Written by: Xiao Sa Team
The digital RMB is a new form of legal tender in our country, combining the advantages of legal tender and electronic payment tools. However, a recent report by the Zhejiang Supervisory Authority titled “Using digital RMB accounts to cash out over 200,000 yuan in just four days, sentenced!” revealed a criminal case where individuals used digital RMB to conceal and disguise proceeds from overseas fraud. This article will analyze the potential criminal legal risks associated with digital RMB transactions based on this case for the reference of our readers.
Case Overview
In late August 2023, Yuan learned about a channel to profit from cashing out digital RMB through a part-time advertisement. By finding businesses with digital RMB accounts to cash out, Yuan could earn an 0.8% commission from the amount cashed out. Yuan approached businesses with digital RMB accounts through shopping and casual conversations, persuading them to cash out. After the businesses agreed, Yuan would convert a certain amount of money into virtual currency as a deposit to the upstream party and send the digital RMB receipt code to them. Once the fraudulent funds entered the business’s digital RMB account, the business would deduct a 1% to 1.5% processing fee and Yuan would cash out the corresponding amount.
During the operation, Yuan cashed out more money than was given to the upstream party, with the difference being the commission Yuan received. The cash obtained would then be used as the deposit for the next cash-out. In order to earn more money, Yuan, despite being aware of the questionable source of the upstream funds, involved his girlfriend Zhang and friend Kou by promising them a 50 yuan reward for every 10,000 yuan cashed out. Due to the limited number of stores supporting digital RMB payments, their repeated transactions were easily detected. To evade police investigation, Yuan and his accomplices used obscure foreign chat tools to communicate with the upstream party and moved between different cities to cash out successfully.
A few days later, the police received reports of abnormal fund flows in multiple businesses’ digital RMB accounts in the jurisdiction and quickly apprehended Yuan and his accomplices. In just four days, they cashed out over 200,000 yuan in Shaoxing. Recently, the Yuezhou District Prosecutor’s Office filed a public prosecution, leading to prison sentences ranging from one year and four months to seven months and fines for Yuan, Zhang, and Kou.
Case Analysis
1. How does cashing out constitute concealing criminal proceeds?
Article 312 of the Criminal Law stipulates the crime of concealing criminal proceeds: “Whoever knows that it is criminal proceeds and its generated gains and conceals, transfers, purchases, sells on behalf of others, or conceals in any other way shall be sentenced to fixed-term imprisonment, criminal detention, or control for not more than three years, and may also be fined; if the circumstances are serious, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and may also be fined.” For the penalty of “imprisonment for not more than three years, criminal detention, or control,” it does not require the act of concealing criminal proceeds to reach the standard of “serious circumstances,” as long as the individual “knows” and assists in concealing or disguising.
In this case, as mentioned earlier, “Yuan was aware of the questionable source of the upstream funds,” thus meeting the subjective element of knowing the criminal proceeds. Yuan’s actions involved the business collecting digital RMB “dirty money” from the upstream party, Yuan cashing out money from the businesses, and providing virtual currency to the upstream party. This can be understood as Yuan providing a service to the overseas criminals by converting digital RMB “dirty money” into virtual currency, facilitating the transfer of “dirty money.” Considering the anonymity and decentralization of virtual currency, Yuan effectively achieved the effect of “concealment” and “disguise” equivalent to concealing, transferring, purchasing, or selling on behalf. Zhang and Kou’s actions were similar to Yuan’s, and it is likely that their statements in the case records confirmed their knowledge of the questionable source of the digital RMB. Based on the above, the court ultimately determined that Yuan and his accomplices committed the crime of concealing criminal proceeds.
2. How would denying “knowledge” affect the case?
If Yuan and his accomplices in this case refused to admit that the upstream funds were illicit, could they still be deemed to have the “knowledge” required for the criminal intent?
Article 1 of the “Interpretation of Several Issues Concerning the Specific Application of Laws in Handling Criminal Cases such as Money Laundering” provides rules regarding the “knowledge” of concealing crimes: Article 1 of the Criminal Law stipulates the “knowledge” as per Articles 191 and 312, which should be determined based on the defendant’s cognitive ability, awareness of others’ criminal proceeds and their gains, the types and amounts of criminal proceeds and their gains, the methods of conversion and transfer of criminal proceeds and gains, and the defendant’s confession and other subjective and objective factors.
If any of the following circumstances exist, the defendant can be deemed to have the “knowledge” of criminal proceeds and their gains, except where there is evidence proving that they genuinely did not know: (1) Knowing that others are engaged in criminal activities and assisting in the conversion or transfer of property; (2) Assisting in the conversion or transfer of property through illegal means without a legitimate reason; (3) Purchasing property at a significantly lower price than the market price without a legitimate reason; (4) Assisting in the conversion or transfer of property and charging significantly higher “fees” without a legitimate reason; (5) Assisting others in depositing large sums of cash into multiple bank accounts or frequently transferring funds between different bank accounts without a legitimate reason; (6) Assisting close relatives or other closely related individuals in converting or transferring property that is significantly inconsistent with their occupation or financial status; (7) Other circumstances that may indicate that the individual is aware.
The actions of Yuan and his accomplices in assisting the upstream party in converting digital RMB into virtual currency and charging high fees align with the fourth scenario specified in the judicial interpretation, enough to establish that the suspects were aware that the digital RMB involved in the case was criminal proceeds and their gains.
Based on this, even if Yuan and his accomplices denied the subjective intent, the judicial authorities could still deem them to have the “knowledge” of concealing criminal proceeds, and they would lose the opportunity for leniency through confession and pleading guilty.
3. Why would the illicit funds be in digital RMB?
Unlike deposits in third-party payment institutions or banks, digital RMB can operate independently for payments through digital wallets. Even without electricity and network access, digital RMB can still be used for transactions. Compared to carrying and counting cumbersome paper currency, digital RMB is more convenient, and compared to bank deposits subject to strict regulations and restrictions, digital RMB is safer. These characteristics lead some criminals to choose digital RMB as a form of receiving illicit funds.
In Conclusion
Although China’s digital RMB utilizes blockchain technology, it does not belong to decentralized virtual currencies. Once a network payment is completed or transferred to a bank account, any abnormal activities in digital RMB will attract attention due to the anti-money laundering mechanism. This was a key factor in the rapid resolution of this case. However, the paper currency features of digital RMB could still make it a primary form of illicit funds for criminals in the future. Balancing the risk management of circulation and users’ disposal rights may be the next challenge for the further development of digital RMB.