Canada Loses Luster as Destination for Corrupt Chinese Cash; Canada became the first country to reach a deal with China to share forfeited assets in an effort to target international organized crime

July 6, 2013, 5:20 AM

Canada Loses Luster as Destination for Corrupt Chinese Cash

Chinese fugitives who touched down in Vancouver or Toronto with suitcases of illicit cash might find it harder to keep their fortunes.

Canada became the first country to reach a deal with China to share forfeited assets in an effort to target international organized crime, according to the official Xinhua News Agency. Once the pact is signed, one country will be able to get money back if a fugitive transfers illegal assets to the other, according to Xinhua.

“Canada is not, and will not be seen as, a safe haven for the proceeds of crime,” said Canadian Foreign Affairs Minister John Baird in a news release about the pact.Canada is one of the top destinations forChinese high-ranking corrupt officials, according to a report published by China’s central bank in 2011. Up to 18,000 corrupt officials and employees of state-owned enterprises have fled with more than $123 billion from mid-1990s, according to the report.

Many in the Chinese public regard Canada as a haven for corrupt officials. A number of high-profile criminals with millions in assets fled there, including Lai Changxing, who Chinese officials considered the primary suspect in a multibillion-dollar smuggling operation, and Gao Shan, former president of a Bank of China branch in northern city of Harbin accused by Chinese officials of fraud.

Legal or illegal, Chinese love to park their wealth in Canada, sometimes flying there with suitcases full of cash. According to documents provided to The Wall Street Journal by the Canada Border Services Agency Officials, Toronto and Vancouver airports seized around $13 million in undeclared cash from Chinese nationals from April 2011 through early June 2012.

Part of the reason that Canada has been a hiding place for Chinese economic criminals is that the North American country doesn’t have an extradition treaty with China. Canada doesn’t support the death penalty, which China is often accused of abusing. Many countries with diplomatic relations with China haven’t signed extradition treaties with the country due to distrust to China’s legal system, including the U.S.

Still, many indicted criminals, including Messrs. Lai and Gao, have come back to China – Mr. Lai was deported and Chinese media has said Mr. Gao turned himself in. According to the official Xinhua News Agency, prolonged legal battles and financial sources have been critical issues for fugitives. Draining their financial resources could limit their ability to live abroad.

In an interview with The Wall Street Journal on Thursday, Canada’s Mr. Baird said the agreement “will hopefully facilitate people not being able to take the proceeds for their crime into Canada and somehow feel immune from state action.”

Roughly $2.83 trillion illicitly flowed out of China from 2005 to 2011, according to research conducted by the organization Global Financial Integrity.

The amount partly explains why China has stepped up its effort to chase the corrupt officials and the assets in recent years. Chinese government has signed extradition treaties with Spain, Portugal, Italy, Australia and France among other developed countries where wealthy criminals usually choose as hiding places. To get the fugitives back to Chinese courts, China has promised not to execute the criminals in many cases.

China does not have an asset sharing pact with the United States, but was a recipient of shared asset from the U.S. according to the State Department.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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