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Police in northern Guangdong province break up two major underground banks

A major channel used to transfer money to the Macao Special Administrative Region for gambling activities has been cut off after police broke up two major underground banks in Shaoguan in northern Guangdong province earlier this month.

Officers detained seven suspected gang members. The banks were involved in more than 20 billion yuan ($3.1 billion) of transactions, according to a statement published online by the Shaoguan public security bureau on Thursday.

Private banks usually charge 0.3 to 0.7 percent per transaction as commission for helping clients transfer money overseas, according to the Chinese authorities.

Meanwhile, more than 10,000 people are suspected to have used the illicit banks to transfer money in and out of the mainland or to exchange foreign currency, the police said.

A special task force was immediately set up to investigate the case in July after the Shaoguan public security bureau learned from the local People"s Bank of China branch that a resident, Zhong, appeared to be involved in illegal trading via an underground bank to provide cash to a suspect named Shen.

Because Chinese yuan cannot be used in Macao casinos, Shen transferred large sums into Zhong"s bank account ahead of every visit Shen made to Macao for gambling purposes, police said. The money was exchanged for Hong Kong dollars or other foreign currency by others involved in the scheme via a secret bank, and then sent to Shen once he arrived in Macao, the police said.

Shen exchanged 50 million yuan worth of foreign currencies and illegally transferred them to Macao for gambling since the beginning of 2016, according to the police.

After months of investigation, the two major secret banks were shut down and police seized a large number of computers, mobile phones and bank cards. Police operations were launched in Shaoguan, Zhuhai and Maoming simultaneously on Nov 9.

The gang was believed to have earned large profits from the illegal foreign currency settlements using 148 bank accounts opened using fake documents in more than 20 provinces, municipalities and regions of the Chinese mainland.

Police froze bank accounts with balances of more than 30 million yuan. Much of the money had been sent to Macao to fund gambling, the police said.

A senior police officer from the economic crime unit of the Guangdong Public Security Bureau said Guangdong police would expand cooperation with their counterparts in the Hong Kong and Macao SARs and continue their cooperation with the People"s Bank of China, the State Administration of Foreign Exchange and other entities to combat underground banks. Transactions through such banks are considered serious economic crimes that undermine the country"s financial stability.