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800 arrested in China for involving in underground banking

800 arrested in China for involving in underground bankingChina’s police authority said it had shut more than 380 “underground banks” last year, involving over 900 billion yuan ($131 billion) as the authorities attempt to stem an exodus of cash flowing out of the country.

The Ministry of Public Security said in a statement Sunday that more than 800 suspects involved in money laundering were arrested. It also found that illegal banking operations were “rampant” across the country, maintained by the internet finance and new online payment methods.

China is facing huge pressure from capital outflows as investors attempt to move their cash overseas, sometimes illegally. The country’s foreign exchange reserves have shrunk by $1 trillion from a peak in June 2014.

Communist leaders allow unlicensed financing activity to support entrepreneurs but try to stop activity they say threatens the state-run banking system, supports crime or helps people violate foreign exchange controls or other regulations.

Companies and small investors began moving billions of dollars a month out of China in late 2015, prompted by expectations the currency would decline in value. Beijing responded by stepping up scrutiny of outbound investment and banning some activities by individual investors.

The police ministry statement Sunday gave no details of what those arrested were accused of doing but complained unauthorized money transfers paid for gambling, drug trafficking and smuggling.
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