China's Supreme Procuratorate collaborates with the State Administration of Foreign Exchange to crack down on illegal cross-border financial activities, with a focus on money laundering involving USDT.

Recently, the Supreme People's Procuratorate of China and the State Administration of Foreign Exchange jointly released a series of typical cases involving illegal foreign exchange crimes. These cases not only demonstrate the effectiveness of the two institutions working together, but also hold significant importance for further strengthening law enforcement cooperation and lawfully punishing cross-border financial crimes.

Strengthening Enforcement Coordination and Crackdown

The Supreme People's Procuratorate of China revealed eight typical cases announced in a joint operation, mainly involving cross-border "matching" illegal foreign exchange activities. These cases reflect the close cooperation between China's judicial departments and foreign exchange management departments in using administrative and criminal justice measures.

New Trend: Increased Concealment and Complexity

The Supreme Procuratorate of China stated that current illegal foreign exchange crimes exhibit new characteristics, including more concealed cross-border fund transfers and faster and more complex fund transactions. The Supreme Procuratorate of China summarized three phenomena:

1. Fund cross-border transfers are becoming more concealed. Underground money changers involved in illegal foreign exchange transactions increasingly adopt a cross-border "matching" model, transferring Renminbi domestically, foreign exchange overseas, circulating funds independently between domestic and foreign entities, intentionally evading regulatory scrutiny.

2. Fund transactions are becoming 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 across multiple banks and layers of accounts nationwide, and new payment methods like virtual currencies increase the anonymity of fund transfers.

3. Illegal information dissemination becomes more "social media-oriented." Social networks, live streaming platforms are flooded with information, overseas websites, chat apps provide private communication tools. Criminals use public and private channels to disseminate illegal fund exchange solicitations, facilitate illegal transactions. After being blocked, they quickly resurface with new URLs.

Analysis of Typical Cases: Money Laundering with Virtual Currency USDT

The case of Zhao and others' illegal operations is one of the notable cases. It involves virtual currency transactions, demonstrating how virtual currency is used as a medium for illegal foreign exchange transactions and highlighting the importance of electronic data in such cases.

"From February 2019 to April 2020, Zhao organized Zhao Peng, Zhou and others to provide exchange and payment services for Dirham and Renminbi in the UAE and domestically. The group received Dirham cash in Dubai, UAE, and transferred the corresponding Renminbi to designated domestic Renminbi accounts, then used Dirham to purchase 'Tether' (USDT, a stablecoin pegged to the US dollar) locally, and immediately illegally sold the purchased USDT through domestic partners to reacquire Renminbi, forming a cycle of funds domestically and overseas. Through exchange rate differentials, the group could earn over 2% profit in each foreign exchange transaction. Investigation found that Zhao and others exchanged over 43.85 million Renminbi from March to April 2019, with a total profit of over 870,000 Renminbi."

China: Virtual Currency Exchange is Illegal

The Supreme Procuratorate of China stated that using virtual currency as a medium to exchange Renminbi and foreign currencies constitutes an illegal operation.

Using virtual currency to profit from exchange rate differentials through providing cross-border exchange and payment services circumvents national foreign exchange regulations, converts the value of foreign currencies and Renminbi through "foreign exchange-virtual currency-Renminbi" exchanges, which is considered disguised foreign exchange trading and should be criminally prosecuted for illegal operations.

Key Points for Investigating Virtual Currency Money Laundering Cases

The Supreme Procuratorate of China stated that by understanding the transaction characteristics of most virtual currencies, one can trace the virtual currency wallet addresses and access the virtual currency transaction records under those wallet addresses through public channels. When handling such cases, it is essential to focus on identifying the virtual currency wallet addresses used by suspects and defendants, conduct targeted electronic investigations on their electronic devices such as phones, computers, and stored software to obtain wallet addresses, and further verify the registered information of the wallet addresses and related bank account bindings.

China's Determination to Combat Illegal Foreign Exchange Activities

The Supreme Procuratorate of China stated that this release demonstrates its determination and capability in combating illegal foreign exchange crimes, providing valuable experience and guidance for handling future related cases. With the continuous evolution of financial crime forms, such interdepartmental cooperation will play an increasingly vital role in safeguarding the security and stability of the financial market.