Bank of China Settles Italy Tax Dispute Over Cash Transfers

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By Eric J. Lyman

The Bank of China paid 20 million euros ($22.4 million) to resolve a tax dispute with Italy over thousands of money transfers the bank orchestrated between Chinese nationals in Italy and their home country, the Italian government said June 21.

Commentators told Bloomberg BNA the agreement could have an impact on the way international financial institutions operating in Italy—such as Barclays PLC, HSBC Holdings PLC, and The Western Union Co.—monitor their international money transfers going forward.

Investigations into the Bank of China date to 2011. The inquiries concern tax avoidance relating to around half of the 4.5 billion euros ($5 billion) that was transferred to China, between 2006 and 2010, for private Chinese citizens mostly living in Tuscany. The money in question was transferred via the Milan offices of the state-owned Chinese lender.

Prosecutors state that the bank allegedly failed to take the proper steps to assure the money had been taxed. As such, prosecutors said the Bank of China ran afoul of the European Union’s Fourth Anti-Money Laundering Directive.

The Bank of China paid the settlement in question in January, and reports of the deal had appeared in unsourced articles in local media since then. It was formally confirmed by tax officials in a background briefing June 22.

Bank of China didn’t comment on the June 22 confirmation, but in response to earlier media reports, bank officials told Bloomberg BNA March 17 that any settlement wasn’t an admission of wrongdoing.

Wider Effort

In the background briefing, Italian tax officials told Blomberg BNA the Bank of China case was part of a wider effort to police international money transfers.

According to Francesco Brandi, a former Italian tax official now a law professor at Rome’s La Sapienza University, the Bank of China case should prompt other international banks operating in Italy to review the steps they take to assure money they transfer internationally had been properly taxed.

“The kind of investigation into the Bank of China could happen to any international institution,” Brandi told Bloomberg BNA. “The problem might be much smaller at other institutions, but this would be a time to be proactive and review procedures.”

Barclays, HSBC, and Western Union didn’t immediately respond to requests for comment.

To contact the reporter on this story: Eric J. Lyman in Rome at correspondents@bna.com.

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

For More Information

More information on the investigation is at http://src.bna.com/qcT.

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