Reuters Publishes Report Detailing Investigations into 2012 ICBC-Madrid Bank Money Laundering Probe

In February of last year, Spanish authorities raided the Madrid subsidiary of the world’s largest bank by assets: the Industrial and Commercial Bank of China (ICBC). They arrested seven of the bank’s directors for their alleged involvement in large-scale money laundering operations. News outlets widely covered the raid and the ensuing arrests at the time, but Spanish authorities kept developments concerning the subsequent investigation confidential.

Nearly 18 months after the initial raid, Reuters has published the first detailed account of the investigation — a two-part exposé  based on the review of “thousands of pages of confidential case submissions” as well as “interviews with investigators and former ICBC employees.”

The Reuters account reveals that, according to phone communications intercepted by Spanish law enforcement and court filings, ICBC sustained a privileged relationship with a cohort of the Chinese business community residing in Spain that had allegedly accumulated large sums of cash as a result of avoiding import sales taxes on goods from China. Bank staff allegedly accepted forged documents, failed to report suspicious transactions, and solicited money transfers from individuals under Spanish police surveillance.

The collusion between the bank and Chinese money laundering networks extended into the upper levels of ICBC management. Transcripts of phone conversations wiretapped by Spanish law enforcement include at least 30 conversations between bank managers and individuals under police surveillance for suspected laundering. In a particularly incriminating conversation dated August 8, 2012, Wang Jing, a senior executive of ICBC’s Madrid branch, says to Xu Kai, an alleged senior member of a transnational money laundering network: “You have to look out for yourself and make sure these people are obedient.” From assessing the transcript of the call, officials have concluded that Wang is instructing Kai on how to avoid detection of his money laundering operation by ensuring that the individuals involved remain fully committed to the scheme.

What does the ICBC investigation tell us about the future of anti-money laundering (AML) compliance enforcement against Chinese banks?

One possibility is that Europe and the United States diverge in their approaches to this enforcement issue, with the United States pursuing a more aggressive enforcement stance, despite the risk of political fallout with Beijing. As Evan W. Krick notes in his post on the Money Laundering Watch blog, the United States’ recent slew of harsher enforcement actions against Chinese based-banks suggest that the United States “may take an increasingly aggressive path” in the near future.

As for Europe, the Reuters report notes that the 2016 raid on the Madrid ICBC branch “ignited a behind-the-scenes diplomatic spat” between Madrid and Beijing officials, and it is possible that the concern over additional diplomatic fallout may temper Spain’s as well as Europe’s enforcement efforts toward ICBC’s European branches. At present, despite the mounting evidence, provided by wiretapped communications as well as cash flow records obtained by Spanish law enforcement, that officials at ICBC facilitated large-scale money laundering operations, not a single suspect identified during the investigation has been formally charged.

For the past several months, European branches of major international banks have been gearing up for the launch of the Fourth Anti-Money-Laundering Directive. According to a European Commission press release, the EU-wide directive takes measures to strengthen existing anti-money laundering and terrorism financing rules in member states, and also “improves transparency to prevent tax avoidance.” The directive was supposed to take effect across the EU on June 26, but thus far as many as 17 member countries are reported to have failed to fully implement the rules of the directive.