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Chinese Banks Test U.S. Legal System in Gucci Counterfeiting Lawsuit
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Counterfeiting in China is big business. Photo courtesy of Vogue.

Summary: A court in New York is set to determine whether or not Americans can demand account records from Chinese banks.

China’s big banks are expanding to the U.S., and they’re starting to test our legal system, specifically how far judges can go in demanding Chinese bank account records.


Legal experts are closely watching Kering SA’s battle against big time Chinese counterfeiters. Kering SA owns brands such as Gucci, Balenciaga, and Alexander McQueen; and they have experienced major problems of counterfeiting in China. The luxury brand claims that many counterfeiters have bank accounts with Bank of China Ltd., and they want Bank of China to release their records.

The problem is that Bank of China isn’t complying.

U.S. District Judge Richard Sullivan of Manhattan has asked Bank of China multiple times for records, but Bank of China says giving that information is a violation of Chinese privacy laws. They handed over a portion of the records, but not everything.

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Next week, Gucci and Bank of China will fight to see if Bank of China should be held in contempt. The bank could face a multi-million dollar fine, and if BOC is held in contempt, the case could be pivotal for lawyers wanting to push through China’s secrecy laws in the future.

New York courts have struggled recently to enforce their judgements on foreign-based banks, even if those banks have New York branches, like Bank of China does. For instance, in September, New York’s highest court heard arguments on whether or not Americans can freeze assets in a United Arab Emirates-run financial institution. In a similar case, the Federal Bank of New York sided with its foreign friends. It warned that subjecting foreign-owned banks in New York to U.S. law could hurt the city’s status as a global banking center.

The Bank of China decision could prove even more important to Kering, whose bottom line has suffered because of counterfeiters. The company is closing stores and has overall floundered in China, despite the fact that Chinese consumers account for one third of all luxury brand sales, according to Taipei Times.

The luxury brand has actively gone after individuals and even web megastore Alibaba for counterfeiting, but because of lack of enforcement in China, justice is often never served. For instance, in July of 2015, Business Insider profiled a Chinese woman named Xu Ting who made millions selling fake goods. She supported herself and her family with a counterfeit business, and her bank accounts were all in China even though she was a student in the United States.

Kering and other brands successfully sued Xu Ting for $6.9 million in damages, and although the companies won the lawsuits, Xu Ting never paid, never went to jail, and still lives a comfortable suburban life in the United States. She avoided all of her legal responsibilities by just not showing up to court.

Only time will tell if this lack of enforcement continues.







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