China regulator penalises lenders for 'hot money' inflows

Branches of BEA and BoC among the eight cases that made 197 illegal transactions totaling $7.34bln.

China's foreign exchange regulator said it has punished a group of banks for illegal transactions designed to funnel speculative "hot money" into the country.

The State Administration of Foreign Exchange said that it has identified 197 illegal transactions totaling $7.34 billion since starting its investigations in February.

"Some banks haven't strictly fulfilled their obligations in verifying paperwork when buying and selling foreign exchange, giving hot money a chance to affect our country's international balance of payments and economic and financial health and stability," SAFE said in the statement on its website.

SAFE highlighted eight cases involving hot money, most of which saw funds being used for reasons other than those stated in the original paperwork.

It reported that one branch of the Bank of East Asia bought HK$11 million from a Hong Kong resident and that the funds were used to illegally buy a property.

A branch of the Bank of China bought $13.58 million from a Chinese company and the funds were not used for the aim stated on the paperwork, SAFE said.

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