Aug 21, 2013 12:03 PM

Inner Mongolia: Where Bankers Sold Bunk

(Hohhot) – Underlying the trial of a woman authorities say drained bank accounts and kidnapped a banker's wife are vexing questions about account security and teller supervision at China's state-run bank branches in Inner Mongolia.

Hundreds of millions of yuan were stolen from customer accounts at the Bank of China's (BOC) branch and the Agricultural Bank of China's (ABC) branch in the city of Bayan Nur between 2007 and 2011, say prosecutors who have charged Tu Ya and 23 alleged accomplices. These include Tu's husband Jin Junping, a boyfriend named Li Shengrong and 11 former BOC employees.

Tu has been charged with scheming with bank executives and tellers to defraud 83 bank clients, draining a combined 2.7 billion yuan from their accounts. Authorities have forced Tu to repay victims about 2.2 billion in principal and interest, but the rest of the money – much of which she allegedly used for bribes – has been deemed unrecoverable.

The trial began in Hohhot on August 1 when prosecutors from the Xing'anmeng bureau of the Inner Mongolia People's Procuratorate formally charged the suspects with financial fraud, illegal bank deposit marketing practices and other crimes.

After reviewing the indictments and hearing witness testimony, the presiding judge adjourned the proceedings at Hohhot's Intermediate People's Court on August 7. Most defendants have been jailed pending a verdict, for which a date has not been announced.

Banking regulators have been paying close attention to the Tu case and its implications for managing employee-related risk at bank branch offices, a source at the China Banking Regulatory Commission (CBRC) said.

As of the first quarter of this year, over 60 percent of illegal fundraising cases involved participation of bank employees, CBRC chairman Shang Fulin said at a Beijing conference on July 31.

"In almost all cases of operational risks leading to investigations at banks, the perpetrators colluded with bank insiders to different degrees," a high-level bank regulatory official said. And Tu's case triggered a wave of investigations.

Insider crime at bank branches was cited as a nationwide concern recently by Shang. He urged regulators to watch for bank employees who, for example, write high-interest loans for bank clients outside official channels.

Authorities say Tu pulled off a colossal Ponzi scheme that would have been impossible without help from inside the banks. Attorneys representing some of her co-defendants who used to work at banks say the scheme is quite common in Inner Mongolia.

Tellers and bank executives have been known to get involved. One of Tu's fellow defendants, a woman named Tonglaga who was fired from a job she long held at BOC's Inner Mongolia business office, did not deny joining Tu, but testified that the scheme also must have had high-level support.

On the witness stand, Tongala said getting a superior's permission to move any large sum of money at the bank was easy. "Whenever they saw Tu's name, they authorized it in two or three seconds."

Tonglaga also testified that she always worked within full view of surveillance cameras, which meant superiors must chosen to have ignore transactions and other office activities related to Tu.

Complicity apparently ran deep because even basic transaction rules were flaunted at branches where Tu did business. For example, according to BOC rules, a window teller is never supposed to move more than 50,000 yuan in a single transaction, nor handle more than 500,000 yuan worth of transfers in a single day. But tellers allegedly routinely moved millions and sometimes tens of millions of yuan on Tu's behalf in just a few transactions, prosecutors say.

Foiled Plot

The five-year money-funneling operation started falling apart in summer 2011. But it was Tu herself who apparently hammered the nail in the coffin by making an ill-fated decision to try saving herself by kidnapping the wife of a prominent bank president.

Tu and accomplices allegedly nabbed Yang Ruilian, stuffed her into an SUV and drove off on July 19, a month after the victim's husband, Zhang Fengkui, spearheaded a crackdown on illegal transactions at BOC.

Zhang at the time was serving as president of BOC's Inner Mongolia branch and had cracked down after BOC regulators uncovered questionable transactions involving clients with big accounts. Discrepancies were found in connection with more than 40 accounts, threatening Tu's operations.

BOC officials found illegal teller operations at a branch had involved transferring funds for Tu. Three bank workers were fired: Tonglaga; a teller named Lei Wenxia at the People's Park branch of BOC in Baotou; and Guo Biao, a deputy manager at a BOC branch in Bayan Nur.

Prosecutors say the crackdown was directly responsible for breaking "Tu's capital chain."

In a desperate attempt to salvage her fortune, Tu asked to meet Zhang at his office in Hohhot to speak on behalf of Tonglaga, Lei and Guo. The request was denied.

Tu and her husband then started plotting to kidnap Zhang. But after several attempts to nab the bank president failed, the couple targeted Yang.

On July 19, Tu learned Yang would return from Chengdu, Sichuan Province, in the evening to her home in Hohhot. That's when she hatched the kidnap plot.

Pretending to be a courier, Tu phoned Yang late that night and said she wanted to deliver a package immediately. The two then met at the apartment complex gate, where Yang was muscled into the SUV.

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