Police in China dismantles billion-dollar crypto money laundering operation

Inner Mongolian police have detained sixty-three people in connection with an alleged conspiracy to launder more than 12 billion yuan ($1.7 billion).

Ten million yuan laundered monthly

According to China News, authorities in the Inner Mongolia Autonomous Region reportedly discovered an extensive cross-border network that used virtual currency to process funds suspected to come from criminal activities, including online pyramid schemes, illegal gambling, and fraud.

The police first became suspicious after noticing abnormal transaction volumes in the Shimouyuan Construction Bank’s card funds amounting to tens of millions of yuan per month.

Special investigators from the Tangliao City Public Security Bureau then spent three months infiltrating the suspected money laundering ring. The investigation involved 230 officers in 17 Chinese provinces, municipalities, and autonomous regions, including Beijing, Guangdong, Heilongjiang, and Henan.

Sixty-three arrested, millions seized

Following the investigations, 63 suspects were arrested, including two ringleaders who had fled to Bangkok, Thailand. Authorities also confiscated about 130 million yuan, suspected of being the proceeds of criminal enterprises.

According to investigators, the gang, which used encrypted messaging apps to communicate, first converted hundreds of millions of dollars of suspected criminal funds into various cryptocurrencies before moving them into hundreds of anonymous crypto wallets. The criminals used the system to launder more than $1.7 billion successfully.

Hong Kong enacts anti-money laundering law

This news comes only days after the Hong Kong legislature passed a law establishing a licensing system for virtual asset service providers (VASP). The new law, called the Anti-Money Laundering and Counter-Terrorist Financing Bill, makes it mandatory for VASPs to conduct the same level of due diligence and record-keeping requirements on digital transactions as is exercised on many traditional transactions.

The new regulations also require financial institutions to keep better records of consumer purchases of cryptocurrency assets and codify penalties for the unlawful sale of crypto-related products.

Hong Kong has historically served as the world’s main entry point for trade with China, and in October, officials mentioned their desire to establish the city as a global hub for virtual assets. Other governments across the world were testing their approaches to regulating cryptocurrency-related businesses. Still, the city was one of the first to establish a regulatory licensing scheme for fund managers and centralized exchanges that traded virtual assets.

The new regulations would mandate that all businesses submit applications to the Securities and Futures Commission for regulatory scrutiny, whereas the former licensing effort was voluntary.

Only two cryptocurrency exchanges, operated by BC Group and Hashnet, and a small number of money management companies have thus far received licenses to deal in crypto assets.