Attention! You’ll be Arrested for Illegal Foreign Exchange!

Recently, the State Administration of Foreign Exchange(SAFE) announced 17 cases of involving violations of foreign exchange regulations, with a penalty amount of 84.437 million yuan.

The SAFE has tightened regulation of the foreign exchange market and investigated and dealt with illegal or irregular inflows and outflows of foreign exchange

Attention! You'll be Arrested for Illegal Foreign Exchange!

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It also has cracked down on false and fraudulent transactions to ensure the robust operation of the foreign exchange market and guard against and address financial risks. 

 

Industry insiders said that strengthening the supervision of foreign exchange violations will help prevent cross-border capital flow risks and maintain financial stability.

 

1

Huge fine: 84.437 million yuan

 

The 17 typical cases of violations reported this time are the first time that the SAFE has reported this year.

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

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These violations involve three types of entities: banks, businesses, and individuals.

 

  • Bank: Mainly manifested in the failure to perform the authenticity audit as required. When the company submits false documents, duplicate documents or invalid documents, it still handles false internal insurance or entrepot trade for the enterprise. 

  • Enterprise: Utilize the false document to fabricate a trade background, and transfer money abroad.

  • Individual: Buy or sell foreign exchange through illegal institutions such as an underground bank.

Especially, individuals who illegally trade forex or illegally transfer money is the hardest hit.

At present, the foreign exchange business under the personal capital project has not been fully liberalized. 

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

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Some individuals use dozens of individuals to facilitate the purchase of foreign exchange to pay overseas purchase or investment. This is a typical violation.

 

According to the reported case, from January 2016 to July 2017, Sun used the annual foreign exchange quota of 34 domestic individuals in China to split the foreign funds into foreign accounts after the purchase of foreign exchange funds in order to invest overseas, with the total capital of 2.44 million USD.

 

2

Typical cases: illegal behavior

 

In fact, SAFE announced 24 cases involving violations of foreign exchange regulations in 2018. Here is a selection of typical cases where foreign exchange regulations were violated are presented as follows:

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

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Case 1: Evasion of foreign exchange

From January 2015 to January 2016, Tianjin Binhai Haitong Logistics Co., Ltd. fabricated the background of entrepot trade and paid foreign exchange of USD 46.518 million using the bills of lading already accomplished by other companies.

 

From January 2015 to December 2016, Xilong Scientific Co., Ltd. in Shantou, Guangdong fabricated the background of entrepot trade and paid foreign exchange of USD 17.6102 million using the invalid bills of lading.

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

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In June 2015, Chengdu Weiyi Trading Co., Ltd. fabricated the background of entrepot trade and paid foreign exchange of USD 4.2528 million using the false bill of lading.

 

These companies violated Article 12 and 14 of the Regulations on Foreign Exchange Administration and are considered getting involved in foreign exchange evasion, which has severely disturbed the order of the foreign exchange market. This is a serious case in nature. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, these companies were fined RMB 11.05, 5.77, 1.3 million respectively.

 

Case 2: Inward remittances of foreign exchange

 

In June 2015, Tianjin Haohua Minsheng Technology Development Co., Ltd. fabricated the background of export and remitted USD 2 million under “advances from customers” into China, which is recognized as an inward remittance in violation of the foreign exchange regulations.

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

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The company violated Article 12 and 13 of the Regulations on Foreign Exchange Administration, and the company was fined RMB 200,000 in accordance with Article 41 thereof.

 

Case 3:  Illegal foreign exchange settlement

 

From July to September 2015, Lianyungang Yunong Agricultural Technology Co., Ltd. in Jiangsu handled the procedure for inward remittance of capital and settled USD 4.89 million in foreign exchange using the false contract.

Attention! You'll be Arrested for Illegal Foreign Exchange!

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The company violated Article 23 of the Regulations on Foreign Exchange Administration and Article 9 of the Provisions on the Foreign Exchange Administration of Domestic Direct Investment from Foreign Investors and is considered getting involved in illegal foreign exchange settlement. In accordance with Article 41 of the Regulations on Foreign Exchange Administration, the company was fined RMB 980,000.

 

Case 4: Evaded foreign exchange through split-up

 

In 2016, to transfer his assets overseas illegally, Mr. Zhang split up his personal funds, used the annual quotas of 27 individuals including his own to buy foreign exchange and transferred the foreign exchange into his overseas account. The funds thus transferred equaled USD 1.3419 million in total.

 

Zhang violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and is considered getting involved in the evasion of foreign exchange. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, Zhang was fined RMB 460,000.

 

Case 5:  Illegal purchase and sales of foreign exchange

 

From August to September 2016, to transfer his assets overseas illegally, Mr. Chen transferred RMB 26 million into the domestic account controlled by an underground bank, exchanged the money into foreign exchange and then transferred the foreign exchange into his Hong Kong account. The funds thus transferred equaled USD 3.8906 million in total.

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

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Chen violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and is considered getting involved in the illegal purchase and sales of foreign exchange. In accordance with Article 45 of the Regulations on Foreign Exchange Administration, Chen was fined RMB 1.69 million.

 

Therefore, please avoid these illegal behaviors! Try to find a legal method to receive foreign exchange, like market purchase trading.

 

 

3

Market purchase trading mode

 

Many foreigners doing business in China will choose to exchange foreign currency in the black market because the factories can’t provide Fapiao (Chinese invoices) and there is no way to export the goods overseas. For this reason, the government promoted the market to purchase in Yiwu in 2016.

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

 

In order to solve the legality of export without an invoice, HACOS also obtained the first batch of pilot enterprise qualifications in Guangzhou in 2017. In 2018, more than 100 Chinese and foreign customers purchased and exported through this mode. 

 

Attention! You'll be Arrested for Illegal Foreign Exchange!

 

At the same time, we also assisted foreign investors to settle foreign exchanges with more than 16 million US dollars. The clients no longer have to worry about their funds being frozen. In 2018, we held five lectures on Market Purchase, which enabled more and more people to enjoy the convenience of the new mode.