Over the last year or so, China has made it harder to get money out of China. Because of this, my law firm’s China lawyers have been getting a steady stream of calls and emails from people who want us — oftentimes via a ten minute phone call — to tell them what they can do to move money from China.
The problem is that as lawyers the last thing we want to do is give people advice that will get money seized or — even worse — put people in jail. And giving someone advice on moving money internationally via a five minute phone call is just far too risky. For us to be able to give money moving advice, we need to gather up all the relevant facts and conduct legal research, oftentimes of the laws of both China and of the country in which the funds are going to be sent.
What so many people fail to realize is that many countries (the US and many European countries, for example), make it illegal to take in money via methods that violate laws of the foreign country. What is the jail risk for someone who does this? Who knows? How do these people often get caught? When one government starts investigating the sender and then all hell breaks loose.
I can tell you that the FBI on more than one occasion has come to our office to ask about our clients. As lawyers, we assert the privilege, but on one occasion, the FBI came to our office at the request of the Russian government to ask 1) how much a particular client had paid us and 2) whether we knew were our client had secured the funds. Our client — truly one of the best and most honest people I know — authorized us to give answers to the FBI and we did. It turned out that our client’s legal fees were being funded via a bankruptcy trustee and the Russians just wanted to make sure that our client was actually paying us, rather than using the funds to purchase oceanfront property in Cyprus, or something similar. So we turned over our invoices to the FBI and all was then good with the world. Just shows you though that these things can and do happen. And more often than you think.
I thought about this the other day because an American company called us after having received a large sum of money from China and then realizing that those funds were very likely highly tainted — yes I am being intentionally vague here. I spent all of five minutes with him insisting that what he needed at this point was a white collar criminal lawyer who deals with international money transfers, and nobody in my firm fits that bill. Having already received the money, I realized that he had the following issues, at minimum, needing resolution:
- Had his company received the money illegally? If no, end of research.
- If his company received the money illegally, should it send it back to China, as he was proposing to me he wanted to do? If you rob a bank and then return the money, you are still criminally liable for having robbed the bank, though returning the money may lessen your sentence. Would it be the same way here?
- If his company returns the money, should he alert Federal criminal law enforcement of having received it and returned it? Many years ago, a client came to us after having realized that it had failed to report a transaction with North Korea. We brought on a Federal white collar criminal law attorney and working together our advice was to report the transaction to the appropriate federal government agency. Our client did so and nothing more ever happened. In this instance, we determined it would be far better to report than to get caught and not having reported. Is it the same thing here?
I kept stressing to the recent caller that he had done the right thing by calling and that far too many people do crazy things, knowing in their hearts that something is wrong but so much wanting to believe otherwise. At least once a year we will get a call from someone who has not been paid for products they sold to China and our first response is: you sold what to China? Is that even legal? Same sort of thing.
So what should you do when you are looking at a transaction with China and your gut is telling you something may be wrong? As a fan of Malcolm Gladwell’s book Blink, I am convinced gut instincts are right more often than generally credited. I certainly believe this true when one’s gut is saying, “maybe I shouldn’t take this money.”
Bottom Line: If you are looking to get money from China and your heart just isn’t into it, you probably should either walk away or conduct the research necessary to confirm that what you plan to do is legal. An opinion from a lawyer can be worth its weight in gold in these situations even if your lawyer turns out to be wrong. Would you rather go in front of jury and say, “whoops, I didn’t care enough to check on this, please forgive me” or “I hired the best, most knowledgable law firm I could find to help me determine whether this was legal or not, and as you can see from this memorandum from that firm, they told me it was.”