Bank in Vanuatu suspected of fraud

IN its battle against fraud attempts from overseas, the People's Bank of China (PBOC), the central bank, has pinpointed a bank said to be operating in the southern Pacific.

A warning about its activities has been issued in a circular to subordinate financial institutions all over the country.

Chinese sources said the circular was relayed to lower-level banking institutions last week after the central bank became suspicious of the overseas bank, which is believed to have subsidiaries in Hong Kong.

An infrastructure project in Fujian province costing about US$100 million to build a 4,000-metre bridge was announced by the company this year.

It is understood that the bank had recently launched business promotion trips to several cities in China, offering syndicated loans and other kinds of co-operation.

The PBOC said the source of money and the company's way of doing business were suspicious.

It suspected the bank of intending to defraud and called on local banking officials to be watchful towards the bank.

So far, no fraud involving the overseas bank had been found and the central bank was still investigating.

Chinese bankers said the overseas bank was registered in Vanuatu.

The latest warning came after a series of fraud attempts, usually involving overseas Chinese, were disclosed in recent months.

Last month, the Construction Bank, one of China's four specialised banks, revealed that its Jiaozuo branch in Henan province had detected a fraud case by self-proclaimed Hong Kong businessmen.

The men approached the branch in May and demanded that a US$5 million counterfeit money order be honoured.

And in mid-June, the official media reported that the Agricultural Bank was the victim of a fraud involving 200 falsified standby letters of credit worth HK$10 billion.

The fraudsters were believed to be Chinese Americans who had collaborated with officials of the Hengshui sub-branch of the Agricultural Bank to issue counterfeit, irrevocable and transferable letters of credit.

Chinese banking officials say the number of attempted frauds against mainland banks has risen in recent years as international fraudsters have taken advantage of the less sophisticated mainland banking system.

Local authorities' eagerness to secure funding for their ambitious development projects also make them an easy target for fraud.

China is reforming its banking system, turning the PBOC into a full central bank and the four specialised banks into commercial banks.

The commercial banks will operate independently and handle their own profits and losses.

The country is also speeding up the drafting of central bank law, commercial bank law, commercial bill law and insurance law to regulate the financial sector.

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