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 Italian prosecutors are seeking to bring 297 people, mostly Chinese,
as well as the Milan branch of Bank of China <3988.HK> to trial on
charges of allegedly smuggling more than 4.5 billion euros ($5.12
billion) into China between 2006 and 2010. A judge in Florence is in
the process of deciding whether they should be indicted and face a
trial.
Part of the probe, code named 'River of Money', focuses on the
relationship between Bank of China and defunct Chinese money
transfer operator Money2Money, which used to dominate the market for
Chinese remittances from Italy, a prosecutors' document reviewed by
Reuters shows.
The source said the supervisory inspection, which started a few days
ago and is continuing, had been triggered by the judicial
investigation in Florence. But the Bank of China (BoC) denied there
was a link.
It confirmed that the inspection was taking place: "Bank of China is
providing full cooperation to the Italian Supervisory Authority,"
the bank said in written answers to questions from Reuters.
The Chinese bank said the inspection was a routine procedure, which
takes place every three to five years and covers all business and
management fields of the bank.
"It is not connected to the M2M (Money2Money) issue," the Chinese
bank said, declining to divulge further details given the ongoing
nature of the inspection.
The Bank of Italy, which oversees banks and financial operators
active in the country, declined to comment as it said supervisory
activity was secret.
Shares in BoC, the Chinese bank with the biggest global footprint,
were up 0.6 percent on Monday, compared with a 1.5 percent rise in
the benchmark China stock index .
SANCTIONS CAN BE TRIGGERED
On-site inspections are a powerful tool the Italian central bank
uses to safeguard the integrity of the financial system and to
prevent illegal practices, including money-laundering.
If management irregularities and regulatory violations are
discovered in the course of off-site reviews and on-site
inspections, sanction procedures are triggered against bank
directors that could result in administrative penalties, mainly
fines, the central bank says on its website.
In the request for the indictment, Italian prosecutors allege
billions of dollars, including proceeds from counterfeiting,
exploitation of illegal labor and tax evasion, were sent to China
and split into small sums to avoid being detected.
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Half of the amount allegedly smuggled, or 2.2 billion euros, was
sent via BoC's Milan branch, the request says.
Bank of China has consistently denied any wrongdoing.
Between 2008 and 2009, the Bank of Italy's financial intelligence
unit (UIF), which fights money laundering and the financing of
terrorism, had identified hundreds of suspicious transactions from
Italy into China that were carried out by Money2Money, the Bank of
Italy told Reuters.
Some went through Bank of China but the Bank of Italy did not impose
sanctions on Bank of China's directors at the time.
UIF sent all relevant details to prosecutors in Florence in 2011 and
2012, the Bank of Italy said.
In 2011, UIF carried out an on-site inspection at Bank of China's
Italian offices and fined two bank employees "for failure to
transmit suspicious transactions," the Bank of Italy told Reuters.
Bank of China immediately appealed and the result of that is still
pending, the Chinese bank says.
It said the penalties do not refer to violations of anti-money
laundering legislation, but to the bank governance.
The Chinese underground economy in Tuscany was brought into focus in
2013 when a fire killed seven workers in their sleep at a workshop
in Prato, center of a network of often-illegal garment workshops.
(Reporting by Lisa Jucca; Editing by Martin Howell)
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