On August 19, the Supreme People's Court and the Supreme People's Procuratorate jointly issued an interpretation on several issues concerning the application of law in handling criminal money laundering cases, which clearly listed "virtual asset" transactions as one of the ways of money laundering. It is reported that "virtual assets" mostly exist in the form of virtual currencies, digital collections, etc.
Among them, virtual currency is different from legal digital currency such as digital RMB. It is not issued by the monetary authorities. It is supported by blockchain or similar technologies and recorded in electronic form. It mainly includes Bitcoin, etc. It is a new form of currency that is not carried by material form. Will trading virtual currencies such as Bitcoin and Ethereum also constitute a crime? The judge reminded that any virtual currency transaction is an illegal transaction and is not protected by law. Most of the funds involved in the virtual currency transaction process are illegal gains such as online fraud. The so-called reselling of virtual currencies for profit is suspected of being a crime.
Yan Lixin, professor at the School of International Finance of Fudan University, executive director of the China Anti-Money Laundering Research Center, and dean of the Lujiazui Financial Security Research Institute, told the Daily Economic News reporter that "with the rapid development of the digital economy, the use of virtual assets such as cryptocurrencies, digital currencies, and virtual tokens for money laundering has gradually become a mainstream trend, posing great harm and challenges to the country's financial compliance, economic security, and social stability."
He believes that from a judicial perspective, clearly listing the use of "virtual asset" transactions to transfer and convert criminal proceeds and their profits as a method of money laundering provides a clear legal basis for law enforcement agencies, helps to more accurately identify and combat money laundering involving virtual assets, more effectively track and monitor the cross-border flow of virtual assets, promote cross-border regulatory cooperation, and jointly combat cross-border money laundering crimes.
Trading "virtual assets" is listed as a method of money laundering
On August 19, the Supreme People's Court and the Supreme People's Procuratorate held a press conference, stating that they will intensify the crackdown on money laundering crimes involving underground banks, virtual currency, game currency, etc., punish "self-laundering" crimes according to law, increase the intensity of sentencing and enforcement of fines, recover the illegal gains of money launderers according to law, and prevent anyone from illegally profiting from criminal acts.
From the money laundering cases handled from 2022 to 2023, more than 50% of the money laundering was done by transferring funds or providing fund accounts through transfer or other payment settlement methods. Among them, money laundering through smuggling, corruption and bribery, and financial crime money laundering was relatively common through cross-border transfer of assets.
At the same time, with the widespread application of Internet technology, money laundering methods have been constantly updated and upgraded. Virtual currency, game currency, scoring platforms, live broadcast rewards, etc. have become new carriers and methods of money laundering, showing more complex and hidden "networking" and "chain" characteristics.
Underground banks have become the main channel for criminals to engage in money laundering and fund transfer. New types of underground banks have also emerged. Upstream criminals use virtual currencies, game coins, etc. to transfer assets across borders through underground banks. The amount involved is high and it is difficult to investigate and punish, which has put forward new and higher requirements for combating money laundering crimes.
Which virtual currency transactions constitute a crime? In this regard, the judicial interpretation clarifies seven specific circumstances in the Criminal Law that "cover up or conceal the source and nature of criminal proceeds and their proceeds by other means", including the transfer and conversion of criminal proceeds and their proceeds through "virtual asset" transactions and financial asset exchanges.
Luo Chunlei, an expert at Kant Think Tank and a lawyer at Shanghai Guangming Law Firm, told the Daily Economic News that when virtual currency transactions are used to cover up and conceal the source and nature of criminal proceeds and the income generated, the act constitutes money laundering. This includes converting criminal proceeds into virtual currency, or converting virtual currency into other forms of assets to evade legal investigation.
In Luo Chunlei's view, the court's clear listing of "virtual asset" transactions as a way of money laundering is an important progress in anti-money laundering work. "This move further improves my country's anti-money laundering legal system and provides a clearer and more specific legal basis for judicial organs to punish money laundering crimes in accordance with the law. At the same time, it will also help to raise the public's awareness of money laundering crimes and prevent them, and create a good atmosphere for the whole society to jointly combat money laundering crimes."
Luo Chunlei said that money laundering crimes are often transnational and complex, and countries need to strengthen cooperation to deal with them together. Clearly listing virtual asset transactions as a way of money laundering will help my country and other countries to carry out closer cooperation in the field of anti-money laundering and jointly combat transnational money laundering crimes.
Yan Lixin believes that "with the rapid development of the digital economy, the use of virtual assets such as cryptocurrencies, digital currencies, and virtual tokens for money laundering has gradually become a mainstream trend, posing great harm and challenges to the country's financial compliance, economic security, and social stability. Therefore, it is urgent to further clarify and refine it from a legal perspective to consolidate the coercive force of the law and enhance the operability of law enforcement."
Money laundering cases using virtual currency are frequent, and some people find the "trick" in the first transaction
According to Yan Lixin, the operating mechanism of virtual currency has particularly distinct characteristics such as decentralization, dispersion and intangibility, anonymity, real-time, network parasitism, and difficulty in tampering. It also has various forms and is not restricted by geographical location. Money launderers or organizations use these characteristics to conceal the nature and flow of funds and easily achieve cross-border transfers, which not only increases the difficulty of supervision, but also is not conducive to the stability of the financial market.
Recently, under the guidance and support of relevant departments of the Wuhan Municipal Public Security Bureau, the Qingshan police followed the clues of a live telecom fraud report and carried out continuous operations in Wuhan, Changsha, Nanchang, Xiangxi and other places. They successfully cracked down on a criminal gang that used USTD virtual currency to help overseas fraud groups launder money. They arrested 6 suspects involved in the case and initially found out that the total amount involved was more than 6 million yuan. They recovered 23 Apple mobile phones and some high-end liquor.
