The top prosecutorial office in China has pointed to the role that Bitcoin can play in money laundering schemes as authorities steps up efforts to contain this area of illegal activity.
The Supreme People’s Procuratorate and the Chinese central bank recently issued a public notice on six landmark money laundering judgements from recent years that are noteworthy for their legal significance.
In addition to standard money laundering cases involving organised crime, bribery, corruption and drug deals, one of the cases highlighted by authorities involved the use of Bitcoin for money laundering purposes.
During the period from August 2015 to October 2018 a Mr. Chen operated a financial services company without the approval of Chinese regulators, using it to run a Ponzi scheme based upon the sale of fixed income wealth management products.
Chen fled abroad in November 2018, after Shanghai law enforcement agencies launched a fraud investigation in relation to more than 12 million yuan in missing funds.
Chen’s wife subsequently conveyed 3.9 million yuan to her husband while he was abroad, including around 3 million yuan that was transferred to his personal bank account, and approximately 900,000 yuan in the form of Bitcoin purchased from a miner using proceeds from the sale of a luxury vehicle.
Mrs. Chen was charged with money laundering by Shanghai authorities on 3 April 2019, and convicted in December of the same year. She received a two year prison sentence alongside a fine of 200,000 yuan.
The case is particularly noteworthy given the money laundering took place in late 2018, shortly after Chinese authorities placed a ban on domestic cryptocurrency exchanges and initial coin offerings (ICO).
The highlighting of the case arrives during a sharp increase in efforts by Chinese authorities to crack down on money laundering.
In 2020 Chinese prosecutors approved the arrest of 221 people for money laundering for a YoY rise of 106.5%, as well launched a total of 707 prosecutions for an increase of 368.2% compared to 2019.
The Chinese central bank also fined 537 financial institutions 526 million yuan for infractions in relation to money laundering in 2020, and applied 24.68 million yuan in penalties to 1000 individuals.