WHEN Liu Wang, the European head of the Industrial & Commercial Bank of China (ICBC), opened its branch in Madrid in 2011, he probably did not imagine that he would one day return to the city as a prisoner. Yet on February 19th Mr Wang was arrested and jailed without bail. He is one of six of the bank’s executives accused of funnelling dubious cash deposited by Chinese expatriates back to China. Some of the money allegedly came from smuggling and illegal exploitation of workers. ICBC said it always respected the law, and threatened to sue “malicious slanderers”.
The case has parallels with one in Italy involving the Bank of China, which also denies any wrongdoing. Judges in Florence are due to decide next month whether to indict almost 300 people alleged to have illegally sent more than €4.5 billion ($4.9 billion) to China between 2007 and 2010. Much of the money came from businesses in Prato, a textile city in Tuscany, which has a population of around 40,000 Chinese. Many are in Italy illegally and work in semi-clandestine sweatshops.
Because so many Chinese enter Europe irregularly, guided by traffickers known as “snakeheads”, it is hard to estimate their numbers. A study three years ago concluded that Italy and Spain had the European Union’s third- and fourth-biggest Chinese communities, at 330,000 and 170,000 respectively. Each had grown almost five-fold since the late 1990s.
Most Chinese in southern Europe work above-board. But others are caught up in a cycle of systematic illegality. At its origin is the importation or smuggling of cheap, often counterfeit goods from the Far East. These are then sold without VAT at prices local firms cannot match. Prato’s sweatshops turn imported cloth into cheap garments with “Made in Italy” labels, easy to sell throughout the EU. The bulk of the proceeds are dispatched to China in defiance of anti-money-laundering controls.
Not only Chinese are involved. Police in Italy have investigated locals who help supply premises and transfer profits. In Spain police allegedly took gifts from Chinese suspects. The profits are immense: in 2012 police broke up an operation in Fuenlabrada near Madrid, Spain’s best-known Chinatown, claimed to have laundered profits of €200m-300m a year.
That sort of money inevitably attracts other types of criminal organisations. Already, in 2003, American researchers found evidence of Chinese gangs in southern Europe involved in extortion, prostitution, document forgery, cigarette smuggling and illegal gambling. The same report said Chinese criminals in Naples appeared to have a deal with the local mafia, the Camorra. But later investigations, surprisingly, have uncovered few proven links to Italian organised crime. And how much of a role Chinese mobsters still play is unclear.
“Western law-enforcement agencies face immense linguistic and cultural barriers when they try to investigate crime committed by Chinese,” notes Wang Peng, an expert on China’s mafias at the University of Hong Kong. Detectives investigating a spate of murders in Prato’s Chinatown in 2010 complained of a total lack of co-operation from the Chinese community.
A sweatshop fire in 2013 that killed seven Chinese workers may have marked a turning point. Since then several Chinese have reported their employers to the police, and on February 6th around 2,000 staged an unprecedented demonstration in Prato against lawlessness. Bearing torches and carrying Chinese flags alongside Italian tricolori, the protesters were implicitly demanding protection from their own compatriots.
Yet the biggest threat to Chinese living abroad who skirt the rules may come from China itself. Officials are starting to enforce a rule that expatriates must pay tax on their entire overseas earnings. It may still be lucrative for Chinese to engage in shady moneymaking schemes in Europe. But sending the gains back to the homeland is becoming trickier.