Golden Gate Bridge in San Francisco. Photo: CFP

As corruption crackdowns begin to bite, there is always a surge in officials and businessmen seeking refuge abroad in the hopes of escaping punishment.

Since the installation of the new Party leadership at the 18th National Congress of the Communist Party of China in November 2012, the country has embarked on a massive anti-graft campaign.

Many see the crackdown as unprecedented because dozens of "big tigers" have been investigated. Along with thousands being given disciplinary sanctions, 27 members of cadres at the provincial and ministerial level or above have been deposed since the Party Congress, a figure five times higher than the average in recent years, according to the Report on China's Rule of Law issued by the Chinese Academy of Social Sciences in February.

Meanwhile, many officials involved in economic crimes, along with enormous assets, have gone missing abroad. To make matters worse, the number of runaways will likely increase as the anti-corruption crusade intensifies, the report warned.

As early as December 2012, Singapore's Chinese language Lianhe Zaobao reported that some 354 officials had defected overseas via the Beijing Capital International Airport prior to the imminent anti-graft campaign.

The paper was citing Boxun News, which claimed that it obtained the information from a source within the Civil Aviation Administration of China.

A similar situation occurred 10 years ago when newly elected Party chief Hu Jintao started a drastic anti-corruption campaign. According to the Hong Kong based Wen Wei Po, a total of 6,528 Party officials went missing and 8,371 fled abroad in the first half year of 2003.

National reports by the Supreme Procuratorate showed that the intercepted money seized from fleeing officials jumped more than four times from 22.48 billion yuan ($3.63 billion) in 2007 to 102.09 billion yuan in 2012.

Liao Ran, Senior Program Coordinator for the Berlin-based Transparency International, a non-government organization, has also observed the rise of these runaways and the increasing fund outflows.

"We can get some clues from booming property sales by Chinese purchasers in major cities in other countries like the US and Singapore," Liao told the Global Times via telephone.

The authorities have neither denied nor disclosed the exact number of missing officials or the scale of the lost assets. But a channel for corrupt officials to move overseas with ill-gotten gains has been uncovered. Nevertheless, due to a lack of international judicial cooperation, it remains difficult to recover the fugitives and illicit assets.

Fleeing the law

"Flee when [you have] embezzled enough, running away ties the matter up" is a popular saying in China describing corrupt officials seeking an escape hatch abroad. Foreign countries, especially the US and Canada, which haven't signed extradition treaties with China, have always been cited as a haven for corrupt officials and fugitives.

Without agreements on extradition or judicial assistance, the authorities in those countries are unlikely to deport those fugitives as long as they live there with a legal residence permit and abide by local laws.

Daniel H. Deng and Ping C. Shen, defense attorneys in Los Angeles, have had contact with a few high-level Chinese officials living in the US.

In the US, the federal government and states have separate jurisdictions. China is not able to demand they arrest any suspects or criminals just by offering them a list of names, Deng, who used to serve as president of the Los Angeles Chinese American Sheriff Advisory Committee, told the Global Times.

Without an extradition agreement, the state law enforcement agencies will ignore Chinese arrest warrants, he said.

Shen cited a recent example in LA. The manager of a company in Southern China fled to the city after illegally raising more than 100 million yuan in China.

Even with a Red Notice issued by Interpol, Chinese police officers and prosecutors failed to recover the suspect, who had already gained a US green card through a US investor immigration program.

Thanh M. Ly, a liaison officer with the LA County Sheriff Department, said China and the US do cooperate when fighting crime. The FBI also set up a branch office in Beijing in 2002, but mainly to focus on issues relating to drug sales, smuggling and counterfeit products.

"When it comes to capturing corrupt officials in hiding, the affair will go to the diplomatic and federal authorities and the local police cannot intervene directly," Ly told the Global Times. "Even if we can locate the fugitives in LA, the local police are not allowed to intervene without the federal government's approval."

But even if these wanted fugitives are finally repatriated to China, they are likely to get lenient sentences because Chinese authorities usually need to strike a plea bargain to ensure their return.

Yu Zhendong, former head of the Kaiping city branch of the Bank of China, was sentenced to 12 years in prison in 2006 after being repatriated from the US. Yu had collaborated with two other bank managers to embezzle $482 million from the bank from 1993 to 2001.

But the Chinese Criminal Law stipulates that embezzlement of more than 100,000 yuan ($16,100) can result in more serious sentences and even the death penalty.

