Italian police, who said in a statement that they had been conducting their investigation for a year, searched the premises of 70 Chinese leather and textile businesses based in Florence, Pisa (Santa Croce su’ll Arno) and the textile hub of Prato. The police seized bank accounts and impounded cars and property.

In the statement, police alleged that the businesses targeted in the raids generated large sums of cash by hiring undocumented workers at low wages and selling counterfeit goods. The business owners then allegedly distributed the cash in briefcases and envelopes to relatives who wired the money to bank accounts in China, police said.

Police said the businesses sent a total of €238 million from Italy to China without paying taxes. Italian judges issued the search-and-seizure warrant for the raid based on police allegations of illegal money transfers, tax fraud and embezzlement by the companies in question.

No one was charged in the raids and police did not identify the businesses or the owners involved in the operation.

Over the past decade, Chinese immigrants have flooded Prato and other Tuscan towns that have long been centers of Italian leather and textiles, selling lower-priced goods and driving traditional Italian manufacturers out of business.

Many of the Chinese-owned businesses in the textile and leather goods sector operate in the shadows, according to police, recruiting undocumented workers directly from China. Unlike Italian manufacturers, who traditionally use Italian materials, Chinese businesses import raw materials at lower prices from China and sell finished products that can receive higher-priced ‘Made in Italy’ labels, say police.

Tuesday’s raids are part of an investigation that began a year ago. The Bank of Italy estimates that every day $1.5 million is sent from Prato to China. As part of the investigation, police have frozen the operations of 318 Chinese-owned businesses. Police allege that companies targeted in the investigation often keep two sets of books, allowing the firms to conceal their real income and using codes to mask the identities of their owners.

Police seized 183 cars, 76 properties and 396 bank accounts linked to the targeted companies, which police described in the statement as the ‘tip of the iceberg.’

Source: Wall Street Journal, Europe