
$2T in Proceeds of Corruption Removed from China and Taken to US, AUS, CAN, NL - kspaans
http://www.antimoneylaunderinglaw.com/2017/01/qa-on-the-2-trillion-in-proceeds-of-corruption-removed-from-china-and-taken-to-us-australia-canada-and-netherlands.html
======
a_bonobo
This is a relatively big problem in Australia - there has been talk of a
housing bubble in Australia for the last few years which in part has been
propped up by Chinese grey money buying whole apartment buildings for
investment, which drives up prices (they can just dictate prices) and keeps
young locals out [1]. I cannot afford a house and I have a well-paying job.

The government looks the other way since building is one of the last big job
creators now that the mining boom is over. For example, there is a government
body for foreign investment breaches (rules like you're not allowed to buy
'used' property if you don't have permanent residency, but I've personally
talked to quite a few Chinese students whose parents did that for them) but it
has never once initiated court action [2].

So everybody profits in the short term - Chinese corruption can move 'dead'
money out of the country, Australian government gets to present itself as a
job creator. Except young Australians, who have to rent and cannot rely on
real estate property for their retirement.

In the long term, the bubble is going to pop and then you have dead cities
with empty high rises falling apart (but then again, people have been saying
for at least 10 years that the bubble is going to pop any day now and it's
still inflating)

[1] Contains no numbers: [http://www.smh.com.au/comment/grey-money-from-china-
helps-bl...](http://www.smh.com.au/comment/grey-money-from-china-helps-blow-
our-property-bubble-20140928-10n7a8.html)

[2] [http://www.abc.net.au/news/2014-11-27/foreign-buyer-rule-
enf...](http://www.abc.net.au/news/2014-11-27/foreign-buyer-rule-enforcement-
needs-to-be-strengthened/5921518)

~~~
kspaans

        Except young Australians, who have to rent and cannot rely
        on real estate property for their retirement.
    

This is orthogonal to the money laundering, but what's stopping the young
people from investing for their retirement? Houses are not the only way to
build savings.

~~~
an_account_name
Because you still have to pay rent - if you could buy, your housing costs
would be earning equity.

~~~
sanswork
It's not uncommon for it to be better financially to always rent and just
invest the difference between rent and mortgage+maintenance+taxes. With
interest first mortgages as they are it is generally a long time before you
earn any equity at all.

~~~
aianus
This. I did the math when I rented an apartment in downtown Toronto and the
rent was less than mortgage interest + condo fees + property tax +
maintenance.

~~~
prklmn
So let's say you save 10¢ on every dollar by renting in your scenario. You'd
have to have a hell of a return on that 10¢ you saved to beat the 90¢ you
would have invested in the property but instead flushed down the drain in the
form of rent....

~~~
raverbashing
"flushed down the drain"

Oh not this crap again

[https://www.youtube.com/watch?v=KAMeI4uHAFE](https://www.youtube.com/watch?v=KAMeI4uHAFE)

~~~
prklmn
"But practically speaking, ownership has worked out better for most people
over the long run."

As I said before, as long as you don't buy high and sell low, your money has
effectively been flushed down the drain in the form of rent.

------
jamhan
In Australia we were supposed to have tranche 2 ("covering real estate agents,
lawyers, accountants, car dealers and others") of the anti-money laundering
regulations introduced over 10 years ago. As this article details, it is
"comically" overdue: [http://www.smh.com.au/business/banking-and-
finance/slated-an...](http://www.smh.com.au/business/banking-and-
finance/slated-antimoney-laundering-legislation-is-comically-
overdue-20150913-gjlb7j.html)

While political parties can wallow in the extra taxes garnered from sky-
rocketing real-estate prices and sizable party donations they have no
incentive to introduce this second tranche.

For example, any party in power in New South Sales will keep its budget in the
black simply from "stamp-duty" taxes collected on real-estate transactions.

The Foreign Investment Review Board was and is a farce and that's how the
government likes it.

------
RandyRanderson
BC is by far and away the most impacted region. Let's list some quick housing
prices examples:

NL - Amsterdam up 15% in 2016 [-1]

AU - Sydney up 17% over _5_ years [0]

NZ - up 13% oct 2015-2016 [1]

BC - Metro Vancouver up 31.4% August 2015-2016 _alone_. BC (not just
vancouver) housing prices have almost _tripled_ since 2004. [2]

No, these new rules the BC government has put in place are not going to work.
I've commented on the reasons before here:

[https://news.ycombinator.com/item?id=12873156](https://news.ycombinator.com/item?id=12873156)

[https://news.ycombinator.com/item?id=12215490](https://news.ycombinator.com/item?id=12215490)

[-1]
[http://www.globalpropertyguide.com/Europe/Netherlands/Price-...](http://www.globalpropertyguide.com/Europe/Netherlands/Price-
History)

[0]
[https://en.wikipedia.org/wiki/Australian_property_bubble](https://en.wikipedia.org/wiki/Australian_property_bubble)

[1] [https://www.bloomberg.com/news/articles/2016-11-02/the-
rich-...](https://www.bloomberg.com/news/articles/2016-11-02/the-rich-have-
found-a-place-to-escape-the-horrors-of-the-world)

[2] [http://www.cbc.ca/news/canada/british-columbia/26-slump-
in-v...](http://www.cbc.ca/news/canada/british-columbia/26-slump-in-vancouver-
real-estate-sales-called-a-return-to-historically-normal-levels-1.3745825?kkk)

------
sudeepj
In India, "grey income" is called "black money". It is a hot topic in India
right now.

Recent activities on this:

Note ban (Nov 2016) =>
[https://en.wikipedia.org/wiki/Indian_black_money#Ban_on_1000...](https://en.wikipedia.org/wiki/Indian_black_money#Ban_on_1000_currency_notes)

Using analytics (today's news) =>
[http://economictimes.indiatimes.com/news/economy/policy/i-t-...](http://economictimes.indiatimes.com/news/economy/policy/i-t-
department-scanning-data-pile-to-dig-out-unaccounted-
income/articleshow/56282112.cms)

