Summary of “Specifics of Activities of Ethnic Chinese Crime Groups in Eastern Siberia in Post-Soviet Period (1991-2011)” (2012)
developed by Enkhchimeg “Jewel” Sengee, TraCCC Graduate Research Fellow
“Specifics of Activities of Ethnic Chinese Crime Groups in Eastern Siberia in Post-Soviet Period (1991-2011)” (2012)
Anna L. Repetskaya, PhD in Jurisprudence, is a Chair and a Professor of the Criminal Law and Criminology Department of Baikal State University of Economics and Law in Russian Federation. In 2012, she conducted a research project on ‘Specifics of Activities of Ethnic Chinese Crime Groups in Eastern Siberia covering 1991-2011’. Repetskaya analyzes the characteristics, scope, and scale of activities of ethnic Chinese crime groups in the region (Early Post-Soviet period 1991-1997 and Modern period 1998-2011), and determines the factors contributing to their expansion. Her methods of research include analysis of statistical data, cases from the Federal Migration Services of Russia, and criminal cases in which Chinese people are both victims and perpetrators. Dr. Repetskaya’s empirical study involves discussions and interviews with experts from the Ministry of Interior and the Federal Security Services of Russia.
Characteristics of Ethnic Chinese Crime Groups
Chinese Diaspora communities, or Chinatowns, in Russia make the illicit activities of ethnic Chinese crime groups possible. Criminals use the diaspora community (1) as a cover to shield themselves from Russian law enforcement, (2) a source of income/tax, and (3) a source of manpower. According to Repetskaya, Chinese criminals emerged in Russia only at the end of the 1980s when the Soviet Union’s strong grasp on the migration of aliens to USSR loosened. In 1992, travel procedures for Chinese citizens to Russia were greatly simplified. As a result, by 1994, several illegal routes for international trade and tourism were established, which led to a greater influx of Chinese substandard and cheap products in Russian markets and related illegal migration problems. In this period, apathy of Russian authorities contributed to the expansion of ethnic Chinese crime in Russia.
Today, Russia, like many other countries, lacks accurate data on the number of Chinese migrants in the country. The government agencies’ rough estimate of Chinese migrants ranges from 400 thousand to 2-3 million, of which the majority live in Eastern Siberia and the Russian Far East. Repetskaya thinks that the number of Chinese migrants would not interfere in the Russian culture because Chinese Diaspora communities are closed to the outside where only ethnic Chinese interact with one another. The major problem is their illegal activities within the Illicit Markets and laundering of their illegal proceeds into the legal economy. This has a detrimental impact on the Russian economy at both regional and federal levels. Regions with concentrations of Chinese migrants (i.e., Eastern Siberia and the Far East) have become more dependent on Chinese businesses. Repetskaya emphasizes that these illegal activities make social control impossible and create social problems caused by imbalance in the sectors of the economy.
In Repetskaya’s view, research on Chinese criminal groups in China is extremely helpful to analyze their activities in Russia (p. 6-9). The existence of Chinese organized crime groups known as ‘Triads’ date back centuries, but they have expanded since the 1970s when economic reform began in China. Triads grew from 197 thousand with 876 thousand members in 1986 to more than 350 thousand with more than 1.5 million members in 1994 (p. 10). The rise in their numbers correlates with the rise in endemic corruption. Repetskaya notes that during the same period, Russia experienced an expansion of illicit markets, convergence of crime and politics, and a rise in economic crimes while traditional forms of crime remained steady (i.e., banditry, narco-business, human traffic). Both Russian and Chinese scholars conclude that Chinese organized crime groups in China and in Russia focus on maximizing profit in both legal and illegal economies and some scholars identify Triads as mafia organizations.
Characteristics of Chinese Triads:
• Chinese Triads are mostly named by the region or area where they come from.
• They speak different languages, dialects, and sub-dialects depending on where in China they come from. Today, five major language families and 129 different languages excluding dialects or sub-dialects are spoken in China.
• Their number and activities in continental China differ from those in southern and coastal provinces.
