Recently, the Supreme People’s Procuratorate of China and the State Administration of Foreign Exchange jointly released a series of typical cases involving foreign exchange illegal crimes. These cases not only demonstrate the effectiveness of the collaboration between the two institutions, but also have important significance for further strengthening the coordination of enforcement actions and lawfully punishing cross-border financial crimes.
Table of Contents:
Toggle
Strengthening Coordination and Crackdown
New Trend: Increased Concealment and Complexity
Analysis of Typical Cases: Money Laundering with Virtual Currency USDT
China: Illegality of Virtual Currency Exchange
Key Points for Crackdown on Money Laundering with Virtual Currency
China’s Determination to Combat Illegal Foreign Exchange Activities
The Supreme People’s Procuratorate of China has revealed eight typical cases in the joint operation, mainly involving cross-border conspiracy-type illegal buying and selling of foreign exchange. These cases reflect the close cooperation between China’s judicial departments and the foreign exchange management department in the use of administrative and criminal justice means.
The Supreme People’s Procuratorate of China stated that current foreign exchange illegal crimes have presented new characteristics, including more concealed cross-border fund transfers and faster and more complex fund transactions. The Supreme People’s Procuratorate of China summarized three phenomena:
1. More concealed cross-border fund transfers. Underground money changers engage in more cross-border “conspiracy” transactions, with RMB transfers within the country and foreign exchange transfers abroad, creating independent circulation of funds inside and outside the country to intentionally evade regulatory scrutiny.
2. Faster and more complex fund transactions. Convenient and efficient payment settlement tools such as bank cards, POS machines, and online payments allow illegal elements to launder, disperse, and aggregate funds among multiple banks and multiple layers of accounts nationwide. New payment methods such as virtual currencies also increase the concealment of fund transfers.
3. “Social media” dissemination of illegal information. Social networks and live streaming platforms are filled with a large amount of information, while overseas websites and chat software provide private communication tools. Illegal elements use public and private contacts to disseminate illegal fund exchange solicitation advertisements, connect with illegal transactions, and, after being cracked down and blocked, quickly change website addresses to make a comeback.
The case of Zhao and others’ illegal operation is one of the notable cases. The case involves virtual currency trading and demonstrates how virtual currency is used as a medium for illegal foreign exchange transactions, highlighting the importance of electronic data in such cases.
“From February 2019 to April 2020, Zhao organized Zhao Peng, Zhou Kaibing, and others to provide exchange and payment services for foreign currency Dirham and RMB in the United Arab Emirates and China. The group collected Dirham cash in Dubai, UAE, while transferring the corresponding RMB to the designated domestic RMB account of the other party. They then used Dirham to purchase ‘Tether’ (USDT), a stablecoin anchored to the US dollar, and immediately sold the purchased Tether through domestic networks, illegally obtaining RMB and thus forming the circulation and financing of funds both domestically and internationally. Through the exchange rate difference, the group could obtain more than 2% profit in each foreign currency transaction. Investigation showed that Zhao and others exchanged an amount of over RMB 43.85 million between March and April 2019, with a total profit of over RMB 870,000.”
The Supreme People’s Procuratorate of China stated that using virtual currency as a medium to achieve the exchange between RMB and foreign exchange constitutes the crime of illegal operation.
By using virtual currency as a medium and earning profits from exchange rate differentials through providing cross-border exchange and payment services, this is a way to bypass national foreign exchange regulations using the special attributes of virtual currency, achieving the conversion of foreign exchange and RMB through the exchange of “foreign exchange-virtual currency-RMB.” It belongs to disguised foreign exchange trading and should be criminally liable for illegal operation.
The Supreme People’s Procuratorate of China stated that, based on the trading characteristics of most virtual currencies, the wallet addresses of virtual currencies can be obtained and the transaction records of virtual currencies under those wallet addresses can be queried through public channels. When handling such cases, it is important to focus on investigating the virtual currency wallet addresses used by the suspects and defendants. Targeted electronic forensics can be conducted on the mobile phones, computers, and other electronic devices used by the suspects and defendants, as well as the software stored in them, to obtain wallet addresses. Based on this, further verification can be conducted on the registration information of the wallet addresses involved in the case and the related information of the linked bank accounts.
The Supreme People’s Procuratorate of China stated that this release demonstrates its determination and ability to combat foreign exchange illegal crimes, and also provides valuable experience and guidance for the handling of future related cases. As the forms of financial crimes continue to evolve, this cross-departmental cooperation will play an increasingly important role in safeguarding the security and stability of the financial market.
USDT
China
Money Laundering