China Mounting Corruption Crackdown

February 10, 2015 – China’s crackdown on corruption has gained much success over the past six months with close to US$5 billion in ill-gotten assets seized and nearly 700 fugitives repatriated.

One of those is a woman named by authorities only as ‘Zhang’. She is said to be the first Chinese fugitive to be extradited from Europe for fraud.

She allegedly embezzled more than US$225,000 while working at a financial firm in 2005, and has been on the run in Italy for the past 10 years.

Although it is not clear how the case is linked to the government, it is the latest under “Operation Fox Hunt” – the code name to China’s global anti-corruption crackdown targeting corrupt officials who have fled overseas.

Within 6 months of its inception, the manhunt repatriated nearly 700 fugitives, 40 of them government officials, although China has no extradition treaties with countries such as Australia, Canada and the US – the top three destinations of choice for Chinese fugitives.

Shen Dingli, Vice Dean of the Institute of International Affairs, Fudan University, said he believed several countries are afraid.

“(They’re) afraid that we’ll use economic crime as a way to get rid of political enemies, afraid that China will re-trial the fugitive upon repatriation. Having a large batch of corrupt Chinese officials won’t reflect well on the country. So, talks are happening about making some kind of arrangements similar to extradition. China has to show evidence that the fugitive is corrupt.”

If that happens, analysts expect hundreds of fugitives like Zhang to be hauled back to China for trial in 2015. This would also help speed up the process for Beijing to seize millions worth of ill-gotten assets siphoned abroad.

By 2012, China’s anti-corruption body estimated that the country has lost more than US$1 trillion.

“The process must have been fair,” warned Samuel Sharpe, Director of Duane Morris & Selvam, adding “it cannot breach principles of natural justice, which is a legal term to mean that the defendant had a fair hearing.”

However, recovering assets is often a long and complicated process.

In corruption cases enforcers must prove that properties, for example, were bought entirely with ill-gained funds, which are often mixed with legitimate money.

Still, China appears to have some success so far. Authorities say they have recovered nearly US$5 billion of corrupt assets, as of December 2014, under Operation Fox Hunt.

Although the crackdown has yet to shake property prices in London or Los Angeles, which are two popular destinations for Chinese investors, that could change in the year ahead.

Chinese authorities are stepping up law enforcement cooperation with other countries in areas such as intelligence sharing and working towards seizing, sharing and returning the proceeds of crime, which could possibly prompt some form of real estate sell-off as homeowners try to offload suspicious investments.

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