• Triads’ activities have transnational characteristics due to the abundance of Chinese Diaspora networks around the world.
• Triads have substantial material assets in the form of shadow capital.
• Almost 80 percent of them use commercial organizations as a cover.
• They maintain corrupt relationships with local authorities including law enforcement agencies.
• Chinese criminal groups monitor politics especially in the economic sphere, and support the politicians who meet their interests.
• Triads use people’s superstitions and religious beliefs to recruit new members.
• They have brutal competitions over their territory of influence.
• Triads do not restrict their activities to certain specializations.
An expert on Chinese triads states the Chinese government willingly cooperated with Triads as Beijing benefited from their illicit proceeds and used that money for the much needed economic reform in China (p. 14). Repetskaya suggests that the ideological principle of collectivism has a key role in both criminal and ordinary Chinese people’s behavior. Even the Chinese Triads unify their efforts to achieve the Chinese government goals. For instance, interviews with Russian Federal Security Services reveal that Chinese special agents control the financial flows of Chinese Triads, lead Chinese firms in Russia, and are educated there as well. Some Western research institutes prove that Chinese Triads have secured free financial flow to continental China with help from contacts at different levels of the government. These illicit funds are used to establish highly profitable businesses, such as night clubs and casinos, mostly in the southern provinces of China. The author mentions a quote by a Chinese expert: “Organizations of a mafia nature gradually entered the legal economy and their economic power grew rapidly” (p. 10-11). Today, the Chinese government has toughened its anti-mafia and anti-corruption politics. They claim that organized crime is one of the most detrimental and destabilizing factors to public life. Therefore, in China, organized criminal activities are subject to harsh punishments including the death sentence. As a result, the number of Triads declined and recruitment of new members fell. Therefore, they moved to bordering Eastern Siberia and the Russian Far East (p. 12-13).
Eastern Siberia and the Far East attract Chinese Triads due to many factors (p. 15). Eastern Siberia includes the Irkutsk and Zabaikal regions, and the Republic of Buryatia (p. 45). These regions are rich in natural and biological resources (80 percent covered in forest) which are easily transported due to close proximity and bilateral agreements of the two countries. Chinese organized crime groups operate flexibly which allows them to branch out into different territories. Chinese and Russian organized crime groups willingly work together to maximize their profit and they use corruption to deal with ‘problems’. Chinese criminals benefit from their Diaspora communities around the world which helps them to settle down easily in new territories. Additionally, the Chinese authorities encourage their citizens to migrate into different parts of the world and benefit from the opportunities there. Per author, inflow of Chinese migrants to Eastern Siberia has amplified due to the Chinese expansion policy to eastern regions of Russia by populating its northern provinces. There, the population is approximately 120 million people and high unemployment in these provinces promotes outward migration (p. 29). According to Russian authorities, in Irkutsk region alone, there are approximately 4.5-5 thousand Chinese migrants (p. 29). Their numbers fluctuate according to the seasons, cross-ethnic relations, labor market conditions, etc. Repetskaya notes that traditional Chinese ideology as well as group behavior, enables Triads to take advantage of the resources of the whole Chinese Diaspora living in the region.
Chinese Triads are involved in a variety of illicit activities in Eastern Siberia. Triads deliver illegal migrants and control the labor supply in the illicit market by arranging manpower based on the demand in the shadow entrepreneurships funded by Chinese capital (p. 48-49). Their criminal activities include counterfeiting, document forgery, money laundering, usury, racketeering, prostitution, gambling (control over casinos and gambling houses), human trafficking, smuggling of people and goods, organization of illegal migration, arms trafficking, narco-business, contract killings, etc (p. 9).
