With reports of corruption among customs agents, China is becoming accessible as an alternative route through which drug proceeds can be moved into Asia. Banking and government officials recognize that both the weakness in and the liberalization of the country's financial system have led to an increase in financial crime, primarily fraud. China's Supreme People's Court, according to 1998 press reports, is seeking stiffer penalties for anyone convicted of illegally trading in foreign currencies. Anyone convicted of money laundering or receiving a fraudulent export tax rebate from the government could face the same penalties as those found guilty of smuggling. Laundering the proceeds of narcotics trafficking, smuggling, and organized crime are criminal offenses under a 1997 law.
China also has asset forfeiture and seizure legislation.
In the financial sector, Chinese banks have been frustrated by difficulties in attracting foreign investment. Outside drug organizations have been taking advantage of this frustration to launder their funds through the banks on the pretext that the money is investment capital for factories and other enterprises. Hainan Island, located off the southern coast, also presents significant opportunities for laundering illicit proceeds, since a number of the financial institutions there offer numbered bank accounts in both local and foreign currency. Over 3,000 foreign investors have set up companies on the island. United States sources indicate that money couriers are bringing U.S. dollars into China in bulk, bypassing Hong Kong.