To successfully have Yu repatriated in 2004, Chinese authorities agreed to a written commitment that he would not get the death penalty and that his wife would not be held accountable, according to the Beijing Evening News.

Yu, who fled the US in 2001, became the first repatriated corrupt official from the US.

Chinatown in New York City. Photo: CFP

Innovative escape hatches



As China has tightened control over the passports of officials and ensured stricter supervision of "naked officials" (Party or government officials whose families are overseas) in recent years, corrupt officials have found new methods to flee and transfer illicit assets.

Instead of having their wives and children immigrate overseas earlier, they and their family members stay in China but often have several fake passports on hand so they can flee when the net tightens. By colluding with corrupt police officers, they can apply for passports under assumed names with false ID cards.

Li Chuncheng, deputy Party secretary of Sichuan Province, was the first ministerial-level official fired after the 18th Party Congress for "serious violations of laws."

In November last year, an insider from the public security bureau in Chengdu, Sichuan Province, revealed to the Beijing News that Wu Tao, a local police chief, was investigated for allegations including processing fake passports for Li and others.

Li's wife Qu Songzhi had two passports while Wu himself had four, the source said. Wu was seized by police while trying to abscond with a huge sum of money in May last year.

Deng said a new method of transferring assets that has emerged in recent years is to mortgage property in China and loan money in the US, which successfully skips the maximum limit of $50,000 of one overseas remittance by Chinese financial institutions.

"But this is indirect money-laundering and some Chinese funded banks in the US have even launched related services," he added.

Previously fund transfers were mainly carried out by signing faux trade or loan contracts, registering shell companies overseas or underground banks.

To plug the loopholes, Deng suggests that Chinese financial regulators should take actions and give tough sanctions on those agencies as well as people who assist with fund transfers.

Hunt continues



Cao Jianming, procurator-general of the Supreme People's Procuratorate, has recently announced that there will be increased efforts to hunt down economic fugitives and recover illicit assets transferred overseas, via deepened anti-graft judicial cooperation with other countries and regions.

According to Cao, 10.14 billion yuan in cash and property was recovered and 762 corrupt suspects were captured at home or abroad last year.

However, there are still many barriers.

According to Deng, among 10,000 applicants each year for the US's investor immigration program, close to 8,000 are from China. The immigration department imposes a review on the origin of funds involved, but the verification is not that strict.

"Facing economic stagnancy, investment and creating more job opportunities are important for the US. So when the money comes, why not open the door?" Deng said.

He suggested that Chinese authorities should submit materials to those frequently-targeted immigration countries immediately when someone suspicious goes missing. "Once it's proved that the applicant is dishonest and the funds are illegal, the authorities will veto the immigration application and freeze the money, and the applicant will possibly be repatriated," he said.

As of May last year, China had signed extradition treaties with 36 countries and judicial assistance agreements with 49 countries, the Ministry of Supervision said in July last year.

The major barriers for China when agreeing to treaties with countries like the US and Canada are related to their very different legal systems, Liao from Transparency International noted.

Issues like the death penalty, forced confessions as well as a lack of judicial independence and transparency have often been cited.

The US media in 2008 estimated that more than 1,000 corrupt Chinese officials had taken refugee in the US, mostly in LA, New York and San Francisco. But very few were repatriated.

Much of the billions of dollars embezzled by corrupt officials has ended up in high-end real estate overseas.

Zhang Shuguang, a former senior official of the Ministry of Railways, was revealed to own a villa worth $1.5 million in LA. A $3 million hilltop mansion near Cannes in France was said to be owned by the family of Bo Xilai, former Party chief of Chongqing. But the status of the properties remains unknown after ouster of the two politicians.

Specialists suggest that China should establish a legal basis to share the illicit assets with those countries so as to create incentives to help with the recovery.

In April last year, Canadian Ambassador Guy Saint-Jacques told media in Beijing that Canada and China would sign an agreement to share assets that Chinese fugitives illegally transferred to Canada. However, as yet there have been no further announcements on the matter.

 "It's rather hard to retrieve these fugitives and assets even if there are extradition agreements. The legal proceedings for an extradition are always painstaking and last for years," Liao said, adding that verdicts to confiscate illegal gains don't work overseas.

"The key to avoiding huge losses of public funds still lies in prevention and the establishment of a property disclosure registry for officials," he stressed.