Chinese Triads are not the dominant ethnic criminal group in the region and they pay for protection. More than 50 ethnic criminal groups operate in the Irkutsk region alone. Chinese Triads obey the local rules of “Thieves in Law”‘ and pay taxes to criminal groups controlling the region, such as ‘Criminal Brotherhood Community’ and ‘Ingush Criminal Group’ (p. 28-29). Chinese businessmen in the region belong under the ‘blue roof’ (krysha) such that Chinese Triads provide protection (p. 48-49). They provide protection against extortion from other criminal groups, negotiate payment terms with criminal communities dominating the territory, and deal with conflicts between state authorities and ‘protected’ businessmen. Evidence shows that Chinese Triads belong under the ‘red roof’ where government authorities provide protection to them. This allows them to operate freely in the territory and to solve problems on their own terms. The author highlights that the corrupt network of Chinese Triads is a big barrier to tackling Chinese ethnic criminal groups in the region.
Repetskaya stresses that Eastern Siberia faces various challenges in combating Chinese Triads. Triads operating in the region take advantage of the closed nature of Chinese Diaspora communities, absence of local departments specializing in ethnic organized crime, and ineffectiveness of Russian law enforcement agencies (p.15). The author adds that large-scale corruption, frequent reorganization or reform of law enforcement agencies, regular changes in personnel, and a shortage of skilled investigators and operatives add to complications in combating ethnic criminal groups in the region (p. 50). Chinese Triads are challenging to combat due to their close cooperation with the Russian organized criminal groups as each group fulfills the role best suited to its comparative advantage. Additionally, investigation is made more complex by differences in Chinese languages and dialects comprised of five major language families with another 129 different languages. Repetskaya notes that Chinese crimes in Russia are the least reported (approx. 10 times less). Also, lack of transparency in criminal data reporting and the Chinese authorities’ understating the number of crimes create serious problems for local and international researchers (p. 10).
I. Ethnic Chinese Criminals in Early Post-Soviet Period (1991-97)
Social changes after the dissolution of the Soviet Union established an environment favorable to Chinese illicit activities in Russia (p. 16-23). By 1993, unauthorized small areas where Chinese people sold counterfeit goods transformed into a unified social organism with strict hierarchical structure equipped with a support network of corrupt Russian officials, police, and racketeers. Then, Chinese traders became an easy target for Russian and Chinese criminals. Traders were constantly robbed or even killed. The Russian press reported such cases as though the Chinese mafia had arrived in Russia, but experts assert that Chinese illegal operations took the shape of organized crime only in 1996. Chinese migrants when victimized rarely sought assistance from Russian law enforcement agencies for several reasons: most were illegal migrants; and their commercial activity had illegal character raising issues, such as tax evasion. Many Chinese believed that Russian police could not protect their interests. Their problems were handled strictly within their ethnic Diaspora communities. Those who involved outsiders in the resolution of their problems were subjected to harsh punishments by their compatriots.
Experts say that Chinese Triads started operating in Eastern Siberia in 1996 (p. 17-23). The Chinese migrants who arrived in Russia earlier than their compatriots usually became leaders of criminal groups. Most of them already had criminal records in China and quickly established contacts with Russian criminals. Chinese law enforcement openly said that “Many criminal authorities, having served sentences in the homeland, go to Russia” (p. 18). These Triads were involved in violent confrontations amongst themselves to secure areas of influence. In 1997, Russian law enforcements arrested and deported leaders of two large Chinese Triads in Russia (Shenyanskaya and Nyantszinskaya) which led to their collapse. Consequently, since 1997, Triads changed to non-violent methods to avoid attracting attention from the Russian law enforcement. This was made possible by a meeting between Chinese leaders of criminal groups operating in border provinces where they divided their spheres of influence (Manchuria city, 1997).
In the early post-Soviet period (1991-97), Chinese Triads in Russia were mostly involved in illegal commercial activities. In Eastern Siberia, Triads were involved in document forgery, the illegal export of wood and scrap metal, the organization of illegal migration, and the cultivation of fruits and vegetables using banned pesticides and agrochemicals. Moreover, in 1995, Russian law enforcements discovered the involvement of Russian customs agents in the operation of an illegal Chinese bank in the Irkutsk region. In 1996, Russian law enforcement detained Chinese smugglers attempting to transport more than US$1.5 million from Russia to China. Repetskaya emphasizes that only 4.8 percent of all registered criminal cases related to Chinese migrants are successfully prosecuted in Russian courts. She stresses that this is not due to a failure in Russian law enforcement. It is largely related to the difficulty in penetrating the Chinese criminal syndicates by foreign law enforcement. This problem was repeatedly raised by law enforcement agencies from different countries at the 1995 International Conference on Economic Security in Munich.
