Cash, Corruption & Crime: How Chinese Illegal Banks in Italy Signal Global Chain

Investigators say the secret bank made in China is able to launder billions of dollars without leaving a trace.

Image: Deeksha Malhotra/The Quint

Italian investigators called it the "China underground bank" and the terminology has now also entered the system of Europol, which has already issued an alert to the EU police because the same phenomenon could be happening in other countries. The daily La Repubblica broke the story first, one that seems incredible.

In Italy, there's a secret bank with branches in Rome, Florence, Padua, Prato, Naples, and Reggio Calabria that moves billions to China by offering 'special services for customers'. The secret bank made in China, according to investigators, is able to launder billions of dollars without leaving a trace.

It is being used by Chinese citizens with huge amounts of cash as a result of tax evasion and illegal profits through a notorious mechanism of 'opening and closing' companies by Italians wanting to recycle huge amounts, Russian oligarchs who after sanctions for the war in Ukraine, cannot make tracked purchases in Italy, and Chinese millionaires who want to do shopping in Italy without being bothered by the official limit of money allowed for bank transfers.

• In Italy, there's a secret bank with branches in Rome, Florence, Padua, Prato, Naples, and Reggio Calabria that moves billions to China by offering 'special services for customers'.

• The secret bank also offers overseas payment services guaranteeing 100 percent money transfer.

• Italian investigators estimate that this underground "institution" is allegedly moving one to two billion euros a year by getting a flood of money into the current accounts of China's banks.

• The suspicion that the Chinese state knows about this money spin stems from the names of the banks that received these transfers, and they are largely state-controlled institutions starting with the Bank of China.

But cleaning up Italian money and basically, the illegal Chinese economy as well, is not the worst. The secret bank also offers overseas payment services guaranteeing 100 percent money transfer, a more sophisticated evolution of the old hawala.

And amongst its clients, one can also count the biggest drug cartels in South America, starting with the "Gulf" cartel in Colombia, the Camorra, and the Calabrian 'Ndrangheta.

Hints of Criminal Conspiracy Behind Chinese Banking Network

Evidence of contact between the organised criminality and the network of Chinese branches is emerging both from recent investigations and from the review of operations made a few years ago by the Italian police, which had not focused much on the presence of Chinese people guaranteeing payments and receiving cash.

All started with the monitoring of a strange phenomenon that the Bank of Italy has been recording over the past decade, the collapse of official remittances from Chinese citizens in Italy to China.

From 5 billion Euros in 2017 to just 9 million in 2021—a figure that goes against all social and economic logic and the earnings of Chinese companies and small stores in Italy, according to the orders issued by Beijing, should not be reinvested in Europe so as not to leave anything to the West.

This is how the black bank works: there are many customers giving cash, and the movement of money takes place in a very short time. A percentage between two and five percent of the amount of money to be transferred or delivered is retained by the Chinese and sent back home.

Is China a Breeding Ground for Black Banks & Illegal Bucks?

The annual Intelligence Relation to the Italian Parliament, reads: “With regard to the Chinese crime, the information continues to be oriented in the direction of the business-criminal dynamism of unscrupulous Sinic entrepreneurs who also through the use of articulated tax evasion and money laundering schemes which are often accompanied by cases of systematic collection and transfer to the Motherland of the proceeds of illegal activities, have managed to consolidate their position within certain national economic sectors, including a systematic placement in well-defined territorial areas."

And the China International Crime Study by "Global Financial Integrity," a Washington-based think tank specialising in the analysis of financial malfeasance, points out also that the illegal banking system is a phenomenon that exists within China as well.

According to some experts, China's underground banks are estimated to have over 10,000 clients and are believed to launder over USD 100 billion each year, however, “It is difficult to determine the extent of China's underground banking system, there is no doubt it has also been used to move large sums across China's borders”.

The Italian investigators estimate that this underground "institution" is allegedly moving one to two billion euros a year by getting a flood of money into the current accounts of China's banks estimated also to keep low, that more than 15 billion euros from Italy through triangulations involving shell companies in Slovenia, Bulgaria and especially Hungary, which has fastly become a fifth column for Chinese investments in Europe, are ending up in China.

And they are almost sure, also, that Beijing perfectly knows.

The suspicion that the Chinese state knows about this money spin stems from the names of the banks that received these transfers—largely state-controlled institutions starting with the Bank of China with accounts in Xiamen, Quanzhou, Hangzhou, and Jinhua, continuing with The Agricultural Bank of China, China City Bank, China Construction Bank Corporation, China Everbright Bank and Industrial and Commercial Bank of China.

La Repubblica also recounted how, "shortly before the lockdown, a lawyer was running around Rome trying to acquire, on behalf of companies directly traceable to Beijing, majority stakes in strategic companies. He did this through carrier companies that served only to shield the sale so that Italian authorities could not later trace the real buyers.”

The calculation proved to be wrong, but this is what happens when a country is so 'ingenious', to use a mild word, to sign up to the BRI imperialistic project. After more than a hundred unofficial (and of course, illegal) police stations discovered a few months around the world, is now the turn of a whole underground bank system. What's next?

(Francesca Marino is a journalist and a South Asia expert who has written ‘Apocalypse Pakistan’ with B Natale. Her latest book is ‘Balochistan — Bruised, Battered and Bloodied’. She tweets @francescam63. This is an opinion piece and the views expressed are the author's own. The Quint neither endorses nor is responsible for his reported views.)