In a crackdown action on illicit crypto activities, police in China’s northeastern Jilin province have arrested six individuals involved in a massive money-laundering scheme. The operation allegedly funneled 2.14 billion yuan (US$296 million) to South Korea, highlighting the persistent issue of crypto-related capital flows amid Beijing’s intensified efforts to combat financial crimes. Crypto-related money laundering is becoming increasingly popular.
Key Takeaways
- Arrests and Scheme: Six individuals arrested in Jilin province, China, for laundering 2.14 billion yuan (US$296 million) to South Korea via cryptocurrency.
- Method: Suspects ran an illegal currency exchange, using bank accounts to buy cryptocurrency through over-the-counter exchanges, facilitating cross-border money exchanges.
- Investigation: Police detected the scheme due to large, unusual daily transactions in the suspects’ accounts, resembling underground banking operations.
- Crypto Transactions: Despite the crackdown, China saw US$86.4 billion in crypto transactions from July 2022 to June 2023, mainly through grey market channels. Illicit crypto transactions declined in 2023, with US$22.2 billion worth of cryptocurrency sent from illicit addresses, down 29% from 2022.
The Case Background
According to a statement by the Panshi city police, suspects identified by the surnames Jin and Shen were implicated in running an illegal currency exchange business. The authorities discovered the scheme after noticing unusually large daily transactions in the suspects’ bank accounts, which involved a high volume of customers. The activity bore the hallmarks of an underground banking operation, prompting further investigation.
The police revealed that the criminal group used mainland China bank accounts to receive funds, which were then utilized to purchase cryptocurrency through over-the-counter exchanges. This cryptocurrency was subsequently employed to facilitate foreign money exchanges for various cross-border businesses, including e-commerce and import-export firms.
China has maintained a stringent ban on commercial cryptocurrency activities, viewing them as a threat to financial stability. Despite this, the underground crypto trade persists, leveraging over-the-counter channels and peer-to-peer services to bypass official restrictions. From July 2022 to June 2023, China saw US$86.4 billion in cryptocurrency transactions, most occurring through these grey market channels, according to blockchain analytics firm Chainalysis.
The latest arrests in Jilin are part of a broader effort by Beijing to tighten its grip on cryptocurrency-related money laundering. In December 2022, Chinese prosecutors and foreign exchange regulators pledged to crack down on the illegal use of cryptocurrencies, particularly focusing on Tether. The government is also revising its Anti-Money-Laundering Law to address the unique risks posed by virtual assets. A revised draft of the law was under review by the Standing Committee of the National People’s Congress as of late April.
China’s aggressive stance against cryptocurrency began in earnest in 2021, when the People’s Bank of China declared that crypto firms facilitating trading activities were violating the law. This led to a sweeping campaign to eliminate bitcoin mining and related activities within the country. While many companies have relocated their operations outside of mainland China, some, like Binance, continue to provide workarounds for mainland users.
Despite the crackdown, illicit crypto transactions remain a challenge. In 2022, police in Inner Mongolia arrested 63 individuals linked to laundering 12 billion yuan through cryptocurrency. However, the overall volume of crypto-related money laundering has recently declined. Chainalysis reported that in 2023, illicit addresses sent US$22.2 billion worth of cryptocurrency, down 29% from the previous year’s US$31.5 billion.