II. Chinese Triads in the Modern Period (1998-2011)
The Financial Crisis of 1998 affected Russia and criminals. As a result, Chinese Triads either transformed their activities into the legal economy or focused on extortion of their compatriots, mostly major Chinese businessmen. In Irkutsk and Chita areas (Zabaykalsky Krai), Republic of Buryatia, Khabarovsk and Primorsky Krai extortion of prominent Chinese businessmen by organized criminal groups became a frequent phenomenon (p. 23). Chinese Triads in Russia kept small portions of their proceeds and sent large portions of it to replenish their ‘Triad Common Fund ’in China. They transferred their proceeds in the form of cash (mostly US$) or goods demanded in the headquarters (recently, non-ferrous metals and wood).
A new tendency in the modern period is the convergence of Russian and Chinese organized crime groups. According to Russian experts, “from simple contacts among themselves, they established new closer cooperation which can pose serious threats to our country’s national interests” (p. 24). Conglomerates of Russian, Caucasian, and Chinese criminal groups are engaged in different criminal activities including the export of wood and scrap metal to China. In the scheme, Russian and Caucasian criminal groups are responsible for obtaining such goods locally and Chinese criminals in exporting them to China. Along with ecological crimes, Chinese Triads commit other criminal offenses. In Eastern Siberia, theft is a common offense committed against Chinese migrants (p. 25). In recent years, extortion of Chinese businessmen has been replaced by kidnapping them. In this conspiracy, Chinese Triads organize kidnappings and the Russian criminals carry them out. There are cases where Chinese Triads were involved in trafficking arms stolen from the military units in nearby bordering regions as well (p. 49).
In this period the Triads have optimized their methods alongside improved response of Russian law enforcement. Currently, Chinese organized crimes operating in different territories of Russia prefer working in close interaction with one another, conducting all of their own operations. This increases the seriousness of Chinese crime. Repetskaya stresses that the data does not capture the underlying facts of Chinese crime in Eastern Siberia (p. 25-27). For instance, Chinese victims comprise 0.03-0.05 percent of all registered offenses in the Irkutsk region. Between 1997 and 2007, the number of Chinese victims in the overall crimes in the region declined by 3 times (from 0.03 percent to 0.01). Even the percentage of Chinese perpetrators in overall crimes committed by foreign citizens in the region did not exceed 4.3-4.5 percent. However, Repetskaya stresses that this decline is caused by the rise in number of victims of other foreign ethnicities than Chinese, and the low rate of crime reporting by Chinese migrants. Chinese do not report criminal offenses because most of them are involved in unlawful acts in Russia, and are fearful of close contacts with Russian law enforcement agencies, and retaliation from criminals, especially among compatriots.
It is important to take into account the factors underlying data on Chinese crime in Eastern Siberia (p. 25-27). Firstly, the percentage of Chinese migrants compared to other foreign citizens in the region remains low, but their number has grown steadily. Secondly, according to the majority of interviewed experts, the danger of ethnic Chinese organized crime is that they are serious crimes with high latency. Chinese criminal groups are in the leading position within the structure of foreign ethnic organized criminal groups in Eastern Siberia. For instance, in 2002, 18 percent of all crimes in the region were committed by organized crime groups of foreign ethnicity in Russia of which Chinese criminal groups made up 34.3 percent (p. 27).
