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HomePaper MoneyChinese Bank Fraud Leads to Millions in Missing Cash

Chinese Bank Fraud Leads to Millions in Missing Cash


By Joshua McMorrow-Hernandez for Coinweek …….

Billions of yuan equaling millions of dollars (USD) are missing in what has become the third major case of bank fraud reported in China since January. The Bank of Tianjin, which recently emerged on Hong Kong’s stock exchange, has reported that the equivalent of $120 million USD in banknotes has turned up missing.

“Recently, a risk incident occurred to the Shanghai Branch of Bank of Tianjin, Co. Ltd in relation to its business of notes held under resale agreement,” said Bank of Tianjin Chairman Yuan Fuhua in a written statement. “After investigation, the relevant amount exposed to risks is RMB [renminbi] 786 million.”

While a single incidence of theft involving a large number of these short-term promissory notes is bad enough for the Chinese banking system, it follows on the heels of two other massive fraud cases.

In late January, China’s CITIC Bank, the nation’s seventh-largest lender and ninth-largest bank in terms of overall assets, released details of a one-billion yuan fraud case. A bank employee allegedly faked documents to obtain a bill for investments in the Chinese stock market.

A few days earlier the Agricultural Bank of China reported a similar but much larger embezzlement case involving two employees who stole 3.9 billion yuan. The pair invested the money earlier last year in Chinese stock, which notched seven-year highs in June 2015 before tumbling early this year.

The Chinese market faltered in part due to a weakening yuan and slipping activity in several sectors. Ironically for the unscrupulous individuals who invested the stolen bank funds into the Chinese stock exchange, the market soured in part when CITIC Bank and the Agricultural Bank of China announced news of the heists. This led to a panic among investors who held stocks in Chinese banks.

Chinese bills of exchange continue to grow in popularity as demand for long-term loans falls. The overall value of exchange bills has increased 60 percent since 2014, which is when the Chinese stock market saw a significant uptick. The exchange bills are popular among criminals because they can be converted to cash via third-party bill agencies.

While it would seem to some that transactions involving exchange bills would leave a clear paper trail for law enforcement agencies, the reality is that regulations involving exchange bills are still relatively scant. Before the stock market crash in summer 2015, bills of exchange were frequently used for buying Chinese stocks.

As market analysts continue watching the shaky situation on the Chinese stock market, bank officials work with law enforcement agencies to further investigate these fraud cases and help prevent others. In light of these crimes, the ultimate goal for China’s banking industry is for improved communication between banks and other financial institutions to tighten the security of Chinese bank assets.

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