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From small and medium-sized traders to Bitcoin miners, the number of cases of freezing bank accounts and Alipay accounts at the end of the year and the beginning of the next year continues to rise. Whether for payees or payers, anti-money laundering risks must be taken seriously.
"Foreign customers will also use agent accounts when remitting money, but if there are problems with the account, such as involvement in gray funds (underground banks, etc.), our bank cards will be frozen. This requires us to send all the information to the judicial authority that froze the account to explain the situation. Only after the explanation is clear can we seek to unfreeze the account. This is also a common problem faced by Yiwu traders." Chen Wenting, general manager of Yiwu Yingjia Trading Co., Ltd. in Zhejiang Province, told Caixin.
In addition to export traders from Yiwu, a "trade paradise", cryptocurrency investors who withdraw cash through OTC (over-the-counter transactions) are also troubled by this. "I originally wanted to sell a bitcoin to exchange for cash for emergency use, but there may be problems with the account that the other party used to transfer money to me. My bank card account was frozen at the beginning of the year. So now I can only watch the bitcoin rise, but I can't exchange it for money." Xiao Gu (pseudonym), a bitcoin "miner", lamented to the reporter of Yicai.
According to the information published on the official website of the People's Bank of China, in 2020, the central bank and its branches imposed anti-money laundering administrative penalties on 417 anti-money laundering obligated institutions and relevant responsible persons, with a total of 733 fines and a total fine amount of about 628 million yuan. The total amount of fines in 2020 was about three times that of 2019. According to the annual statistics of the Anti-Money Laundering Bureau of the Central Bank on the supervision and management of anti-money laundering, this data is the highest in recent years. The risk of anti-money laundering in cross-border trade is rising <br />The importance of anti-money laundering in cross-border trade has become increasingly prominent. Since the second half of 2020, the number of freezing cases has soared. On the one hand, anti-money laundering measures have become stricter, and on the other hand, 2020 is a big year for China's exports. Under the epidemic, the world is more dependent on China's supply chain.
According to data released by the General Administration of Customs, China's exports increased by 18.1% year-on-year in December 2020. In 2020, the total value of China's import and export of goods was 32.16 trillion yuan, an increase of 1.9% over 2019. The scale of foreign trade has hit a new historical high.
Recently, the reporter found that the Yiwu Municipal Bureau of Commerce specially issued a "Notice to Foreign Investors", mentioning that many bank accounts of merchants in the Yiwu market have been frozen by public security organs recently. The main reason is that overseas buyers used high-risk payment methods, resulting in the payment of goods being mixed with the stolen money of criminals, thereby freezing the bank accounts of the receiving merchants.
To this end, the Yiwu Municipal Bureau of Commerce recommends that Yiwu traders should inform those who pay for goods to pay the foreign exchange directly to foreign trade companies or market merchants through banks, rather than paying in RMB through unfamiliar accounts in China. This payment method is very likely to be mixed with stolen money by criminals, resulting in the confiscation of the payment by the government.
In addition to problems with remittance accounts, traders themselves often lack compliance awareness. Deng Guobiao, founder and CEO of XTransfer, a cross-border financial services company that serves many small and medium-sized trading companies, told the First Financial reporter that for traders, compliance is currently a risk that needs more attention than exchange rate fluctuations.
The reason why many Yiwu traders' accounts were frozen is that many of them were caused by international fraudsters who, under the guise of looking for Chinese agents, promised generous commissions and specifically looked for foreign trade companies with US dollar payment accounts, taking the opportunity to "launder money."
Small and medium-sized enterprises occupy an increasing share of foreign trade orders, but they face huge challenges in cross-border risk control of funds. Therefore, big data and AI technology have played a key role in risk control and anti-money laundering work. Among the various cases that Deng Guobiao has come into contact with, there is one that is very typical. He told the reporter from China Business News that he had previously received a report from the owner of another foreign trade company that a "scammer" had sent him an "inquiry" email through a platform. The email roughly said, "Under the epidemic, it is inconvenient to collect trade payments from a certain country. I hope you can help collect the payments on my behalf. He is willing to pay a 5% commission for this." However, remittances that usually involve commissions are risky, so it is necessary to invest more energy in risk control infrastructure and anti-money laundering and anti-terrorist financing mechanisms.
Because of the huge risk of anti-money laundering, Deng Guobiao said that ordinary banks are unable to do a good job of anti-money laundering risk control for small and medium-sized export enterprises, and it is difficult for small and medium-sized enterprises to open bank accounts. At present, for platforms that can provide relevant services, doing a good job of risk control is the top priority. Bitcoin OTC trading cash withdrawals encounter risks <br />It is not just traders who have had their accounts frozen recently. Since the spring and summer of last year, the prices of crypto assets such as Bitcoin have soared due to the flood of global liquidity. As of January 15, Bitcoin once again exceeded $40,000. Many Bitcoin investors and miners who have experienced big ups and downs hope to cash out some of their Bitcoin to prevent potential future plunges.