~~~
LiweiZ
We Chinese call it "black money", too. But it sounds too harsh and directly
pointing to crime when talking, esp. publicly. So the color is changed to gray
meaning color between clear and black so that no one "overreacts" (when "black
money" is normal, everywhere possible and most people deal with it do not end
up in jail or are not being investigated"). Just a way people accept the
reality.

------
kspaans
Interesting point on the Vancouver angle:

    
    
        Q: In Canada, where does the money end up and why? 
        
        A: Vancouver is the preferred destination, by far, because of perceived
        more relaxed anti-money laundering on-boarding compliance and more
        importantly, easier access to better schools and lifestyle for children
        of Chinese foreign nationals.

~~~
JumpCrisscross
What's the source of their Vancouver assertion?

~~~
raquo
Don't know their source, but I can confirm that relevant Canadian laws are
wide open for abuse due to both being toothless and because of near zero
enforcement, at both federal and provincial (BC) levels.

You can google how CRA actively avoided auditing foreign buyers "for fear of
racism allegations" (yeah right) or how people bring hundreds of thousands of
dollars in paper bills on themselves and their children, paying only $2.5K if
caught (cheaper than Western Union!).

Or the latest Vancouver 15% foreign investor tax designed to appease the
population, but wholly ineffective because it relies on self reporting which
no one ever checks and allows for other obvious loopholes. Much better
proposals were ignored in favour of this purposely flawed one.

It's amazingly fucked up, I'm surprised Canadians are taking it so willingly.

~~~
aianus
> It's amazingly fucked up, I'm surprised Canadians are taking it so
> willingly.

Nothing surprising about it, ~69% of Canadian households (and a much higher
percentage of voters!) are homeowners and directly benefit from this influx of
capital.

~~~
raquo
That home ownership rate includes everyone who lives in a dwelling owned by
their family, so it includes the youth who lives with their parents because
they can't afford to move out. Besides, all the home owners I know are not
happy about constantly increasing prices either. Many of them think it's
unfair, many don't like the foreign inflation aspect, and even pragmatically
speaking it's harder to jump to owning a bigger dwelling now. So I don't know
why this is going on, but it's not because most people want higher housing
prices.

------
tehlike
I wonder what ways US could prevent Chinese money buying real estate in the
US?

1\. Do what Vancouver did, add tax for foreign property ownership. 2\. Tighten
the checks on origin of money? How exactly, especially when it's coming as all
cash? Maybe forcing it to go through a bank, where more thorough check is
mandatory per IRS? But then again, banks are not the most trustworthy in this
country. 3\. Other ideas?

~~~
Hondor
Why ban Chinese money, not local money or money from other countries? What's
your actual goal? To keep rich people concentrated in the places they came
from?

Transferring money internationally is already a pain in the ass. You want to
make it even harder? To outlaw bitcoin too? China itself is already
restricting its people from taking money out of the country. It's nearly
impossible for normal people to invest overseas because banks won't allow them
to transfer their money.

~~~
tehlike
Thry can probably invest in housing through indirect ways. When the houses
chinese bought do not result in increased housing, thats when things are
wrong.

