Thursday, January 29, 2015

The Astonishingly Clever Ways the Chinese Launder Money and Move Assets

As long time readers know, I have a morbid fascination with the underbelly of the markets, in all its permutations.
Following up on (and linking to) yesterday's "China Cracks Down on Using Art for Corruption" David Keohane spots the larger story.

And no, we didn't link simply because he gave us the HT, this is quite amazing stuff and if one can figure out how to interposition one's self in the flow, there is money to be made.

As it is, I'll have to wait a couple hours before my ace translator can tell me the Mandarin for "Would you like to come up and see mein Klimt?"

From FT Alphaville:
Remember Roubini going off about the art market in Davos? About how “Whether we like it or not, art is used for tax avoidance and evasion” and “While art looks as if it is all about beauty, as a business it is full of shady stuff”?
Well here are two bits of related Chinese art market shenanigans for you.
The first, from the Epoch Times, is about corrupt officials who peddle their works of calligraphy to disguise bribes (via Climateer and The Art Market Monitor)....

... The second is part of a motley assortment of ways in which dodgy money in China gets moved about. Check out “Hard-to-value assets” about half way down and then realise how art is just a small part of this.
From the ever reliable Anne Stevenson-Yang of JCapital:
In a series of meetings with the anti-money-laundering offices of banks, brokerages, and insurance companies a couple of weeks ago, I learned about the channels through which the big money passes. The business is enormous. Banks and insurers typically flag roughly half of large transactions, over RMB 10 mln, for eyeball review, after which around 10% of all large transactions are reported to the PBOC as potential laundering. Channels for moving the money are astonishingly varied, and household-level transactions, under 10 million RMB, would have a similarly eclectic list. Major takeaways:
  • Insurers: Insurance companies are the biggest channels for money laundering. This is because settlements do not match premium income and therefore become virtually impossible to audit. Likewise, insurance payouts are often directed to inheritors, companies, or other parties who are not the premium payer. Recent liberalization of insurance company capital investment rules abets their participation in large money transfers of all sorts....

Speaking of Klimts, Here's the one Ronald (Thanks Mom)  Lauder dropped $135 mil. on (NYT), #5 on the world's most expensive paintings list.

Portrait of Adele Bloch-Bauer I (1907)