AML Case study[ies] on Bypassing China’s Currency Controls

Lei Zhang, 41, from Las Vegas, Nevada, has been sentenced to 15 months in prison for helping Chinese gamblers bypass currency conversion limits. Lei Zhang, stood accused of collecting cash from various US-based third parties, which he would then use to ensure high-rollers visiting Las Vegas casinos from China had a ready supply of US dollars with which to gamble.

That meant these high-rollers didn’t have to be limited by China’s strict rules forbidding nationals from converting more than $50,000 per year from yuan to US dollars — and, in the process, they could avoid scrutiny from US banks as well. Instead, to pay for the ready supply of US cash, these Chinese gamblers would transfer the equivalent value of yuan from their Chinese bank accounts to Chinese bank accounts that Zhang controlled. For each transaction, Zhang received a commission.

According to a June 3 statement by the US Attorney’s Office for the Southern District of California, he will also face the forfeiture of $150,000.

• https://www.justice.gov/usao-sdca/pr/owners-underground-international-financial-institutions-sentenced-operating-unlicensed

Zhang, who pleaded guilty in February 2020, implicated several casino hosts in the scheme.

• https://www.justice.gov/usao-sdca/pr/owners-underground-international-financial-institutions-plead-guilty-operating

He admitted that certain casino hosts would regularly connect him with customers who wanted to increase their gambling budget. In turn, Zhang would often give them a cut of his commission.

Neither the names of the casino hosts nor the casinos they worked for have been disclosed.

According to prosecutors, Zhang is the first individual in the US to be sentenced for his role in this type of scheme. Yet, for those in Canada, this bears a resemblance to the money laundering method known as the Vancouver model,

1. https://www.bloomberg.com/news/features/2018-10-20/vancouver-is-drowning-in-chinese-money
2. https://complyadvantage.com/blog/standing-for-corruption/

The model uses casino gambling to help Chinese nationals bypass currency controls and provides an avenue for criminals to launder illegitimate funds. Often, these funds are then used to fund real estate transactions or make other luxury purchases.

It also calls to mind one of Canada’s highest-profile money laundering cases in history, which, after a years-long investigation that began in 2015, was dropped in 2018 — mere months before it was set to go to trial.

• https://financialpost.com/news/fp-street/one-of-canadas-biggest-money-laundering-probes-has-collapsed