III. Illicit Activities of Chinese Triads in Eastern Siberia (p. 27-46)
The main activities of Chinese organized crime in Eastern Siberia are extortion of compatriots, organization of illegal migration, illegitimate foreign trade especially in exports of wood and scrap metal from Russia to China, smuggling of ecological goods, and financial fraud. Recently, the traditional extortion of compatriots has been replaced with payments for ‘protection’ or ‘roof’ (See p. 2). The author describes the situation of use of natural resources by Chinese as “They [the Chinese] do not invest in the development of our [Russian] economy, but use Eastern Siberia only as a base for raw materials” (p. 30). Repetskaya notes convergences in different type of crimes, but highlights their specifics in her research, as follows:
i. Organization of Illegal Migration (p. 29-33)
For Chinese Triads, the organization of illegal migration is an important activity which makes their illegal businesses possible. Chinese illegal migrants provide the labor supply for Chinese activities in the region. They are mostly involved in activities in the shadow economy which include scrap metal melting, shipment of wood, fruit and vegetable farming.
Illegal Chinese migrants enter Eastern Siberia legally. After entering Russia, Chinese migrants overstay their allowed time in Russia, thereby becoming illegal migrants (p. 30). The author points out that one of the most commonly used legal travel methods for Chinese citizens to come to Russia is travel on a Tourist Visa. Chinese migrants exploit this situation for commercial purposes and illegal work activities. This travel method has the highest rate within the structure of illegal migration procedures between the two countries and is the most challenging to monitor. Another widely used method is Russian-Chinese joint ventures representing small consumer goods, raw commodities, and agricultural activities. According to Repetskaya, the majority of such enterprises are a cover for legal entry to Russia for Chinese illegal migrants. Experts say that one legal Chinese worker is a cover for ten Chinese working illegally in Russia (p. 31).
The main activities of illegal Chinese migrants in the region are construction and repair work, retail and wholesale trade in the food and goods markets, seasonal agricultural activities, and illicit logging. Illegal migrants participate in illicit businesses including unlawful export of natural resources. The author mentions that in 2010, Russian authorities revealed a large wood smuggling group composed of 152 illegal Chinese migrants who smuggled wood from Eastern Siberia to China.
Chinese migrants also use Eastern Siberia as a transit point to other European countries, such as Hungary, Czech Republic, Finland, etc. There are several Chinese Triads with hundreds of members who are involved in smuggling people to Western Europe. They charge US$3,000-$10,000 for their services, depending on the purpose of migration and the destination country. Chinese Triads in China control the forging of all documents required for travel including passports, stamps and prints identical to consular services and other Russian authorities. Forgery of documents (p. 327, Criminal Code of RF) has the highest rate in the structure of registered crimes committed by foreign citizens in Eastern Siberia (68.3 percent in 2010) (p. 32).
ii. Chinese Triads in Illicit Economic Activities (p. 33-34)
The dominant change in organized crime in both Russia and China is the penetration of its activity in the economic sectors. According to Chinese experts, economic crimes committed by Chinese citizens in the bordering regions make up 36.9 percent of all crimes (p. 33). Repetskaya claims that the external economic policy of China facilitates its citizens to fill the ‘exhausted’ national natural resources at the expense of other countries’ resources, in this case Russia. They choose illegal or semi-legal methods to achieve these goals with minimal expenses. The predominant illegal activities in economic spheres in the studied region include financial frauds and external economic crimes related to forest products, non-ferrous metals and scrap metal; smuggling of bio-resources, semi-precious stones (nephrite), and consumer goods made in China (footwear, clothing, etc). Chinese imported goods are mostly counterfeit and are delivered in an illicit way (approx. 80 percent).
iii. Chinese Triads in illicit Trade of Forest Wood (p. 34-38)
In Eastern Siberia almost 80 percent of crimes in illegal logging are committed by organized crime groups and their partners. Official statistics show that between 2006 and 2010 illegal logging grew twofold in all regions of Siberia. Repetskaya mentions that half of the independent experts believe that 50 percent of all exported wood from Russia is obtained in an illicit way. She highlights that the Irkutsk and Krasnoyarsk regions are most severely affected by illegal logging. In these regions, not Russians but mainly foreigners, especially Chinese citizens, are involved in this activity. The organized criminal groups involved in the illicit trade of unlawfully obtained wood stimulate corruption in this sector.
