Asian Underground Banking
(CUBS)
What is CUBS?
• CUBS is the Chinese
Underground Banking
System.
• It is an Informal Value
Transform System (IVTS)
in east Asia that transmits
large sums of money with
fewer paper documents
and banking procedures.
• Asian IVTS are also called
Chop Shops.
How does it work?
•
•
•
•
•
•
There are no physical transfer of
funds.
It is mostly a bookkeeping entry.
The sending company takes a credit
in its books and the receiving
company records a debit.
“Trust” is very crucial because the
Chop Shops are based on familial
lines.
If trust is broken it leads to
economical suicide and
ostracization from community.
Chop Shops make money by fees
and capitalize on official and
unofficial exchange rates.
Where does it operate?
• There are branches in Hong
Kong, Malaysia, Singapore,
Thailand, and the US.(East
Asia)
• Flourish where there are
inefficiencies in official
banking.
• Exist in countries with or
without laws controlling the
exportation of funds.
• Exist in countries with
convertible or nonconvertible
currency.
Who makes use of it?
• Legal abiding citizens
mostly use CUBS to send
their remittances over
seas.
• However, there are some
secret brotherhoods, called
“triads”.
• They have an oath and
disciplinary code.
• They are affiliated with
Chinese organized crime
that uses CUBS.
Legitimate Customers
Who: The Asian Diaspora has a
mistrust of central government and
central banking systems because of
foreign occupation and political
turmoil. They then rely more on ethnic
banking systems.
Why:
• Formal financial sector may be too
unstable or unreliable
• Tax evasion
• Avoidance of reporting
requirements
• Anonymity
• Murkier paper trail
• Efficiency
• Inexpensive
• Convenient
Heroin trafficking example
NYC – heroin profits
HONG KONG
Bulk cash
smuggling
BURMA
IVTS
CHIANG MAI
IVTS
Wire
transfer
PARAGUAY
Wire
transfer
BANGKOK
CUBS operator also made money
because of difference between official
and unofficial Burmese kyat/Thai baht
exchange rate
Source: IP 555 Money Laundering, Terrorism Financing, and
Policy Responses; Prof. Moyara Ruehsen