Chinese Banks as Safe Havens for Counterfeiters; US Unsure about How to Deal with Them

Some of the largest state banks of China have turned into safe havens for counterfeiters who are depending on them to process credit card payments or to move the money out of the reach of the U.S. law enforcement. In the United States, the counterfeiters sell many fake products online and the government is unsure about how to deal with the situation. Though the U.S. Justice Department flexed its muscle to sue the Chinese banks and seize the assets of the counterfeiters, the department, under the pressure from China, argued that considering China’s sovereign interests, the U.S. courts should be more careful before ordering the Chinese banks to freeze the accounts of the counterfeiters.

According to the reports, four of the leading state-owned banks in China- the Bank of Communications, the Agricultural Bank of China, the Bank of China, and the Industrial and Commercial Bank of China (ICBC) have been named in the lawsuits filed in the United States. The investigations are mainly around the role of these banks in holding accounts for the counterfeiters and processing credit card payments for the online sales of the fake goods. Though the banks do not dispute the accused counterfeiters having accounts with them, they refuse to freeze the funds or disclose information about the accounts, citing bank secrecy laws. Regulators advise that the only way to extract information about the accounts is by approaching the Chinese courts or the Hague Evidence Convention. However, this is too complicated.

Several private companies such as Gucci, Tiffany and Co., New York Yankies, and Chicago Bears have been affected by the sale of the counterfeit products online. In 2012, the U.S. Justice Department seized US$2.3 million as counterfeiting proceeds and it filed lawsuits against the ICBC and the Bank of China. However, after getting pressurized by the Chinese Embassy on the grounds of respecting China’s sovereignty and laws, the Justice Department asked the U.S. courts to carefully consider their decision to force the Chinese banks to block the counterfeiters’ accounts. The Justice Department has declined to comment on the ambiguity in its actions.