Banknotes seized from the house of one of the suspects who were detained for running an illegal foreign exchange business in Shanghai.(Ti Gong)
Police have detained 31 suspects for running an underground foreign exchange banking in Shanghai that involved transactions worth over 2 billion yuan ($300 million) in the past three years.
The gang, led by a 60-year-old local woman surnamed Sun, provided the money exchange to about 100 people.
Some of them exchanged Chinese yuan for foreign currencies to purchase real estate abroad.
Police said the case was the largest illegal money exchange in Shanghai in recent years.
The underground money exchange had partners in provinces, including Zhejiang and Sichuan, who helped with the money transfers.
The total amount of illegal transactions through the network could exceed 10 billion yuan, police said.
The modus operandi involved clients transferring yuan into the domestic bank accounts set up by the gang. The corresponding amount in foreign currencies was then deposited into foreign bank accounts of the clients. In short, money exchange deals did not involve any actual remittance via bank.
Police said the clients were hooked into the scheme by scalpers with links to the gang. In some instances, bank clerks provided the information about prospective clients but in most cases scalpers approached them when they went to the bank to exchange currencies.
The scalpers then served as agents between the clients and Sun for negotiating the exchange rates and verification of the transactions during the process. Deals were also done with banknotes exchanged offline.
Under China's foreign exchange control rules, the quota for foreign currency purchasing for individuals is US$50,000 per year.
Wang Xiaowen, the police officer who handled the case, said the single largest transaction was about 10 million yuan. "The gang profited between 30 to 50 cents for every $100 worth of money exchanged," he said.
Wang said that clients, who did not have any malicious intent in using the illegal service, would be exempt from liability.
Police said investigations were still ongoing and it was still unclear if ill-gotten wealth was involved in any of the transactions.
The suspects were nabbed in a raid last week from different parts of the city. Over 6 million yuan in cash and over 300 bank cards were seized from them.
Clues emerged from a recent financial fraud case in which money was funneled into one of the accounts belonging to the gang, police said.
