Since the beginning of this year, the State Administration of Foreign Exchange (SAFE) has been committed to implementing the work plans and arrangements of the CPC Central Committee and the State Council. With a focus on serving the real economy, guarding against financial risks and deepening the financial reform, the SAFE has reinforced market regulation, investigated behaviors violating the laws and regulations, and cracked down on fabricated trading and frauds, thereby safeguarding the healthy and sound order in the foreign exchange market, and forestalling the systematic risks to maintain our bottom line. In accordance with the Regulations of the People’s Republic of China on the Disclosure of Government Information (Decree No. 492 of the State Council), a selection of typical cases of foreign exchange violations are announced as follows:
Case 1: Evasion of foreign exchange by Guangzhou Changli Import and Export Co., Ltd.
From May to July 2015, Guangzhou Changli Import and Export Co., Ltd fabricated its trading backgrounds and repeatedly used the import declarations to pay foreign exchange that amounted to USD 50.4868 million.
Such behavior violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was considered evasion of foreign exchange. Involving a large amount of money, the behavior disrupted the order of the foreign exchange market with serious consequences. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 9.5239 million on the company.
Case 2: Evasion of foreign exchange by Ningbo High-tech Zone Gaoan Trading Co., Ltd.
In August 2015, Ningbo High-tech Zone Gaoan Trading Co., Ltd. used the bill of lading already used by other companies to pay foreign exchange worth USD 23.69 million under false entrepot trade.
Such behavior violated Articles 12 and 14 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was considered evasion of foreign exchange that seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 5.87 million on the company.
Case 3: Evasion of foreign exchange by LOUNIE Trade (Shanghai) Co., Ltd.
In December 2015, LOUNIE Trade (Shanghai) Co., Ltd. massaged the bill of lading and illegally transferred USD 10.25 million abroad under false entrepot trade.
Such behavior violated Articles 12 and 14 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was considered evasion of foreign exchange that seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 3.31 million on the company.
Case 4: Evasion of foreign exchange by Ningbo Duo Fu Man Chemicals Co., Ltd.
From March 2015 to November 2016, Ningbo Duo Fu Man Chemicals Co., Ltd. borrowed the bill of lading of other companies to pay USD 19.2362 million in foreign exchange.
Such behavior violated Articles 12 and 14 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was considered evasion of foreign exchange that seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 3.793 million on the company.
Case 5: Evasion of foreign exchange by Shandong Yongjia Group Co., Ltd.
From June to September 2016, Shandong Yongjia Group Co., Ltd. fabricated bills of lading and paid USD 4.8975 million in foreign exchange.
Such behavior violated Articles 12 and 14 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was considered evasion of foreign exchange that seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 1.6227 million on the company.
Case 6: Entrepot trade transaction handled by the Agricultural Bank of China Shanghai Branch Huangpu Sub-branch in violation of regulations
From January to March 2016, the Agricultural Bank of China Shanghai Branch Huangpu Sub-branch didn't conduct the due diligence investigation into the authenticity of entrepot trade and handled the payment of foreign exchange under entrepot trade without the presentation of the effective ownership voucher by the company.
Such behavior violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE ordered the sub-branch for rectification within a prescribed time limit, and imposed a penalty of RMB 1 million on it.
Case 7: Entrepot trade transaction handled by the Bank of China Zhoushan Branch in violation of regulations
From May to July 2016, the Bank of China Zhoushan Branch didn't conduct the due diligence investigation into the authenticity of entrepot trade and handled the payment of foreign exchange under entrepot trade without the presentation of the ownership voucher by the company.
Such behavior violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE ordered the branch for rectification within a prescribed time limit, confiscated its illegal gains of RMB 216,000, imposed a penalty of RMB 1 million, and suspended its sales of foreign exchange to businesses for 6 months.