Almost 80 percent (150 million hectares) of Eastern Siberia is covered by forest and woods. Illegal logging has become a disaster in the region, inflicting a serious threat to the valuable forestry industry. Repetskaya notes that ecological damage in the affected region is so great that it cannot be defined in any monetary value. According to the author, Russian authorities are not concerned about stopping illegal logging; they are more interested in confiscating and selling the wood. Often criminal cases related to this offense are discontinued due to absence of an accused party because most of the Chinese firms involved are registered on false, deceased, third party documents, or on stolen, lost, and counterfeit passports (p.37).
Siberian wood is sold for much lower value than its actual market price. Chinese people like Siberian wood for not only its low price and good quality, but also due to the prohibition of tree cutting in their homeland. There are several uncontrolled entry points along the Chinese borders through which trees from Siberia are smuggled. Repetskaya notes that smuggling of illegal wood has caused a loss of US$ 5.3 million to the Irkutsk regional customs agency. 77.7 percent of this value is connected to the illicit activities of Chinese businesses (p. 36). She explains that this is happening because companies with 100 percent Chinese capital are involved in the export of raw wood. For instance, of 2,000 export-oriented firms in the Irkutsk region two thirds are established with Chinese capital (p. 36). Chinese criminal groups pay their Russian partners an extra US$5-8 per ton of wood (2,000 pounds) as a reward. Chinese Triads exploit this situation because this allows them to exist in the shadow while obtaining large amounts of forest materials. Sometimes Chinese people use Russian firms only in sectors where they are not established.
Smuggling wood to China is carefully planned and managed by the Triads. Chinese people transporting the goods always bring with them a package of documents that may be required if asked by Russian authorities. These documents are very well forged, so only specialists in forgery can identify them.
A structural problem with Russian regulations concerning the export of forest wood incentivizes illegal activities in this sector. Current customs legislation authorizes export of forest products requiring only a foreign trade contract and the document confirming the scale of the exported goods. Therefore, the exporter is not required to submit documents confirming legal acquisition of the wood, and Russian customs are not interested in the illegality of the wood crossing the border. However, the severity of this problem persists. For example, in just one inspection, Chita regional authority revealed that in this region 1.7 million cubic meters of illegally prepared forest wood was exported to China in 2007 (p. 37).
iv. Chinese Triads in Illicit Metal and Scrap Metal Trade (p. 38)
Between 2000 and 2010 the external trade of scrap metal grew 130 times its original level. Repetskaya notes that this is a result of the lack of monitoring of this market which operates without accountants, cash registers, and paperwork. In the region, Chinese migrants dominate the scrap metal market and operate under the control of Chinese Triads. The network of reception points for scrap and waste metals in the area incentivizes the local population to steal metals from high-voltage power supply networks, transformer substations, transport systems, objects of communication tools, and so on. For instance, electricity cables make up more than 40 percent of non-ferrous metals obtained through theft. Chinese melt scrap metal at small melting plants and export the ready metal to China using similar mechanisms as used in exporting wood.
v. Illegal Sale of Nephrite (p. 39-41).
Jade, a semi-precious stone, is abundant in the form of nephrite in the Irkutsk region and Republic of Buryatia of Eastern Siberia and its sales mainly belong to the illicit market. Nephrite is largely sold illegally in the shadow economy evading tax revenues and legitimate income for Russia. Called ‘green gold’ in China, jade is considered a sacred stone and is believed to have mystical and even medical qualities by the Chinese. Legal exporters of this stone are limited. Locals illegally obtain these stones and sell them for cash to Chinese. Chinese people purchase green and white nephrite for a price much lower than its market value and smuggle it to China to factories which make jewelry, figurines, panels, and other wares from them. The author notes that illegal sale and smuggling of these stones date back to the early 1990s. In earlier periods, these stones were smuggled in passenger luggage in small airports on routes from the obtained region to China. In later periods, armed conflicts occurred between organized crime groups in the region for the right to control the nephrite market. After these battles, the regional organized crime groups controlled the acquisition of nephrite and Chinese Triads controlled the purchase and transportation to China. The law enforcement and customs agents in Buryatia and Zabaikal region still detect smuggling and illegal sales of nephrite, one of which includes confiscating 24 tons (48,000 pounds) of nephrite from the illicit market.
