What’s in a name? Quite a lot if you are ICBC, the world’s largest bank by assets.
Switch the initials around and you come up with the name of another financial institution, BCCI, once the world’s seventh largest private bank, with a client list said to include Panamian dictator Manuel Noriega, the Iraqi dictator Saddam Hussein and the Palestinian terrorist Abu Nidal.
BCCI, otherwise known as Bank of Credit and Commerce International, collapsed in 1991 as a result of an anti-money laundering investigation, which also damaged its regulator, the Bank of England (creditors unsuccessfully sued the latter for breaching its fiduciary duties).
ICBC now finds itself embroiled in a probe too, this time in Spain following a joint investigation by the Spanish tax authorities and Europol called Operation Shadow.
Last week, five executives including ICBC’s Madrid-based country head were arrested after the Guardia Civil, raided the branch. A sixth official, who had transferred from Spain to the bank’s Luxembourg branch, was arrested a few days later.
A judge has since ordered three of the six to remain in jail and set €100,000 ($110,472) bail for the others. The latest arrests are a follow-up to an earlier investigation called Operation Snake, which led to raids across 60 businesses suspected of evading taxes by selling low-priced goods through Chinese-run bargain basement stores, which then laundered the money through ICBC.
If the story feels familiar to readers, that is because we’ve mentioned it before. In WiC170 we told the story of Gao Ping, a businessman who styled himself as a Chinese Guggenheim that patronised the Spanish arts, but turned out to be more of an Al Capone following his arrest for running a gang that was laundering money from Spain’s bargain basement stores.
Ji Yihong, the director of a Spanish law firm, told Xinhua the Gao Ping case is still controversial among Spain’s 190,000-strong Chinese community (the country’s fourth-largest immigrant group). He adds that while the ICBC probe suggests that the bank probably has the correct remittance processes in place, they were not being supervised properly. Ji also believes other raids may be forthcoming as Operation Shadow is a pan-European initiative. According to CBN, 20 Chinese banking institutions have now opened 1,200 overseas branches across 53 countries and regions, amassing assets of $1.5 trillion. ICBC has overseas assets of $270 billion.
The Spanish and Chinese newspapers have taken a slightly different view of ICBC’s troubles. For instance, Beijing News says the case has echoes of Dalian Wanda’s problems renovating the Edificio Espana building in Madrid, as we reported in WiC312. CASS Institute of European Studies researcher Zhang Min told the newspaper that both ICBC and Wanda have fallen foul of the new Spanish government, which is taking a harder line on immigration and scrutinising foreign investment more closely.
“Some Chinese business practices don’t comply with Spanish laws and that’s giving the government a headache,” he says.
Chinese government officials say they are working with the Spanish authorities to resolve the case. However, comments by deputy foreign minister, Liu Xing, have annoyed the Spanish press, which has a different reading of the situation.
“The Chinese government is upset, very upset by the police and the judicial actions against ICBC,” reports El Mundo. It also adds Liu’s “complaints” to Spanish embassy official Jose Luis Garcia that the legal rights of Chinese businesses be upheld show that the Chinese “fail to understand that a government cannot intervene in a legal action launched by the police”.
In the past, El Pais has complained that unlawful behaviour in Spain’s Chinese communities are a common trait of Chinatowns around the world. This leads to a “kind of China extraterritoriality where justice or working conditions are determined by the Chinese and not by the state [they are living in],” the newspaper has concluded.
Last month, the US authorities launched an enforcement case against Bank of China New York for undisclosed “deficiencies” and next month Bank of China also faces a court case in Italy, where prosecutors allege that the lender’s Milan branch laundered millions of dollars from prostitution rings.
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