A money laundering case involving the sale of a £1.73million house has thrown a rare spotlight on the operations of the Chinese underground banking system.

Entrepreneur Wei Chen sold her property in China in 2021 and held the proceeds in a bank account in that country but was unable to move the money out of the jurisdiction. 

Detective Constable Nicholas Widdison told a forfeiture hearing at Reading Magistrates Court that Chen ’circumvented’ Chinese exchange controls to have those funds in her possession in the UK.

The process involved Chen entering into an agreement with a distant relative, referred to in court as QC, a judge ruled. Chen transferred money into QC’s account in China and QC’s husband, Taiwanese international businessman Chien-Hung Huang, who was resident in the UK, provided equivalent sums in cash to Chen.

Chen deposited £85,000 in her Lloyds bank account in batches of up to £4,000 at a time over the course of 33 days, leading to a report being made to the police of suspicious activity.

Widdison told the court that this process was the ’very definition of the Chinese underground banking service’.

Chen, of Maidenhead, Berkshire, told the court she had not returned to China to retrieve the sale proceeds herself because of strict Covid restrictions in place at the time.

John Fitzgerald, for Chen, said she would have had to have taken ’the best part of three or four weeks out of her life’ to go to China because of quarantine rules. He told the court that the maximum amount that could be taken out of that jurisdiction at the time was $50,000 and Chen accepted she had ’bypassed’ those restrictions.

District Judge Kathryn Verghis said using the Chinese underground banking service was ’not in itself criminal activity’ in the UK. However the case brought by Thames Valley Police was that Huang could not explain where the £85,000 in cash he held in the UK had come from.

Verghis said Huang’s explanation - that it was money he was paid to act as a guardian for Chinese students and the sale of his Mercedes Benz - were not credible.

Chen had responded to the forfeiture application by stating she had received the money ’in good faith’. Her counsel argued that Huang was a ’wealthy man with business interests around the world’ and so there was nothing to put her on notice he was engaged in criminal activity.

But the judge ruled that Chen had acted ’deliberately to conceal the cash’ by depositing it in relatively small amounts, so said she could not rely on the good faith defence. Forfeiture was granted.

Solicitors have been warned in the past about the risks of involvement in Chinese underground banking, which has been described as ’the most prevalent money laundering threat faced across the Western world’.