Police have expressed concern at reports by economists that much of the foreign investment in China is actually clandestine funds from mainland companies being recycled through Hong Kong to dodge tax.
Financial experts from the Organised Crime and Triad Bureau warned SAR professionals such as accountants and lawyers that they could be handling laundered money if it came from mainland companies or individuals trying to evade tax.
However, just two reports of suspicious financial transactions had been received from accountants in the past four years among the 26,990 reports received by authorities, said Superintendent Stephen Tarrant.
Lawyers had made 14 reports and company formation agents reported 14 suspicious cases. They are required by law to inform the Joint Financial Investigation Unit if they find or suspect funds they are handling for clients are involved with crimes such as tax evasion, he said.
The South China Morning Post has revealed that the movement of funds into Hong Kong shelf companies which are then funnelled back to give the false impression that mainland corporations have foreign investment partners to gain tax benefits is an open secret in the financial world.
Economists from Singapore's Ministry of Trade and Industry in a report released two weeks ago estimated significantly more than a quarter of China's foreign direct investment comes not from overseas but is mainland money recycled to Hong Kong and Caribbean tax havens to secure tax benefits from having 'foreign' partners.
