Central Bank Fines Firm Linked to Fallen Officials

The flagship subsidiary of cross-border settlement firm IZP Group, a company linked with several senior officials under investigation for corruption, has been fined by a local branch of the central bank for failing to comply with the country’s anti-money-laundering rules.

Globebill Technology Co. was fined 1.9 million yuan ($296,000), according to a statement (link in Chinese) on Jan. 12 by the People’s Bank of China (PBOC) in the southwestern city of Chongqinq, where the company is based. Two employees who were responsible for the misconduct were also fined 20,000 yuan and 30,000 yuan, respectively. The fine was made public in a list of penalties posted by the PBOC branch on its website with a brief comment that the company had violated anti-money-laundering rules but gave no further explanation.

An executive with Globebill, who declined to be named, denied the company had engaged in any money laundering activities. The fine was imposed due to the firm’s failure to build an anti-money-laundering system to comply with central bank requirements in time, a task that had been delayed by the relocation of its headquarters and a management reshuffle, he told Caixin.

“(The penalty) was rather due to our failure to perform our duty than money laundering,” he said. “Money laundering is a serious crime and if we had really laundered money we wouldn’t be just be facing a fine.”

Globebill is one of the 17 cross-border payment providers licensed by the State Administration of Foreign Exchange in a 2013 pilot project. In 2014, 75% of the company was sold for 1 billion yuan to IZP Group, whose top managers have been unreachable since April last year and are believed to be assisting an investigation by the Communist Party’s anti-corruption agency into former Chongqing party chief Sun Zhengcai.

After the acquisition, IZP restructured Globebill and relocated the company, originally based in the southern boom town of Shenzhen, to Chongqing. Several sources close to the matter have told Caixin that Mu Huaping, then chief of the city’s Yubei district offered significant support to IZP’s business and arranged a deal for several companies controlled by the district government to buy a 25% stake in Globebill for 270 million yuan. Mu is also being investigated over allegations of corruption.

IZP expanded rapidly in the businesses of data mining, e-commerce and cross-border payments with backing from Sun and Mu, who was later promoted to become vice mayor of Chongqing, several sources with knowledge of the matter told Caixin.

Sun was removed from his post by the Central Commission for Discipline Inspection (CCDI), the anti-graft watchdog, on July 24 and is being investigated for “serious violations of party discipline,” a phrase that usually refers to corruption. The Supreme People’s Procuratorate — the country’s highest prosecutorial body — said in December that Sun had been detained and formal legal proceedings against him had been started.

Mu has not been seen in public since April and on Oct. 9 the CCDI said he had been found guilty of trading favors for personal gain and failing to carry out his duties. Sources previously told Caixin that Mu’s downfall was related to his support for IZP in order to curry favor with Sun.

Contact reporter Leng Cheng (chengleng@caixin.com)