Financial Crime World

Financial Crime Control Crucial for China’s Global Influence

China plays a significant role in transnational crimes and illicit financial flows, with the country being both a source and transit point for many of these crimes.

The Magnitude of Transnational Crimes in China

According to a new report by Global Financial Integrity (GFI), “Made in China: China’s Role in Transnational Crime & Illicit Financial Flows,” China is involved in four major transnational crimes:

  • Drug Trafficking: The domestic “drug industry” alone is worth $82 billion annually.
  • Counterfeiting and IP Theft: China is responsible for 86% of globally-traded counterfeit goods, with an estimated value of $438 billion each year.
  • Human Trafficking: An estimated 3.8 million victims in the country, with a rough estimate for the value of human trafficking in China at $19 billion.
  • Wildlife Trafficking: The report highlights concerns about the use of wildlife in traditional Chinese medicine.

The Shadow Banking System

China’s shadow banking system has mushroomed into a $10 trillion obscure financial system that connects thousands of financial institutions with companies, local governments and hundreds of millions of households. This has led to concerns about regulation and oversight of the pharmaceutical and chemical manufacturing industries.

Recommendations for China

To address these issues, GFI recommends:

  • Improving regulation and oversight of the pharmaceutical and chemical manufacturing industries
  • Designing and enacting legislation focused solely on human trafficking
  • Focusing on manufacturers of counterfeit goods rather than just platforms where they are sold
  • Banning the use of wildlife in traditional Chinese medicine

Recommendations for the US and Other Jurisdictions

The report also recommends that countries hold China accountable for:

  • Weak pharmaceutical and illicit chemical controls
  • Abuses in Xinjiang
  • Corruption
  • Targeting individuals, entities, and countries facilitating financial crimes and money laundering, particularly Chinese professional money laundering networks.

Key Findings

  • China’s domestic “drug industry” alone is worth $82 billion annually.
  • The country is responsible for 86% of globally-traded counterfeit goods, with an estimated value of $438 billion each year.
  • China has an estimated 3.8 million human trafficking victims, with a rough estimate for the value of human trafficking in China at $19 billion.
  • China’s shadow banking system has mushroomed into a $10 trillion obscure financial system.

Sources