The head of China’s top graft buster launched “Operation Fox Hunt 2014” just three months ago to track down fleeing officials and their fraudulent gains, and the new anti-corruption initiative already seems to be leading to Australia’s booming real estate market.
Just last week the Australian Federal Police announced that they are poised to seize the assets of corrupt Chinese officials, and the conviction last Friday of a former senior railway official brought to light how millions of ill-gotten Renminbi are being converted into Australian houses, apartments and townhomes.
The series of events helps to reveal the extent to which Australia – along with other western nations – has become a favorite refuge for corrupt officials, and real estate assets – often in the names of family members – have become the favored asset class for laundering the profits of graft.
Official’s Son Buys $3.96 Million in Homes By Age 32
As part of the trial of Su Shunhu, a deputy director of the transport department of China’s Ministry of Railways, Australian property purchases by the fallen gatekeeper to China’s rail freight system were laid out in detail and reported in the Australian Financial Review.
The government official was shown to have wired A$1.2 million (US$1.06 million) to his son Su Guanlin and his daughter-in-law Qian Yi. Another A$2 million (US$1.76 million) was sent to the younger Su by a Chinese firm that was seeking business favors from his father. Although the payments were structured as salary, Su Guanlin had no apparent connection to the company.
The official’s son and his wife put this cash to work buying and selling properties in Sydney including an initial $1.93 million townhouse, followed by a $351,000 apartment and later a $1.19 million house in a posh suburb which the couple apparently intended to demolish in favor of a more expansive mansion.
The $1.93 million townhouse was purchased in 2010, just three months after Su Guanlin had received the $1.06 million from his father, and the apartment was purchased just seven months later. During that time Su Guanlin was already receiving his regular transfers from the company in China.
Tracking China’s Illicit Trillions
Su Shunhu’s trial ended on Friday with the disgraced official receiving a life sentence for having taken RMB 25 million (US$ 4 million) in bribes in return for giving his clients priority access to China’s rail freight system, and the case fits into a broader drive by the current government to clean out corruption in its ranks.
Since Xi Jinping took power last year, his government has made restoring the image of the Communist party a top priority, and Operation Foxhunt appears to be the extension of this campaign beyond China’s boundaries. The initiative may also be aimed at deterring officials who have been spooked by Xi’s investigations from attempting to flee their fate by heading overseas.
China has estimated that $1.5 trillion will be illegally transferred beyond its boundaries this year, and Washington-based Global Financial Integrity group has estimated that $2.8 trillion was illegally transferred out of the country from 2005 to 2011.
In an interview last week with the Sydney Morning Herald, Australian authorities confirmed that they were prepared to assist China in seizing the assets of corrupt officials, and extraditing the culprits back home to face justice. The Australians expect the first case of asset forfeiture to come within weeks and said that they have drawn up a list of fugitive Chinese officials hiding in Australia.
China’s Economic Crime Investigation Department launched its Fox Hunt campaign in July to drag back home corrupt officials who have been fleeing overseas in ever-larger numbers. At the time, Liu Dong, deputy director of the anti-corruption unit said, “”We will hunt them down and bring them to justice wherever they try to escape and hide.”
Australia a Leading Refuge for Corrupt Officials
Despite the determination of China’s authorities to use Operation Foxhunt to claw back what assets they can, Su Guanlin’s Sydney portfolio may be safe behind Australia’s robust legal system, and this helps to underscore part of what has made the country a leading refuge for officials escaping overseas.
Although Su Shunhu wasn’t able to escape his own prosecution he followed what has become a typical path of the what are called “naked officials” in China, by staying behind himself while sending first his family members, and then his assets overseas.
Su Guanlin reportedly went to Australia originally as a student and apparently stayed to help arrange the family’s new financial home down under.
Corrupt officials, like many other Chinese are drawn by Australia’s nice weather, clean air and growing Asian community, but also by the sturdiness of its legal system and its lack of an extradition treaty with their home country.
Although the country’s investor visa program has a higher minimum investment than many other destinations (US$4.4 million) it has been popular with wealthy Chinese emigres and has also been criticised as open to abuse by money launderers and corrupt officials.
In October, China’s Foreign Ministry reacted to Australia’s launch of an additional category of investor visa by recommending that the program be administered so as not to allow “corrupt elements to have shelter overseas.”