Italian police uncover more than $2 billion tax fraud scheme involving Chinese shadow bankers

ROME

Italian financial police said Thursday it dismantled a criminal ring that is accused of enabling nearly €2 billion ($2.17 billion) in tax evasion by Italian companies through the use of Chinese shadow bankers.

The Guardia di Finanza (GdF) said it seized 140 companies, suspended activities and accused 85 people of being part of the illegal scheme.

Most of the accused are Chinese nationals, said police.

“The investigation was named ‘Fast & Clean’ because of the speed with which the illegal operations were carried out, guaranteeing the laundering of money through the simulation of commercial transactions which never happened,” GdF said in a statement. “The means used ensure that the entrepreneurs involved, both Italian and Chinese, had the proceeds of the tax fraud immediately available.”

The investigation, which triggered arrests and seizures of companies in Italian cities, is the latest in a raft of operations uncovering the role of Chinese underground banking in laundering illegal proceeds, including from drug trafficking and other activities of organized criminal groups in Italy.

A police operation in May led to the arrest of 130 members of the “Ndrangheta,” the powerful mafia group from Calabria, which were accused of paying for shipments of cocaine from Colombia worth €22 million through shadow Chinese money brokers.

The centuries-old system they used is called “fei ch’ien,” or “flying money,” which enables users to transfer money from one point to another based on trust, similar to the hawala system used in the Muslim world.

The latest investigation alleged that the companies issued false invoices indicating which bank account a sum of money had to be paid by the criminal partner in the scheme.

The companies were transferring the same amount of money to another bank account in China, alleging it was for payment of the import of goods from China which never happened.

The money was then returned to Italy from China through shadow banking channels.