- China has cracked down on the first money laundering case involving digital yuan.
- The police made multiple arrests in the case.
- The suspects are detained as investigations widen.
Chinese authorities have taken down a criminal gang believed to have used digital yuan (CBDC) wallets to launder thousands in illicit proceeds sometime last year.
The digital yuan has been accessible in China since its pilot launch in Shenzhen in October 2020. While the project attained a landmark 1.8 trillion yuan (US$249 billion) transaction volume in June, criminal elements could have also contributed to the uptake.
China Dismantles Digital Yuan Money Laundering Gang
According to a report by local media outlet The Paper, the Shaoxing Public Security Bureau has arrested and detained seven individuals on fraud-related charges following a tip from a bank staff member in September.
The bank staff member alerted the police to “very abnormal” transaction activity on a merchant’s e-CNY wallet, which prompted the police to “immediately” set up a task force for further investigations.
The investigations led the police to Yuan Mou in Yuecheng, Shaoxing, and Zhili, Huzhou, who were all arrested, and several items were seized from them, including computers, 24,000 yuan in stolen money, and 500,000 yuan believed to be involved in money laundering.
Following the arrests and further interrogations, the police discovered an intricate web of money laundering activity that extended to overseas gangs.
Leveraging the Privacy of CBDC Payments to Launder Money
The report alleged that the criminal gang “took advantage of the high privacy of digital RMB payment transactions” to evade investigation and launder money.
Typically, the gang would travel to Shaoxing, Jinhua, Hangzhou, Jiaxing, and other places, wooing cigarette hotel owners to accept dubious payments from their digital yuan wallets at an 8% commission per thousand yuan.
After agreeing to the deal, the money would be sent to the hotel operator and withdrawn on the spot before the gang moved to another location to evade investigation and crackdown by the public or security agencies.
Although none of the gang members has been arraigned in court, the report insisted that the suspects were “criminally detained in accordance with the law” as the police concluded their investigation.
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