However, this process is also "heart-wrenching at every step".
According to the reporter from China Business News, some trading platforms could previously transfer funds to Chinese bank cards or Alipay, but after stricter supervision, there are currently only two main trading methods - selling cryptocurrencies such as Bitcoin and exchanging them for USDT (Tether, a stablecoin pegged to the US dollar), storing them on the trading platform, or exchanging them for cash such as RMB through OTC (over-the-counter trading).
But it is not easy to withdraw cash through OTC. "Some platforms also support OTC, that is, sellers place orders to sell Bitcoin on the OTC platform, and buyers pay by bank card or Alipay transfer. Then the seller transfers the Bitcoin to the buyer's digital currency wallet, but many accounts are frequently frozen," Xiao Gu told the reporter of China Business Network. "My two bank cards were frozen at the beginning of the year. The reason may be that the account for the money transfer has anti-money laundering risks. Once there is a problem with an OTC trader familiar to miners, we can easily be involved."
Another investor also had such an experience. "Not long ago, I used a bank card to buy cryptocurrency on a mainstream encryption platform. When I went to the bank to handle the business in November last year, the counter staff told me that the bank card was frozen because it was suspected of money laundering." He told reporters that the card is still unusable. The bank explained that the card was frozen by the police and needed to wait for notification.
In fact, as early as October 2019, the Alipay Security Center’s Weibo account announced that it is forbidden to use Alipay for virtual currency transactions. If a transaction involves Bitcoin or other virtual currency transactions, Alipay will immediately stop the relevant payment service. Merchants involved in virtual currency transactions will be resolutely cleared; for personal accounts suspected of virtual currency transactions, measures such as limiting the account’s payment function or even permanently restricting payment will be taken according to the circumstances.
The dilemma Xiao Gu faces is actually a microcosm of the current "cryptocurrency circle". He ordered 50 mining machines in the first half of 2019 and hosted them in a Sichuan mining farm. In the current wave of Bitcoin price increases, the 50 mining machines earn him more than 100,000 yuan in revenue every month, but how to cash it out? For many miners, the problem is that the appreciation of Bitcoin in their accounts may only stay in their accounts forever. Compliance is still a prerequisite for preventing account freezing <br />OTC transactions of cryptocurrencies are themselves in a "gray area" in China, but for areas such as cross-border trade, there are ways to prevent account freezing, and compliance is still a major prerequisite.
Pre-risk control of cross-border payment institutions is very important. "On average, we reject 15 to 20 out of 100 customers who apply for services each month." Deng Guobiao gave an example, saying that first, we need to verify the identity of the customer and whether they are really engaged in foreign trade of goods. If the customer knows nothing about the foreign trade industry they are engaged in, then there is a high probability that they are engaged in money laundering; second, we need to check whether they have a criminal record in China to understand their integrity; third, we need to verify the "three flows" (information flow, logistics flow, cash flow) information of each fund through the transaction system and cross-verify it.
For example, a company in Dongguan, China, that sells production line molds, ships the goods to London through the Shenzhen port and sells them to the British at a unit price of $20,000, and the British buyer pays through an Irish bank account. Each noun here is very critical. If the mold is produced in Shaanxi, but there is no such production base in Shaanxi; or the unit price suddenly soars to $100,000; or the money is transferred from a German account... Any change may be suspected of money laundering. The payment institution will call the risk control engine in an intelligent way, and combine offline employees to intervene in the investigation to verify. For traders, preventing account freezing also requires compliance. Chen Wenting, who has been engaged in cross-border trade for many years, summed up her own experience. She told China Business News that traders can register a company in China and use the company account to collect payments, which is the best way to prevent the account from being frozen. This means having a formal company and formal shipping documents, and conducting international trade in accordance with national laws and regulations. In addition, you can also register an offshore company and open an account in the country, which is similar to the first method, and the cost will be relatively lower, but it also needs to be compliant and legal. The third method is to open some electronic payment platforms such as Xtransfer, Western Union, and Paypal to collect payments, which is mainly suitable for cross-border e-commerce collection.
Of course, opening a letter of credit is also a good idea. A letter of credit is a written document issued by a bank to an exporter (seller) at the request of an importer (buyer) to guarantee the responsibility of paying for goods. Therefore, it is the bank that ultimately pays the exporter, and there is no anti-money laundering risk involved. But Chen Wenting believes that the problem is that in international trade, letters of credit are still more suitable for large customers, but more than 70% of domestic traders are small and medium-sized merchants. However, for traders who meet the requirements, they should still be encouraged to use letters of credit to trade with customers, and at the same time make good use of the services of China Export Credit Insurance, conduct customer credit investigations, and minimize the risk of international trade. (Yicai Global) |
