Little Guy Gets Hard Time in Hong Kong

Money laundering has been big news recently in the United States, with big banks, not the least of which is HSBC, being fined huge amounts after being found out. Few will shed a tear for the big banks given their recent appalling behavior in other spheres, but spare one for the young mainlander, Luo Juncheng, who was sentenced recently to ten-and-a-half years in prison in Hong Kong for money laundering.

This case cries out for the attention of Amnesty International and other human rights organizations. But the human rights community is so preoccupied with political cases and literary figures, and with China in particular, that it is not likely such groups will take up a case involving money and business. At stake is the right to do business in a territory where there are supposed to be no controls on the movement of foreign exchange and where the laundering of corporate profits made on the mainland but made to appear derived from low-tax Hong Kong is a billion-dollar-a-week activity involving all banks and many Chinese state corporations.

The Hong Kong case also smacks of politically inspired discrimination whereby the culprit appears to be a low ranking person of little substance acting for mega rich mainlanders through a bank which itself has not been prosecuted for its role in the affair. The Hong Kong judge who handed out the sentence appears to be either unaware of commercial realities in Hong Kong or anxious to please certain people.

In this case 24-year-old Luo Junsheng, a man of no obvious substantial personal means, was sentenced for making 4,800 bank deposits and 3,500 transfers totaling HK$13 billion. Luo was said to be acting on behalf of an "uncle" on the mainland whose identity was not disclosed. But no evidence was ever produced that this money had been illegally obtained. Even if that were a reasonable presumption it flouts the necessity of evidence. Guilt cannot be presumed. In any event, there was no evidence either to show that Luo knew how the money had been obtained, only that he was given the task of making the transfers.

In all probability the transfers were in breach of China's foreign exchange rules but those are breached massively every day and it is the job of the mainland not free market Hong Kong to police its own rules.

No evidence was presented of any effort either by mainland or Hong Kong authorities to find the identity of the "uncle," who was clearly well connected to have such sums at his disposal. Luo would surely have feared for his life if he had opened his mouth about who was behind the money and the transfers - even assuming he knew; he might simply have been the last in a chain of intermediaries.

While Luo faces a lengthy stretch in prison, the bank involved ‑ the Chiyu Bank, which is part of the Bank of China group ‑ has not been prosecuted at all. Given the difficulty that public sometimes has in remitting even quite small sums without showing proof of their origin, Chiyu itself was clearly in no hurry to find the source of Luo's funds despite their huge size and the frequency of his deposits. It will have earned a lot of profit itself from transactions on that scale averaging around HK$1.6 million each.

The very notion of money laundering has to assume that the money was made from some illegal activity such as drug running or from tax evasion before being passed through banks and business with a view to disguising its origins. It is vague at the best of times and places an onus on the intermediaries to take care to ensure that the source of the funds they are handling is clean.

The anti-money laundering crusade is of course a fig leaf, albeit one that has created an immense amount of bureaucracy particularly since the 9/11 attacks and the assumption that somehow a war on money laundering was also a war on terror. Occasional and selective fines for a few banks has done nothing to stem the flow of drugs and money in the US. Likewise anti-money laundering actions become a bad joke when one views the sums being daily laundered through the casinos of Macau - and now perhaps those of Singapore as well - or the origin of the deposits made in Singapore by Myanmar drug and gem barons.

The hypocrisy shown by the Hong Kong prosecutors and the judge in this case cries out for outrage in the territory and beyond. The whole process smacks of prejudice, political interference and willful use of a scapegoat to protect the big fish.