11 Arrested for the First Money Laundering Case Using Digital Yuan

  • Richard Marley
  • November 04, 2021
  • 3 minutes read
  • 1381

Chinese security officials have arrested 11 suspects in the first Central Bank Digital Currency (CBDC) money laundering case. 

China’s government agencies may want to review the security measures of Central Bank Digital Currency (CBDC) as Xinmi police together with the Anti-Fraud Center of the Zhengzhou Public Security Bureau arrested 11 criminals as they were suspected to use digital Yuan wallets for laundering money.

China’s local news agency “Jiemian” provided more details on CBDC’s first money laundering case. It stated, “This time, a case of telecommunications network fraud occurred in Xinmi City. Qu received an unfamiliar call saying that the items purchased online had quality problems and planned to compensate him at three times the price. Qu followed the other party’s instructions and was arrested. In the name of ‘identification verification,’ the other party requested multiple transfers, totaling more than 200,000 yuan, and then realized that he had been deceived.”

The activity was carried out by using a telecommunication network in Xinmi city. The Criminal Investigation Brigade of the Public Security Bureau said that numerous payments were made to one specified digital wallet. 

Based on the Xinmi Police investigation, the government agencies alleged the criminal group used the digital Yuan to launder money by routing the capital to a cross-border scammer group located in Cambodia. According to the law enforcement authorities, the fraudsters sought to manipulate the CBDC digital wallets to overcome the risk of getting caught.

Even though trading cryptocurrency is banned by the Chinese government, the digital Yuan is usable across several Chinese cities. Till Oct. 2021, around 140 million Chinese locals had signed up on digital Yuan wallets.

Instead of using blockchain technology, the currency depends on virtual signatures and storage encryption for digital transaction security and to restrict double-spending. As digital Yuan can be traded privately, it has a high potential for financial crimes.

China’s Central Bank has frequently communicated concerns regarding the use of digital currency and stablecoins for illegitimate financial activities like money laundering. Back in June 2021, the country’s security agencies arrested more than 1,100 criminals on suspicion of laundering digital currencies.

Moreover, China’s law-enforcing authorities have to comprehensively analyze the flow of digital Yuan using data analytics. This will eventually limit the risk of money laundering cases.

Suggested read: China Strides Forwards with New KYC Rules to Rein Money laundering