China’s Supreme People’s Court (SPC) and Supreme People’s Procuratorate (SPP) have stepped up efforts to clamp down on illegal foreign exchange (forex) trade by clarifying tougher restrictions and announcing stricter punishments.
Any illegal forex trade involving more than 5 million yuan ($741,600) or yielding profits of more than 100,000 yuan should be classified as a severe violation, according to a new regulation of the SPC and SPP that took effect on February 1.
Such crimes could mean a fine equal to one to five times the illegal income, and in addition a sentence of imprisonment of not more than five years. Cases involving particularly severe violations could mean a jail term of more than five years, with a fine between one time and five times the illegal income or confiscation of property, according to China’s Criminal Law.
The latest move in China’s continued crackdown on money laundering and illegal financing has clarified the rules on illegal forex trade. This will mean a tougher crackdown on such behavior, and it will help maintain financial market order and national financial security, according to analysts.
As internet finance has developed rapidly in recent years, the payment and settlement means have undergone great changes. Controversies have been raised in the judicial practice for the identification of illegal operations, said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.
According to Xinhua News Agency, public security crackdown more than 380 underground banks cases that involved more than 900 billion yuan in 2016. But in the first 11 month of 2018, only 70 underground banks got public security crackdown with the help of State Administration of Foreign Exchange system, involving more than 100 billion yuan, according to the China Forex Magazine.
With the crackdown on forex violations going from strength to strength, the prudential management of cross-border capital flows and the regulatory framework of the foreign exchange market have been improved, and the space of underground banks has been further squeezed.
Unlawful behavior and evasion of supervision will be difficult to hide, said Liu Jiahui, a lawyer at Beijing Derun Law Firm.
Underground banks have become the main channels for money laundering and the illegal transfer of funds.
These banks not only involve crimes in the economic field, but also increasingly become channels for the money transfers linked to telecommunications fraud and online gambling. This has disrupted financial market order and jeopardized the country’s financial security and social stability, the SPP said in the announcement.
The principle of punishment for business crimes and money laundering or the crime of helping terrorist activities is clarified in the new regulation. It highlights the attitude and determination of China, the announcement said.
Newspaper headline: Nation starts to rein in illegal currency trading