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China Says 'Underground Banks' Laundered $1.75 Billion During 2006

Chinese police say they have discovered seven illegal financial operations this year involved in money laundering services worth more than $1.75 billion. The so-called "underground banks" were discovered as part of China's efforts to crack down on economic crimes, and prevent the funding of criminal gangs and terrorist groups. Daniel Schearf reports from Beijing.

China's Public Security Bureau says the seven illegal operations were found in Shanghai, and in four provinces of in the South and Northeast.

The PSB said Tuesday that the authorities have arrested 44 people suspected of involvement in the illegal financial activities. A PSB official labeled them "underground banks," because they carried out many of the financial transactions of legitimate banks.

. She says money laundering is a hidden danger for China's financial and economic stability.

"Money laundering transfuses into other criminal activities. It helps other criminals make illegal earnings become legal," Han said. "Money laundering crimes every day become part of trafficking in illegal drugs, terrorist activities, smuggling, corruption, fraud and other criminal activities."

In the largest of the illegal operations, a Singaporean and three others whose nationalities were not revealed were arrested in Shanghai, for illegal financial activities involving more than $630 million.

Han said this group ran a network in 25 cities across China, providing remittances, foreign exchange, and other banking services between Singapore and China.

Chinese authorities said they seized or froze more than $7 million during their investigation into the illegal banks.