers of Chinese nationals and companies regularly seek to transfer funds, including to the United States, beyond the permitted amount for both legal and illegal purposes.

U.S. investment expert Mr. Liu told The Epoch Times that there has long been a strong demand for overseas money transfer services among Chinese nationals. Early on, the demand came mostly from Chinese Communist Party (CCP) officials and, more recently, Chinese business owners as China’s current environment allows government authorities to confiscate private assets at any time.

Liu said that the CCP further tightened controls on capital outflows in 2019 at the start of the CCP virus pandemic. China’s State Administration of Foreign Exchange (SAFE) typically allows foreign transfer up to $50,000 per year. However, recently, many transfers have been declined with the authorities requiring additional information on the reasons for the transactions.

According to the filing, Chinese nationals often exchange and transfer funds in two ways to evade limitations set by the Chinese authorities. The first method involves transferring funds from currency exchanges in Hong Kong to U.S. bank accounts.

The second method involves the unregulated or illegal transfer of funds evading formal or conventional banking channels, commonly known as informal value transfer systems (IVTS)—a method that avoids generating records of funds transfers, which is often used in money laundering.

“In an IVTS transfer, neither currency nor assets are actually transferred, but instead, a payment to one party by a customer creates [a] debt to be paid to that customer by a separate third party, typically in another jurisdiction [(a foreign country)],” the filing said.

According to Liu, after the 9/11 terrorist attacks, the U.S. government introduced the U.S. Patriot Act. One of its powers was to intercept and prosecute international money laundering or any funds that might finance terrorist activities.

The Act’s anti-money laundering (AML) provision requires U.S. financial institutions to implement a customer identification program (CIP). The CIP stipulates minimum standards that require financial institutions to verify the identity of customers as they open new accounts. The program has enabled banks to have reasonable confidence in each customer’s true identity.

Under the AML-CIP rule, U.S. banks must require non-resident alien (NRA) applicants to provide an original and acceptable identification document (such as valid passports, etc.) and verify their physical addresses in the United States. Meanwhile, the applicant must apply at the bank in person.

Liu said that the most important condition for opening a bank account in the United States is going to the bank in person and signing the documents. If the applicant has never been to the United States, opening a U.S. bank account would be illegal. It is possible that the account holders may not know about these regulations, but the bank employees processing these applications must know.

For Chinese nationals looking to transfer money to the United States, some have turned to “account brokers” for help. Account brokers circumvent the customer identification systems by conspiring with corrupt bank employees, the filing said.

The account brokers would typically solicit bankers with account-opening authority in the Southern California region, promising them either cash compensation for the illegal account openings or a flow of account openings sufficient to increase the employee’s account-opening bonuses under the bank’s internal compensation systems.

To circumvent the AML-CIP procedure, the account brokers would not use the Chinese applicant’s actual residency address. Instead, they would use an address controlled by the account brokers or their agents.

Once the account was opened, the bank would mail bank cards for the new account to the false address submitted by the brokers, who would then collect these cards and transfer them to the Chinese nationals living abroad, who could then conduct banking transactions remotely.

In the court filing, the affidavit disclosed a collaboration between a criminal group targeting Chinese and corrupt employees within the California-based Bank of America. The U.S. Department of Justice, the U.S. Department of State, and the U.S. Department of Homeland Security have initiated court proceedings to seize the funds of victims targeted by the criminal ring.

Liu said it has become more difficult for Chinese nationals to exchange and transfer money abroad in recent years. Although the Chinese authorities have said they will relax restrictions on personal foreign purchases, there has yet to be any development.