"This is a criminal gang with a clear division of labor." The police officer in charge of the case said that Lei Mourui was responsible for contacting overseas fraud groups through chat software, and instructing Ma Mou and others to collect express deliveries, cash in stolen goods, and transfer stolen money; Ma Mou was responsible for organizing Duan Mouguo, Wang Moulin, and Xie Mouhao to help the fraud group collect express deliveries of mobile phones, high-end wines, etc. and hand them over to Zhou Mou; Zhou Mou was responsible for selling stolen goods, and the stolen money was transferred to overseas fraud groups in the form of USTD virtual currency.
It is understood that the criminal gang has been helping overseas fraud groups collect express deliveries, cash in stolen goods, and transfer stolen money since March 2023, and has received a certain percentage of remuneration. According to preliminary statistics, since January 5, 2024, the gang has helped overseas fraud groups collect and cash in more than 340 Apple mobile phones, watches, headphones and other items, and dozens of boxes of high-end wine in Wuhan, with a total value of more than 6 million yuan.
Recently, the People's Court of Tongzhou District, Nantong City, Jiangsu Province, publicly tried a case of concealing and hiding the proceeds of crime in the court of Tongzhou Detention Center.
After examination in accordance with the law, it was found that from November 2022 to August 2023, the defendants Wang Moufu and Wang Moubiao and Wang Mouping (all handled in separate cases) discussed and decided to buy and sell USDT virtual currency through the Ouyi platform. It was agreed that Wang Moufu and Wang Mouping would jointly invest 250,000 yuan and Wang Moubiao would invest 110,000 yuan, and they would operate their respective accounts to conduct transactions, and the profits would be divided equally among the three.
The so-called virtual currency trading is actually a means for Wang Moufu and others to transfer fraudulent funds for fraudsters. The fraudsters used the stolen money to buy virtual currency from Wang Moufu and others, thereby achieving the purpose of money laundering, and Wang Moufu and others made a profit from the price difference. From July to November 2023, the defendant Wang Moufu provided multiple WeChat accounts to collect virtual currency transaction funds, and used virtual currency on-site and off-site transactions on the Ouyi platform to transfer fraudulent funds for fraudsters, totaling more than RMB 380,000, from which he made an illegal profit of more than RMB 12,000.
In court, the defendant Wang Moufu confessed that when he conducted the first virtual currency transaction, he found that the other party's funds came from fraud, and reminded his accomplice Wang Moubiao, but Wang Moubiao said that as a merchant, they were simply conducting transactions to earn the difference. The public prosecutor brought a public prosecution against Wang Moufu for the crime of concealing and hiding the proceeds of crime. At present, the court is further hearing the case.
This type of behavior of raising "virtual currencies" such as Bitcoin is also suspected of illegal fundraising.
"Compared with traditional money laundering tools, virtual currency has the characteristics of anonymity and decentralization, which makes it more harmful when used for cross-border money laundering." The Qingdao Municipal Bureau of Justice introduced that, for example, cross-border money laundering with virtual currency causes financial regulatory failure and endangers the stability of the financial management order; there is huge room for regulatory arbitrage at home and abroad, which seriously interferes with the normal activities of judicial organs; cross-border money laundering with virtual currency has a strong tendency to evade supervision and has an impact on the foreign exchange control system; it is difficult to recover the property involved in cross-border money laundering crimes with virtual currency, which seriously infringes on the victim's right of recourse.
The official website of the Office of the Financial Committee of the CPC Fujian Provincial Committee issued a "Risk Warning on Preventing Illegal Fund-raising in the Name of Virtual Currency", stating that recently, it was discovered that some companies were soliciting people to subscribe for investment in the name of "DD0 digital options", claiming that they were anchored by physical assets and issued and launched digital options DD0 through overseas digital asset exchanges. They used this as a gimmick and signed subscription agreements with investors to issue DD0 digital options to the outside world. In essence, it is the issuance and trading of virtual currency.
In addition, some financing entities raise so-called "virtual currencies" such as Bitcoin and Ethereum from investors through illegal issuance and circulation of tokens. This is essentially an act of illegal public financing without approval, and is suspected of illegal issuance of token tickets, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities.
Image source: Office of the Financial Committee of the CPC Quanzhou Municipal Committee
The judicial interpretation clarified the identification standards for the crimes of "self-laundering" and "money laundering by others", as well as the examination and identification standards for the subjective knowledge of the crime of "money laundering by others". The judicial interpretation also clarified that if the amount of money laundering is more than 5 million yuan, and there are multiple acts of money laundering; refuse to cooperate with the recovery of property, resulting in the inability to recover the stolen money and property; cause losses of more than 2.5 million yuan; or cause any other serious consequences, it shall be deemed as "serious circumstances".
Chen Hongxiang, president of the Third Criminal Division of the Supreme People's Court, said that the people's courts will severely punish money laundering crimes in accordance with the law, and intensify the crackdown on money laundering crimes involving underground banks, using virtual currency, game currency, etc. "Self-laundering" crimes will be punished in accordance with the law. The intensity of sentencing and execution of fines will be increased, and the illegal gains of money launderers will be recovered in accordance with the law, so that no one will be allowed to illegally profit from criminal acts. At the same time, the criminal policy of combining leniency with severity will be implemented in earnest, and different situations and treatments will be distinguished to ensure the best political, social and legal effects.