vi. Chinese Triads in illegal Trade of Bio-Resources (p. 41-42)
In Eastern Siberia, parts of animals and plants are obtained and exported illegally to China. They consist of: parts of musk deer, deer horns, bear paws and bile; skins of mink, sable, and seal; and plants used in food such as pine nuts, a fern bracken, etc. Varieties of these bio-resources are mostly used for medicinal purposes in China. These bio-resources are sold to Chinese in Russia for lower prices and sold for higher rates in China. The author emphasizes that the illicit market in bio-resources causes loss of revenue and irreparable damage to the environment. This ‘exploitation’ of natural resources leads to obtaining bio-resources in volumes exceeding its natural ability of survival in certain types of species. The Irkutsk region the quota for musk deer hunting is 750 per year, but in just one district (Nizhneudinsk )1,750 musk deers are poached every year. This has a detrimental impact on the natural reproduction of this whole species. A similar situation occurs with the Baikal seal, the poaching of which is three to four times the official quota.
vii. Chinese Triads in Smuggling of Goods and Products (p. 42-43)
According to Customs Agencies, 30-50 percent of all imported goods from China (estimated at 20-30 billion USD per year) are smuggled into Russia. Up to 80 percent of these Chinese goods are counterfeit – fake products not meeting standards or not having the documents of origin. These are mostly common goods of large scale demand, such as boots, textiles, clothing, etc. Chinese sell their goods in ‘Chinese Markets’ in big cities or in local markets in smaller towns. The local authorities try to register Chinese traders and charge legitimate tax. However, wide spread corruption in the region, and short stay of Chinese dealers in the region complicate this effort. The author notes that Chinese dealers also smuggle illegal substances, containing toxic chemicals, to the region for use in the cultivation of agricultural goods. Their smuggling continues and the use of these toxic substances undermines the health of the local population and the environment. Repetskaya stresses that it is impossible to estimate the value of illegal Chinese businesses in Russia. And today no one is specializing in analyzing this problem.
viii. Chinese Triads in Financial Fraud (p. 43-46)
In Russia, money transfers are usually carried out through corresponding bank accounts of the sender and the recipient. Chinese Diaspora and Chinese criminal groups widely use illegal banks in Eastern Siberia to transfer money to China and to “wash” their illegal proceeds into the legal economy. In the Irkutsk region, ‘feiqian’ or ‘flying money’ is a widely used unlawful method among Chinese. In this scheme, money is transferred without a bank account where the sender in Russia deposits local currency (Rubles) into the illicit bank and the receiver in China collects that money in RMB. The service provider fills in the form where the transfer sum, recipient, and sender (often fictitious) are specified. The sender receives a copy of the form with a code which needs to be told to the recipient to be issued that money. Another commonly used financial fraud is conducted jointly by Russian and Chinese criminals. Russian intermediary firms purchase wood, scrap metal, and other raw materials. Then, transport them to China. Sale proceeds from the goods are divided among the involved participants. Thus, sales are not subjected to tax and customs authorities. The author states that according to Chinese experts, every year RMB 200 billion (24.7 billion USD) illegal proceeds from abroad are laundered into the legal economy of China (p.45).
In 2010 in the Siberia region, only three cases related to money laundering were uncovered by Russian authorities, which was 33 times less than in 2002. Repetskaya emphasizes that technological improvement in communication systems has complicated investigations and the compilation of evidence in these criminal cases. The legalization of illicit proceeds (laundering) usually enables criminals to convert their illicit activities into highly profitable businesses, such as casinos, night clubs, etc.
Link to the original research in Russian: Repetskaya_Siberia_Chinese_Triads_2012
NOTE: This is a direct summary of the original report in Russian. The content and views expressed herein do not necessarily reflect the views or policies of TraCCC.
Contact TraCCC at firstname.lastname@example.org