Italy uncovers $1.9bn fraud linked to Chinese shadow bank network

Italian police said on Thursday they had uncovered a tax fraud carried out by 85 suspects involving 1.7 billion euros ($1.9 billion) in false invoices, with the money laundered through a system of so-called Chinese shadow banks. Guardia di Finanza (GdF) police in Ancona, a port city on Italy’s eastern Adriatic coast, said they seized assets worth 350 million euros, including cash, luxury cars and real estate. They also blocked 1,569 bank accounts, ordered the sequester of 140 companies believed to have issued false invoices and searched properties in Milan and the surrounding Lombardy region, Florence, Padova and Sicily. The seizure order, reviewed by Reuters, shows that 64 of the 85 suspects are Chinese nationals. People with direct knowledge of the matter said that the investigation was ongoing to identify the Italian customers who used the service to launder cash.

The emergence of a kind of parallel underground banking system run by unlicensed Chinese money brokers has been the focus of several investigations over the past year in Italy. These investigations, carried out in different parts of Italy, led the authorities to assume the existence of a broader array of services  offered by Chinese-linked organisations, including concealing cross-border payments for drug cartels and facilitating tax evasion. The GdF said prosecutors in Ancona found that fictitious ‘paper” companies issued false invoices and told customers into which Italian bank account to make the payments. Once the money had arrived, the bogus company would then transfer the same amount to an account in a Chinese bank, justifying it as payment for imports of products that had never taken place. The original sum, minus commission, was returned in cash by couriers to the customer who made the first payment, according to the police statement. Reuters