Improving Foreign Exchange Inspections in a New Regulatory Era
China Forex: What achievements were made in foreign exchange inspections in terms of combating illegal activity,curbing improper outflows of funds and maintaining order in the foreign exchange market in 2017?
Xu Weigang: In 2017,the national foreign exchange inspection system closely followed changes in the overall situation,expanding the scope of its inspections and toughening its punishments in an effort to crack down on illegal activities. In so doing it sent clear signals to the outside world of its intent to strengthen regulations and get tough with violators to bring order to areas where we had a chaotic market. A total of 3,160 cases of foreign exchange violations were investigated and fines of 760 million yuan were imposed during the year. That was an increase of 58% and 76%,respectively,over the previous year. Authorities punished financial institutions that failed to comply with regulations,and some 240 million yuan in fines imposed,up 2.7 times from the previous year.
Banks,as the main channel of capital flows,were subjected to much heavier punishments. The total of fines and confiscations showed an increase of 3.6 times the figure for the previous year. There were 825 cases involving companies and they were fined some 250 million yuan,representing increases of 29.3% and 2.6%,respectively. Some 1,840 individuals were found to be caught up in regulatory violations and they received fines totaling 270 million yuan,an increase of 1.5 times and 1.2 times,respectively,compared with the same period of the previous year. This was an effective deterrence to illegal capital outflows and a key part of our effort to maintain a stable foreign exchange market.
Our actions over the course of the year included the following: First,we cracked down on illegal fund outflows. In 2017,we conducted special operations to halt foreign exchange fraud,regulatory evasion and illegal arbitrage activities. We carried out on-site inspections of 307 banking institutions,407 enterprises and 194 individuals,dealing with cases of foreign exchange fraud and evasion of foreign exchange rules,illegal arbitrage and the failure of financial institutions to conduct proper audits and inspections related to their transactions. We had another 211 cases of illegal foreign exchange-related activities and these resulted in penalties and confiscations totaling 190 million yuan. We carried out special inspections of foreign exchange business and found that more than 300 bank institutions and 5,000 individuals were involved in breaking down larger transactions into many smaller ones in order to circumvent regulations. The total amount involved in this category of regulatory violations was US$230 million. We conducted special inspections on the foreign exchange business of third-party payment agencies,punishing those responsible for illegal transfers of funds or assisting in foreign exchange fraud or evasion of regulations. In some cases we temporarily suspended the authority of some financial institutions to process cross-border foreign exchange transactions.