Case 8: Overseas loans under domestic guarantees issued by China Minsheng Bank Quanzhou Branch in violation of regulations
From September 2014 to June 2015, and from September 2015 to July 2016, China Minsheng Bank Quanzhou Branch handled foreign exchange payments without the due diligence investigation into the qualification of the debtor, sources of guarantee funds, the purposes of funds under guarantees, sources of funds for the planned repayment of borrowings, and backgrounds of related transactions in terms of signing and performing the contracts for overseas loans under domestic guarantees.
Such behaviors violated Articles 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees, and seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE ordered the branch for rectification within a prescribed time limit, confiscated its illegal gains of RMB 3.041 million, and imposed a penalty of RMB 8 million on it.
Case 9: Overseas loans under domestic guarantees issued by Xiamen International Bank Zhuhai Branch in violation of regulations
From August 2014 to August 2015, Xiamen International Bank Zhuhai Branch handled foreign exchange purchases and payments without the due diligence investigation into the solvency of overseas debtors and the sources of funds for their repayment of borrowings, or the continuous monitoring and tracking of the purposes of the loans in terms of the signing and performance of the contracts for overseas loans under domestic guarantees.
Such behaviors violated Articles 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees, and seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE confiscated its illegal gains of RMB 816,000, imposed a penalty of RMB 1 million and suspended its sales of foreign exchange to businesses for 3 months.
Case 10: Overseas loans under domestic guarantees issued by OCBC Wing Hang Bank (China) Limited Beijing Branch in violation of regulations
From September to October 2015 and in September 2016, OCBC Wing Hang Bank (China) Limited Beijing Branch handled foreign exchange purchases and payments without the due diligence investigation into the borrowing contracts, expected sources of funds for the repayment of borrowings, and related transaction backgrounds in terms of the signing and performance of the contracts for overseas loans under domestic guarantees.
Such behaviors violated Articles 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees, and seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE ordered the branch for rectification within a prescribed time limit, confiscated its illegal gains of RMB 3.879 million, imposed a penalty of RMB 4 million and suspended its sales of foreign exchange to businesses for 3 months.
Case 11: Overseas loans under domestic guarantees issued by the Industrial Bank of Korea (China) Limited Shenzhen Branch in violation of regulations
From September to November 2014, and from October to November 2016, the Industrial Bank of Korea (China) Limited Shenzhen Branch handled foreign exchange purchases and payments without the due diligence investigation into the expected sources of funds for the debtors' repayment of borrowings, the likelihood of performing the guarantee contracts and related transaction backgrounds, or the continuous monitoring and tracking of the purposes of the loans in terms of the signing and performance of the contracts for overseas loans under domestic guarantees, in spite of the inconsistency between the beneficiary of the bill of lading and the buyer/seller of the trade in the documents submitted by the company.
Such behaviors violated Articles 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees, and seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE ordered the branch for rectification within a prescribed time limit, confiscated its illegal gains of RMB 229,000, and imposed a penalty of RMB 2 million.
Case 12: Transfer of QDII quotas by Haitong Asset Management Co., Ltd. in violation of regulations
From January 2015 to June 2016, Haitong Asset Management Co., Ltd. provided investment quotas to companies without the investment qualifications for QDII in violation of the foreign exchange administration regulations on QDII investment that involved net outward remittance of USD 16.28 million. Even worse, the company submitted inauthentic evidencing materials to the foreign exchange authority.
Such behavior violated Article 6 of the Regulations on Foreign Exchange Administration for Overseas Securities Investments by Qualified Domestic Institutional Investors, and seriously disrupted the order of the foreign exchange market with severe consequences. In accordance with Article 44 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE warned the company and imposed a penalty of RMB 7.75 million.
Case 13: Illegal arbitrage by Lion Fund Management Co., Ltd.
In October 2015, Lion Fund Management Co., Ltd. purchased and remitted out USD 2.987 million in foreign exchange under investment by QDII and then had the money remitted back after overseas settlement on the same day, in order to gain the spread in interest rates between CNY and CNH.