------
coygui
I study at Vancouver UBC and rented a room in a house in the nearby area. I
could tell that the Canadian government has started to investigate the
corrupted $ because one day a government official came to "my house" and asked
the information about the previous landowner. It seemed that he used the
corrupted $ to buy the real estate and make more $

~~~
ChuckMcM
I'll just say if you're using house sales in Vancouver or the Bay Area to
launder your money you are really moving a lot of money around.

I bought a house for cash in Las Vegas after the crash and the bank never once
asked where I got the funds to do so. I'm pretty sure they were supposed to.

~~~
djrogers
> I bought a house for cash in Las Vegas after the crash and the bank never
> once asked where I got the funds to do so. I'm pretty sure they were
> supposed to.

Umm, no. It only. I, but that's frightening. You have a right to privacy in a
private transaction like that. Where you will run in to a ton of questions is
when you use a big chunk of money for a down payment on a mortgage. In that
case the bank wants to make sure you didn't borrow the down payment and get in
over your head.

~~~
pjc50
The US has no general right to privacy, and all large transactions are
potentially notifiable to the anti-money-laundering authorities. This is what
HSBC got in a lot of trouble for not doing.

~~~
djrogers
Any notification would go as far as that - simple notification of a
transaction. There's no requirement for the bank to investigate the source of
your funds as part of a private transaction.

------
mathattack
Interesting about this on a per-capita basis. Is ~$2K per citizen a lot? I
wonder what comparable #s for the US and Russia are.

(Note that with 16,000-18,000 people doing the moving, it's very large per
intermediary)

~~~
neurostimulant
Average annual household income in China is around $10k, so yeah, $2k is quite
a lot.

~~~
mathattack
The numbers are on a cumulative basis though. So $200 per person per year
sounds less. It's hard to tell without seeing similar for other countries. I
assume Russia is higher. And how do you measure corruption in government
contracts in the US?

------
sytelus
Simple question: when some invests his corruption money in US, doesn't it
automatically become "public" and hence traceable? For example, if you buy a
house for X dollars in US then shouldn't Chinese government be able to easily
trace you down? My understanding was that so called "black" money stays black
only as long as you use it in form of cash, not investments.

~~~
pjc50
Traceable to whom or what, though? If you've got enough money it's easy for
the registered owner of the house to be e.g. a Cayman Islands company with
anonymous directors.

------
kspaans
And in a similar vein:
[https://news.ycombinator.com/item?id=13314967](https://news.ycombinator.com/item?id=13314967)

------
pizza
Wonder how this correlates with the current growth of the US economy, and
maybe more relevantly, how the top 1% seems to be increasing its wealth much
faster than the rest.

------
ForFreedom
Might also explain a lot of Chinese moving into Australia.

------
TaylorSwift
What's wrong with keeping the proceeds in China?

~~~
kspaans
From the article:

    
    
        China also has something called “grey” income, which means income
        earned (or acquired off the books) in China that is not reported
        on income taxes and that is held by its richest families.
    

If the money can be laundered by buying a house overseas, grey becomes green!

~~~
eternalban
How is it "held"? I've seen reports of raids where they find houses stuffed
full of cash, but how do you get $2T in cash to Canada? At some point this is
getting converted to electronic funds and that is where the "laundering" is
happening.

As to why they are buying hard assets in Anglo-sphere, possibly because they
are worried that the said Anglos may pull the plug on the fiat currency in a
Great Reset at some point in the near future. I guess the silver lining here
is that the Chinese corrupt set are bullish on the continuity of rule of law
over here.

~~~
webmaven
_> how do you get $2T in cash to Canada? _

Shipping containers?

~~~
angry_octet
Try wire transfers.

Eg Their factory needed a container full of Danish ball bearings. They paid
the overseas supplier. Maybe there was an actual container (in which case it
was re-sold overseas) and maybe there wasn't. May e an actual container of
bearings arrived in China.

------
toodlebunions
And it all poured into real estate.

------
peteretep
Wonder why the British Isles isn't in there; unlikely to be EU stuff as NL is
on there.

------
non_repro_blue
That's a big number, _way_ too large for anyone to take personally in an
emotional sense. But it's definitely big enough for a purge. Jailing,
disappearances and more.

This is a pretty large economic tide. Almost twice the size of California's
economy, all at once. Ranking it The Fifth Largest Economy, worldwide, if it's
worth thinking in those terms.

Given that an approximate number of participating Chinese nationals have been
enumerated, if they suddenly disappeared (and ~20,000 is certainly within the
realm of possibility), what would a sudden halt of two trillion (legal or not)
do to the rest of the world?

~~~
ac29
>This is a pretty large economic tide. Almost twice the size of California's
economy, all at once.

Well, not all at once, that number (USD 1.5T, the 2T number is CAD) is
cumulative from 1995-2013, per the article.

~~~
non_repro_blue
You're right. I skimmed the numbers too fast.

------
andrewvijay
I thought around 500 times to buy myself a car on christmas and then I see
this

