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Italian Drugs Cartels Make Payments Through Chinese Shadow Banks

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According to Italian judicial and law enforcement, Italian drug cartels are making use of shadow networks of unlicensed Chinese money brokers to cover up cross-border payments. The update emphasises how an issue that US authorities have been combating in connection with the Latin American narcotics groups has been rooted in Europe.

Seven judicial and law enforcement officials informed the British news agency Reuters, there has been an increased use of money transfer networks in Italy without a traceable trail along with quick payments. The transfer method requires the deposit of a payment with a broker in one country while the intended recipient receives the same amount from another agent positioned in another country across the globe.

Barbara Sargeti, Italy’s national anti-mafia prosecutor who works on investigations both domestically and abroad, said, “The phenomenon is on the rise.” Sargenti said in an interview at her office that there have been growing numbers of related cases because of increased activity and the ability of the authorities to identify such cases.

Since the money is transferred externally and not through a banking system, it is difficult for the authorities to trace and identify the cases, she added. She said, “This kind of financial intermediation undermines the entire international anti-money laundering system”, which depends on the management and analysis of the banking system. This is considered a key weapon to combat gangs. 

The seven people stated that transferring money is one of the many services the Chinese-linked organization offers. These include facilitating tax evasion, which Italy’s forces consider an “underground” banking system.

There are many ongoing investigations of money transfers or other illegal activity associated with Chinese organizations that have not yet been announced to the public, one among the seven people said. The individual who knows these inquiries gave an estimate of tens of billions of euros every year which was transferred from Italy using the underground banking system.

Previously, the Chinese authorities promised to get to the root of this underground banking.

When the spokesperson of the Chinese foreign ministry was asked about the movement of the large sum of money, he said, “I am not aware of the circumstances you mentioned.”

Flying money 

The money transfer involved in the informal payment system is called ‘fei quian’ or ‘fei chien’, Chinese terms, meaning flying money, and is highly dependent on a network of reliable transfer agents.

While transferring money via friends and family to pass cash to creditors is not considered illegal, providing unauthorized banking services and laundering the payments of crime is illegal in Italy.

One of the first cases related to Chinese money brokers by an Italian gangster was connected to one of the world’s largest crime mobsters, the ‘Ndrangheta group’. In 2018, the authorities arrested 90 people in Italy and other nations in Europe, and 4 tonnes of cocaine worth 240 million ($261. 96) was seized during the investigation.

One of the ongoing investigations resulted last November in the arrest of more than 40 people suspected to be involved in drug trafficking in Italy and Spain. Among them was a former army officer and senior in the Italian Referees’ Association, Rosario D’Onofrio’, who served as the chief of a drug gang. 

D’Onofrio paid 180,000 euros to a Chinese agent during a visit to Milan’s Chinatown in March 2020, to pay for a shipment of hashish to suppliers in Spain.

The agent sent a text message to another agent in Spain to give the amount to the suppliers and charged D’Onofrio a commission of 2,700 euros, which is equal to 1.5%, for the transaction, according to the details of the arrest warrant.

At present, D’Onofrio is serving detention, which his lawyer Nicolo Vecchioni refused to comment on. While the Chinese agent still has to be identified.

Suitcase of cash

According to an arrest warrant in October 2021, a separate investigation led to 720 kilograms of drugs and millions of euros in cash being confiscated, while the authorities tracked down a man who intervened in Italy to collect payment for a large number of drugs from Morocco.

The authorities stated in the documents that a payment was made to Chinese businesses in Tuscany and Rome, where money was transferred to drug suppliers through “Chinese correspondents” in the North African country.

The police arrested eight suspects of drug trafficking and money laundering linked to the case. 

Major Michele Maselli, a senior officer in the Milan Carabinieri police, said the investigation yielded some physical cash that was packed into suitcases and handed over to Chinese nationals flying to Hong Kong.

According to the Carabinieri, each week from October 2019 to October 2021, sums ranging between 2.5 million euros and 4 million euros were sent from Rome’s Fiumicino airport. 

The Chinese businesses in Tuscany and Rome, as per the 2021 arrest warrant, were involved in the underground banking network. The authorities did not identify the businesses due to an ongoing investigation of money transfers into Hong Kong and their destination.

Underground banking

Western law enforcement stated money brokers help wealthy Chinese to transfer money to dodge China’s currency controls. These brokers are part of huge Chinese diasporas in Europe, the United States, and Latin America. Beijing asserts its citizens transfer money out of China in limited amounts which are equivalent to $50,000 U.S. dollars per year.

Chinese nationals engage in informal exchanges involved in transferring money electronically in China and the same amount in cash is deposited to another abroad into a bank account.

Criminal groups fulfil the demand for hard currency by transferring euros from drug sales.

Francesco Pinto, a deputy chief prosecutor in Genoa, said, “Upstream of this clandestine banking activity there is a huge availability of liquidity of these Chinese groups all over the world.”

As per three out of seven people who spoke to the British news agency Reuters, in Italy, the authorities are debating whether there is a single large-scale Chinese-linked investigation with countless interrelated branches or several separate organisations operating independently. 

Money laundering is just one of the illegal services offered, all seven people said. A deputy chief prosecutor in Milan, there is a “parallel banking system” that deals with varied customers ranging “from tax evaders to drug traffickers.” Milan prosecutors declared the arrest of 22 people and seized 292 million euros after an investigation into tax evasion involving Chinese mediators in Italy, last month.

Over the past decade, official wire transfers between Italy and China have declined, a senior investigator said that the Chinese community in Italy has cut down on the use of the official banking system. Payments from Italy to China estimates 22 million euros in 2021, which has increased from 2.67 billion euros in 2012, according to the Bank of Italy.

Italy’s finance organized a special unit to look into the underground banking system.

The new Italian government has requested the anti-mafia commission, which constitutes of politicians, for the first time to investigate “the Chinese infiltration in Italian society.”

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