Such behavior violated Articles 2 and 16 of the Regulations on Foreign Exchange Administration for Overseas Securities Investments by Qualified Domestic Institutional Investors, seriously disrupting the order of the foreign exchange market. In accordance with Article 40 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 950,000 on the company.
Case 14: Illegal trading of foreign exchange by a Mr. Chu from Henan
Between September and October 2016, in order to transfer assets overseas against the laws, Chu transferred a total of RMB 30 million in three times into a domestic account controlled by an underground bank, and remitted a total of CAD 5.91 million into his account in Canada after having the money exchanged into foreign exchange through the underground bank.
Such behavior violated Article 30 of the Measures for the Administration of Individual Foreign Exchange, and was considered illegal trading of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 1.95 million on Chu.
Case 15: Illegal trading of foreign exchange by a Mr. Liu from Shandong
From February to August 2015, in order to transfer assets overseas against the laws, Chu transferred from his account a total of RMB 13.551 million in seven times into a domestic account controlled by an underground bank, and had his relative collect the illegal foreign exchange proceeds of AUD 2.5645 million after the remittances were exchanged through the underground bank.
Such behavior violated Article 30 of the Measures for the Administration of Individual Foreign Exchange, and was considered illegal trading of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 970,000 on Liu.
Case 16: Illegal trading of foreign exchange by a Mr. Zhong from Jiangxi
From January to May 2016, Zhong exchanged USD 1.1533 million into RMB 7.5776 million via an underground bank and transferred the money into his domestic account.
Such behavior violated Article 30 of the Measures for the Administration of Individual Foreign Exchange, and was considered illegal trading of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE warned Zhong and imposed a penalty of RMB 530,300 on him.
Case 17: Illegal trading of foreign exchange by a Mr. Zheng from Macau
From February 2013 to July 2015, Zheng made payments or collected receipts in RMB through his domestic personal account and collected receipts or made payments in HKD of equal value through his foreign account to convert foreign exchange for others against the laws. 33 such transactions were conducted, involving a total of RMB 65.0157 million.
Such behavior violated Article 30 of the Measures for the Administration of Individual Foreign Exchange, and was considered illegal trading of foreign exchange, seriously disrupting the order of the foreign exchange market. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE warned Zheng, and imposed a penalty of RMB 3.2508 million on him.
Case 18: Illegal trading of foreign exchange by a Mr. Zang from Jiangsu
From April to May 2016, Zang exchanged the RMB into the banknotes of the Hong Kong dollar by making payments in RMB through the POS at a currency exchange store in Macau, which involved a total of RMB 11.746 million.
Such behavior violated Article 30 of the Measures for the Administration of Individual Foreign Exchange, and was considered illegal trading of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE warned Zang, and imposed a penalty of RMB 939,700 on him.
Case 19: Evasion of foreign exchange by a Mr. Song from Inner Mongolia through split purchases of foreign exchange
From July 2015 to December 2016, to illegally transfer his assets, Song used the annual quotas for individual purchases of foreign exchange of 54 persons including his family and friends to purchase foreign exchange in a split way for the fabricated purposes of studying abroad, seeking medical advice overseas and overseas trips, and then transferred the foreign exchange into his overseas account, which involved a total of USD 3.4927 million.
Such behavior violated Article 7 of the Measures for the Administration of Individual Foreign Exchange, and was considered evasion of foreign exchange. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 683,000 on him.
Case 20: Evasion of foreign exchange by a Mr. Jiang from Henan through split purchases of foreign exchange
From January to April 2017, to illegally transfer his assets overseas, Jiang used the annual quotas of 55 persons for the purchases of foreign exchange to purchase foreign exchange in a split way for the fabricated purpose of overseas trips at his own expense, and then transferred the foreign exchange into his account in Hong Kong, which involved a total of USD 2.6938 million.
Such behavior violated Article 7 of the Measures for the Administration of Individual Foreign Exchange, and was considered evasion of foreign exchange. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE imposed a penalty of RMB 389,700 on him.
