China’s Introduces Anti-Telecom Internet Fraud Law for Crypto Money Laundering, Others
Perhaps in the wake of its series of crypto-related money laundering discoveries last year, the Supreme People’s Procuratorate of China has issued the Anti-Telecom and Internet Fraud Law to tackle associated crimes.
Adopted at the 36th meeting of the Standing Committee of the 13th National People’s Congress on September 2, 2022, the law is formulated to prevent, curb and punish telecom network fraud activities and strengthen efforts against them. This, it says, includes efforts related to helping individuals carry out activities like money laundering through cryptocurrency.
China pushing hard on crypto-based money laundering
In June 2021, Chinese police arrested over 1,100 people suspected of using cryptocurrencies to launder illegal proceeds from telephone and Internet frauds. According to China’s Ministry of Public Security, more than 170 criminal groups which charge their clients between 1.5% to 5% as fee to convert illegal proceeds into crypto, were busted to make the arrests.
The arrests came before China introduced a blanket ban on all crypto-related activities – including mining and transactions – in the country. By June 2022, cryptocurrencies were cited – for the first time – as a means to launder and transfer drug trade money. It follows the finding in the China Drug Crime Report 2021 in which the Chinese police say it solved about 5,000 drug-related cases involving online transactions. It finds that drug funds circulation “has expanded from online bank transfers to cryptocurrency and in-game currency”.
Crypto for money laundering growing everywhere
Not just in China, though. The use of cryptocurrency in money laundering activities reportedly increased by 30% in 2021 from 2020 according to a report by Chainalysis. The blockchain analysis firm says criminals laundered $8.6bn of cryptocurrency in 2021 after following flows of cryptocurrency from addresses associated with criminal activity.
The Chainalysis report coincides with a Europol report which says criminal networks that are specialized in large-scale money laundering “have adopted cryptocurrencies and are offering their services to other criminals”.
The U.S. in February arrested two individuals for allegedly planning to launder cryptocurrency that was stolen in a 2016 hack of Bitfinex crypto exchange. Over $3.6bn in crypto linked to the hack was seized at the time.
Last month, another blockchain analytics firm, Elliptic, disclosed that criminals now launder money with crypto through a means that bypasses centralized services where suspected transactions could have been traced and frozen. It says they have so far used RenBridge to launder at least $540 million in crypto cash since 2020.
A little about China’s new anti-telecom and Internet fraud law
The law requires a real-name system for telephone users and applies to such fraudulent activities carried out within the Chinese territory or by Chinese citizens outside the country.
Telecom business operators and ISPs are expected to monitor, identify and dispose of businesses that engage in fraud-related support and assistance activities. These include those offering online promotion services such as information release or search, advertising promotion, and drainage promotion. Others are those providing production and maintenance services for application programs, websites and other network technologies and products; as well as those that provide payment and settlement services.
Though efforts such as organizing, determining the targets, tasks and working mechanisms as well as carrying out comprehensive management would be led by state and local governments at all levels in their regions, public security organs would take the lead. The courts and the procuratorates are mandated to adjudicate and carry out procuratorial functions to prevent and punish related fraud crimes.