Virtual Asset Trading Designated as a Money Laundering Method: Urgent Need to Combat Cross-border Money Laundering Crimes

Virtual Asset Trading Designated as a Money Laundering Method: Urgent Need to Combat Cross-border Money Laundering CrimesOn August 19th, 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 Money Laundering Criminal Cases, explicitly including transactions through "virtual assets" as one of the methods of money laundering. This move signifies the further improvement of China's anti-money laundering legal system and provides more clear and specific legal bases for judicial authorities to legally punish money laundering crimes

Virtual Asset Trading Designated as a Money Laundering Method: Urgent Need to Combat Cross-border Money Laundering Crimes

On August 19th, 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 Money Laundering Criminal Cases, explicitly including transactions through "virtual assets" as one of the methods of money laundering. This move signifies the further improvement of China's anti-money laundering legal system and provides more clear and specific legal bases for judicial authorities to legally punish money laundering crimes.

"Virtual assets" often exist in the form of virtual currencies, digital collectibles, etc. Among them, virtual currencies differ from legal digital currencies such as digital yuan, as they are not issued by monetary authorities, are supported by blockchain or similar technologies, and are recorded electronically. They primarily include Bitcoin, etc. As a new form of currency, virtual currency transactions are not legally protected, and most transactions involve funds from illegal sources such as online scams. Using the excuse of reselling virtual currencies to make profits is suspected of criminal activity.

In recent years, with the rapid development of the digital economy, using cryptocurrencies, digital currencies, and virtual tokens as virtual assets for money laundering has gradually become a mainstream trend, posing significant risks and challenges to the country's financial compliance, economic security, and social stability. Clearly designating the act of transferring and converting criminal proceeds and their profits through "virtual asset" transactions as one of the methods of money laundering helps to more accurately identify and combat money laundering activities involving virtual assets, more effectively track and monitor the cross-border flow of virtual assets, and promote international regulatory cooperation in jointly combating cross-border money laundering crimes.

Frequent Occurrence of Virtual Currency Money Laundering Cases, Escalating Difficulty in Crackdown

The anonymity and decentralization of virtual currencies make them ideal tools for money laundering crimes. In recent years, cases of money laundering using virtual currencies have become more frequent, with the criminal methods constantly innovating and upgrading, exhibiting increasingly complex and concealed "networked" and "chain-like" characteristics, posing new challenges to combating money laundering crimes.

Underground Money Laundering Operations Utilize Virtual Currencies for Cross-Border Asset Transfers, Increasing Difficulty in Investigation

Underground money laundering operations have become the primary channels for illegal elements to engage in money laundering and asset transfer. In recent years, new types of underground money laundering operations have emerged, where upstream perpetrators utilize virtual currencies, game currencies, etc., to transfer assets across borders through underground money laundering operations. These cases involve large sums of money and are difficult to investigate, presenting new and higher demands on combating money laundering crimes.

Case Analysis of Utilizing Virtual Currencies for Money Laundering

Recently, Wuhan police successfully cracked down on a criminal gang involved in money laundering for overseas scam groups using USTD virtual currency, arresting 6 suspects. Preliminary investigations revealed that the gang laundered money for overseas scam groups by collecting express deliveries, converting stolen goods, and transferring stolen funds, receiving a certain percentage of the proceeds.

In a case of concealing and disguising criminal proceeds tried by the Nantong City Tongzhou District People's Court in Jiangsu Province, defendants Wang Moufu and others used the OkEx platform to trade USDT virtual currency, transferring fraudulent funds for scammers, totaling over 380,000 yuan, earning illegal profits of over 12,000 yuan. Wang Moufu and others were aware that the source of the funds was from fraud but still conducted transactions and profited from them, constituting the crime of concealing and disguising criminal proceeds.

Consequences of Cross-Border Money Laundering with Virtual Currencies

Cross-border money laundering with virtual currencies leads to financial regulatory failures, jeopardizing the stability of the financial management order; there is a significant space for regulatory arbitrage between domestic and foreign entities, severely disrupting the normal activities of judicial authorities; the regulatory evasion of cross-border money laundering with virtual currencies is strong, impacting foreign exchange control systems; it is difficult to recover assets involved in cross-border money laundering crimes with virtual currencies, severely damaging the victims' right to claim.

Preventing Illegal Fundraising Risks Associated with Virtual Currencies

In recent years, some companies have used "virtual currencies" as a means to engage in illegal fundraising activities, such as issuing "DD0 digital options" and illegally issuing and circulating tokens to raise funds from investors in the form of Bitcoin and Ethereum. These activities are suspected of illegal issuance of token securities, illegal issuance of securities, and illegal fundraising, financial fraud, pyramid schemes, and other illegal and criminal activities.

Judicial Interpretation Clarifies Combating "Self-Money Laundering" Crimes

This judicial interpretation clarifies the criteria for determining "self-money laundering" and "other money laundering" crimes, as well as the criteria for examining and determining the subjective knowledge of "other money laundering" crimes. The judicial interpretation also clarifies that money laundering amounts exceeding 5 million yuan, involving multiple acts of money laundering; refusal to cooperate with asset recovery, leading to the inability to recover stolen funds; causing losses exceeding 2.5 million yuan; or other serious consequences should be deemed as "serious circumstances."

Stepping Up the Crackdown on Money Laundering Crimes

Chen Hongxiang, director of the Criminal Division III of the Supreme People's Court, said that people's courts will severely punish money laundering crimes in accordance with the law, stepping up the crackdown on money laundering crimes involving underground money laundering operations, the use of virtual currencies, game currencies, etc. They will punish "self-money laundering" crimes in accordance with the law. They will strengthen the imposition and execution of fines, legally confiscate the illegal proceeds of money launderers, ensuring that no one benefits illegally from criminal activities.

Conclusion

The inclusion of virtual asset trading as one of the methods of money laundering marks a further improvement of China's anti-money laundering legal system and provides a clearer legal basis for combating cross-border money laundering crimes. Combating money laundering crimes requires the collective efforts of all sectors of society to strengthen regulation, enhance public awareness, and jointly create a sound anti-money laundering environment.