China’s Supreme People’s Procuratorate and State Administration of Foreign Exchange join forces to combat illicit cross-border financial activities, highlighting USDT money laundering
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 cooperative operations between the two institutions but also have significant implications for the continued strengthening of the coordination of execution and the lawful punishment of cross-border financial crimes.
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Strengthening Execution Coordination and Crackdown
New Trend: Increasing Concealment and Complexity
Analysis of Typical Cases: Money Laundering with Virtual Currency USDT
China: Illegal Exchange of Virtual Currency
Key Points of Investigating Money Laundering with Virtual Currency
China is Determined to Crack Down on Illegal Foreign Exchange Activities
The Supreme People’s Procuratorate of China revealed eight typical cases in the joint operation, mainly involving cross-border “wash trading” illegal foreign exchange activities. These cases reflect the close cooperation between China’s judicial department 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:
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First, cross-border fund transfers are more concealed. Underground banks engage in illegal foreign exchange transactions more through cross-border “wash trading,” with Renminbi transfers within the country and foreign exchange transfers outside the country. Domestic and foreign funds circulate independently, intentionally evading regulatory scrutiny.
Second, fund transactions are faster and more complex. Payment settlement tools such as bank cards, POS machines, and online payments are convenient and efficient. Criminals launder, disperse, and aggregate funds among multiple banks and layers of accounts nationwide, and new payment methods such as virtual currencies increase the secrecy of fund transfers.
Third, illegal information dissemination has become more “social media-oriented.” Social networks and live streaming platforms are flooded with a large amount of information, and overseas websites and chat software provide private communication tools. Criminals use public and private contacts to publish illegal money exchange and solicitation advertisements and connect with illegal transactions. After being suppressed and blocked, they change their website addresses and return in a very short period of time.
The case of Zhao and others’ illegal operations 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 Kaifeng, and others to provide foreign currency Dirham and Renminbi exchange and payment services in the United Arab Emirates and domestically. The group collected Dirham cash in Dubai, UAE, while transferring the corresponding Renminbi to designated domestic Renminbi accounts. They then used the Dirham to purchase ‘Tether’ (USDT), a stablecoin anchored to the US dollar, and immediately resold the purchased Tether through domestic groups, illegally obtaining Renminbi, thereby forming the circulation and financing of domestic and foreign funds. Through the exchange rate difference, this group could obtain more than 2% profit in each foreign currency transaction. According to the investigation, Zhao and others exchanged an amount exceeding 43.85 million yuan from March to April 2019, with a total profit of more than 870,000 yuan.”
The Supreme People’s Procuratorate of China stated that using virtual currency as a medium to achieve the exchange of Renminbi and foreign exchange constitutes the crime of illegal operations.
Using virtual currency as a medium to earn profits from exchange rate differentials through cross-border exchange and payment services is to bypass national foreign exchange regulations using the special properties of virtual currency and achieve the conversion of foreign exchange and Renminbi through “foreign exchange-virtual currency-Renminbi” exchange. This belongs to disguised foreign exchange trading and should be criminally liable for illegal operations.
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 these wallet addresses can be queried through public channels. When handling such cases, it is important to investigate the virtual currency wallet addresses used by the suspects and defendants. This can be achieved through targeted electronic forensic examinations of the electronic devices used by the suspects and defendants, such as phones and computers, and the software stored on them, to obtain wallet addresses. Based on this, further verification of the registration information of the involved wallet addresses and the related information of the linked bank accounts can be conducted.
The Supreme People’s Procuratorate of China stated that this release demonstrates its determination and capabilities in combating foreign exchange illegal crimes and provides valuable experience and guidance for the handling of future related cases. With the continuous evolution of financial crime forms, this cross-departmental cooperation will play an increasingly important role in safeguarding financial market security and stability.
USDT
China
Money Laundering
Further Reading
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