Ex-Chinese official’s son remanded in Hong Kong over HK$64m money laundering case

The son of a former mainland Chinese official has been remanded in custody in Hong Kong pending sentence for laundering more than HK$64 million, including a 4 million yuan bribe his father allegedly sought from a merchant a decade ago.

Xiao Rui, 37, will also face criminal sanctions for using bogus bank records to deceive the Immigration Department into granting him the right of abode in Hong Kong through a cash-for-residency scheme in 2013.

The District Court on Tuesday rejected Xiao’s assertion that he did not know the documents were false because the relevant immigration procedures were all handled by his mother.

The court also found the defendant had no reason to believe the money, which he channelled to the city through an underground bank over nine years, originated from lawful activity.

Xiao, who was found guilty of four counts of money laundering and one of using false instruments, is the son of Xiao Jun, a former anti-corruption chief at the People’s Procuratorate in Wuhan.

The elder Xiao was earlier suspended following a corruption investigation by mainland authorities.

The trial heard that the younger Xiao applied for residency in Hong Kong through the old Capital Investment Entrant Scheme in 2013, as a Gambian national.

Under the policy, mainland citizens needed to be a permanent resident in another foreign country to be eligible. About 90 per cent of all approved cases were Chinese nationals with permanent residence abroad, according to official data.

Using two forged bank statements claiming he had 10 million yuan (US$1.48 million) at China Construction Bank, Xiao successfully induced immigration authorities to issue a two-year visa to him in July 2014.

The defendant did not move to Hong Kong, but remained in Wuhan before relocating to Shenzhen with his wife in 2019.

Xiao also handled over HK$64 million (US$8.16 million) in illegal gains in Hong Kong between March 2014 and November 2023.

He received four sums totalling HK$4.72 million from a subsidiary of a Hubei-based industrial investment firm in 2016, even though they had no prior business dealings.

The firm’s chairman, Yao Qian, testified that they were illicit payments made at the elder Xiao’s request after the latter helped him secure a 50 million yuan water pump project commissioned by the Wuhan government over 10 years ago.

In the witness box, Xiao denied any knowledge of the bribery scheme, while insisting the HK$64 million was either investment money given by his mother or proceeds of cryptocurrency sales.

He said his mother, a former hospital nurse, had made a fortune through investing in a gardening design company and an electrical engineering business run by his uncle.

The defendant said his mother gave him 20 million yuan in cash in 2016, saying they were “dividends” from the engineering firm. The amount was so huge that he had to make four round trips to transport all the banknotes to his home.

“Mum told me she made that money through lawful business activities. I believed that was true,” the defendant said.

Deputy Judge Bernard Chung Wai-keung dismissed Xiao’s assertions as far-fetched and illogical, questioning why the defendant and his mother had decided to handle the money in such a “bizarre” manner.

Chung found that the money Xiao had handled far exceeded what he could have earned through lawful means.

He noted that a HK$10 million deposit to Xiao’s HSBC account in 2014 was equivalent to more than 60 years’ worth of what he could earn from his own laser technology company in Wuhan.

“Upon receiving such enormous amounts of money from unknown sources, the defendant must have realised that the cash was tainted,” the deputy judge said.

“Any reasonable person with the same knowledge as the defendant would have reason to believe as such.”

The court adjourned sentencing until July 23, with Xiao facing up to seven years behind bars.