In recent years, the State Administration of Foreign Exchange (SAFE) has accelerated promoting the "five shifts" in foreign exchange administration by streamlining administration and delegating power, deepening the foreign exchange administration reform and stressing promoting reforms while guarding against risks, thus allowing market participants doing business in compliance with laws and regulations to fully enjoy trade and investment facilitation while continuing crackdown on foreign exchange irregularities to maintain foreign-related economic and financial security in China. Due to complex and changing economic conditions both at home and abroad, the short-term cross-border capital flows have been more fluctuating since the beginning of 2015, despite equilibrium between foreign exchange supply and demand. To guard against risks arising from abnormal cross-border capital flows, the SAFE has enhanced monitoring and checking using the big data system for the real-time cross-region, cross-market player and cross-business monitoring of all cross-border receipts and payments, and stepped up efforts to inspect the key channels of abnormal cross-border capital flows and relevant key market participants, so as to promptly identify irregularities and have relevant persons punished without interrupting normal operations of market participants that do business in compliance with laws and regulations.
As we have inspected, most financial institutions, companies and individuals are in strict compliance with the regulations on foreign exchange administration, suggesting further improvement in the overall level of compliance. However, some enterprises and individuals use deceptive means such as false instruments, invalid instruments, repeatedly-used instruments and structuring of trade, or conduct outward remittance through split-off for outflows and purchases of foreign exchange in violation of regulations; some banks conduct foreign exchange sales and settlement, as well as cross-border receipts and payments of foreign exchange without performing the obligation of authenticity review, affecting the healthy and stable economic and financial development and the equilibrium of balance of payments. For the purpose of warning and education, we hereby make public the selected institutions and individuals violating foreign exchange regulations and the resulting punishments on them.
From April 2012 to January 2014, Bank of Shanghai Co., Ltd. Shenzhen Branch handled 9 payments of foreign exchange under entrepot trade for 3 companies in Shenzhen, which involved a total amount of USD 30.78 million, despite the inconsistency between the destination in the contract and that on the receipt as well as between the date of transportation, trading object in the contract and those on the imports filing list. Since this violated the regulation that banks should conduct reasonable review of the authenticity of transactions under trade and of the consistency of the transactions with foreign exchange receipts and payments, the SAFE decided to impose a fine upon the said bank as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
In February 2013, Shanghai Pudong Development Bank Co., Ltd. Yiwu Sub-branch refunded foreign exchange under general trade to a Zhejiang-based company, which involved an amount of USD 1.02 million, but violated the regulations on to-be-inspected accounts by making payments directly from the to-be-inspected account for revenue from exports. In March 2013, the bank handled outward remittance of USD 7.09 million under entrepot trade, despite doubts and flaws in the relevant documents submitted by a Yiwu-based company. Since this violated the regulation that banks should conduct reasonable review of the authenticity of transactions under trade and of the consistency of transactions with foreign exchange receipts and payments, the SAFE decided to impose a fine upon the said bank as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
Between June and July 2013, Ping An Bank Co., Ltd. Chongqing Branch handled payments of foreign exchange under entrepot trade for 2 companies in Chongqing, which involved USD 7.06 million and USD 2.22 million respectively, despite inconsistency between the agreed parties and the signatories in the warehousing agreement retained for the transactions. From June 2013 to February 2014, the bank handled 29 payments of foreign exchange totaling USD 85.95 million under entrepot trade for 3 companies in Chongqing, without endorsing the relevant original instruments as required and retaining any original or duplicated copies for reference. Since this violated the regulation that banks should conduct reasonable review of the authenticity of transactions under trade and of the consistency of transactions with foreign exchange receipts and payments, the SAFE decided to impose a fine upon the said bank as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
Between December 2007 and April 2014, Shanxi Shouyang Zhongsheng Weiye Dongwan Coal Mine Dedicated Railway Line Management Co., Ltd. purchased and paid overseas foreign exchange through individual split-off of corporate profits by employee, which involved a total amount of USD 4.8 million. Since this violated the regulations for foreign exchange administration on purchases and payments of foreign exchange, the SAFE decided to impose a fine upon the said company as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
In June 2013, Hubei Wuhan Rongduan Trading Co., Ltd. made 4 payments of foreign exchange under entrepot trade with 2 invalid bills of lading, which involved USD 21.27 million in total. Since this violated the regulation that receipts and payments of foreign exchange under the current account should be conducted with true and legal transaction bases, the SAFE decided to impose a fine upon the said company as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
From May 2013 to March 2014, Sichuan Hongda (Group) Co., Ltd. made payments of foreign exchange of USD 7.34 million for import through entrepot trade and collected foreign exchange of USD 7.37 million from export through entrepot trade repeatedly using 12 bills of lading. Since this violated the regulation that receipts and payments of foreign exchange under the current account should be conducted with true and legal transaction bases, the SAFE decided to impose a fine upon the said company as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
In January 2014, Hunan Honors Resources Trading Limited made one payment of foreign exchange of USD 15.24 million with instruments without true and legal transaction bases. Since this violated the regulation that receipts and payments of foreign exchange under the current account should be conducted with true and legal transaction bases, the SAFE decided to impose a fine upon the said company as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
In February 2014, Jiangsu Kunshan Jinaer Sports Instruments Co., Ltd. purchased foreign exchange of USD 3.40 million for making payments overseas, but actually for performing the contract of forward foreign exchange settlement, thus violating the regulations for foreign exchange administration on purchases and payments of foreign exchange. The SAFE therefore decided to impose a fine upon the said company as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
In May 2014, Shandong Chuanjun Chemical Co., Ltd. made one payment of foreign exchange of USD 2.43 million under import letter of credit through a bank using invalid instruments including a false import contract, bill of lading and commercial invoices. Since this violated the regulation that receipts and payments of foreign exchange under the current account should be conducted with true and legal transaction bases, the SAFE decided to impose a fine upon the said company as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
In September 2014, a Mr. Zhao in Chengde, Hebei organized 23 persons including a Mr. Du to buy foreign exchange of AUD 1.23 million (or USD 1.15 million) using RMB for the purpose of individual "overseas travel", and remitted the money to Australia for Zhao to buy an overseas property. Since this violated the regulations on administration of individuals' foreign exchange, the SAFE decided to impose a fine upon Zhao as an administrative punishment, in accordance with the Regulations of the People’s Republic of China on Foreign Exchange Administration.
Market participants should learn from these cases, developing a sense of social responsibility in economic activities, enhancing self-management, pursuing robust operations and scientific development and strictly abiding by the policies and regulations on foreign exchange administration. The institutions and individuals that have violated relevant regulations and been investigated and punished should rectify their activities and raise their awareness of doing business in compliance with laws.
