China uncovered more than 50 money laundering cases involving almost 10 billion yuan (US$1.25 billion) in illicit funds last year and vowed to do more to crack down on the crime, the central bank said in an annual report on black-market cash yesterday.

The hot spots for money laundering were in Zhejiang and Guangdong provinces, which accounted for 61 percent of the cases, the People's Bank of China said in its report.

The coastal locations of those provinces make them prime spots for smuggling and large-sum cash flows, according to the bank report.

"Authorities will increase inspections and strengthen cooperation between banking regulators and other government bodies to fight money laundering," the central bank said.

Illegal financing groups were the chief culprits in the transfer of shady cash, the report said.

These underground banks use money generated from drug trafficking, smuggling and other illicit sources to provide loans to companies that can't qualify for bank credit, investigators said.

Last year, police arrested 25 suspects and closed down five underground lenders that were involved in 47 million yuan worth of illicit transactions in Shanghai and neighboring Zhejiang and Jiangsu provinces.

In Beijing, police arrested 41 people, including five expatriates, who they said were responsible for 28 million yuan worth of illegal money deals.

Checks on legitimate financial institutions were also strengthened.

The central bank's 600-plus branches and subbranches conducted more than 3,000 spot inspections at banks nationwide last year and handed out administrative penalties, the PBOC said, without giving details.

"The year 2006 is an important year for the country to deepen its anti-money laundering efforts with new rules and regulations," Xiang Junbo, the central bank's deputy governor, said in the report.

The National People's Congress is reviewing a draft of the country's first anti-money laundering law, and tighter rules on financial institutions including banks, brokers and insurers are expected to go into effect later this year.

Under draft rules posted in July, banks would have to report large-sum deals, such as daily cash transactions involving more than 50,000 yuan or the foreign currency equivalent of US$10,000.

Editor: Yan