Author: Xiao Sa Team

Digital RMB is a new form of legal tender in our country, with the dual advantages of legal tender and electronic payment tools. However, in recent days, the Zhejiang Supervision Bureau released "Using digital RMB accounts to cash out more than 200,000 yuan in four days, sentenced!" revealing a criminal case in which the perpetrator used digital RMB to conceal and disguise the proceeds of overseas fraud. This article will analyze the criminal legal risks that digital RMB transactions may involve based on this case, for the reference of readers.

Case Summary

At the end of August 2023, Yuan learned about the channel for cashing out profits from digital RMB through a part-time advertisement, as long as he found a merchant with digital RMB to cash out, he could receive an 8‰ commission from the upstream for the cash-out amount.

Yuan lured merchants with digital RMB accounts through shopping and chatting, and after the merchants agreed to cash out, he first converted a certain amount of his own money into virtual currency as a deposit to give to the upstream, then sent the digital RMB receipt code to the upstream. After the upstream's fraudulent funds entered the merchant's digital RMB account, the merchant deducted a 1% to 1.5% handling fee and cashed out the corresponding amount of cash.

In the process, the amount Yuan cashed out would be higher than the amount given to the upstream, and this price difference was the commission given to Yuan by the upstream. The cash obtained would be used as a deposit for the next cash-out.

In order to make more money, although Yuan realized that the source of the upstream's money was unclear, he could not resist the temptation of profit, so he brought his girlfriend Zhang and friend Kou along, promising them a 50 yuan benefit for each 10,000 yuan cash-out, in order to make a profit from the price difference. Since there were not many stores supporting digital RMB payments, it was easy to be discovered after multiple operations. In order to evade the investigation and crackdown by the public security organs, Yuan and others used obscure overseas chat tools to contact the upstream, and from early September, they moved around Shaoxing, Jinhua, Hangzhou, Jiaxing, and other places. After successfully cashing out, they would drive a motor vehicle to a new location to convert the upstream's fraudulent funds from "black" to "white".

A few days later, the public security organs received a report, and found that the funds in the digital RMB accounts of many merchants in the jurisdiction were abnormally flowing. They quickly identified the suspects Yuan and others, and arrested them. In just four days, the suspects Yuan and others cashed out more than 200,000 yuan in Shaoxing.

Recently, the Procuratorate of Yuecheng District filed a public prosecution, and the court sentenced Yuan, Zhang, and Kou to imprisonment ranging from one year and four months to seven months, and imposed fines.

Case Analysis

1. Why does cashing out constitute the crime of concealing criminal proceeds?

Article 312 of the Criminal Law provides for the crime of concealing and disguising criminal proceeds: "Whoever knows that it is the proceeds of a crime and its income and conceals, transfers, purchases, sells on behalf of others, or conceals and disguises it in other ways shall be sentenced to fixed-term imprisonment, criminal detention, or control of not more than three years, and shall also be fined; if the circumstances are serious, they shall be sentenced to fixed-term imprisonment of not less than three years and not more than seven years, and shall also be fined."

For the punishment of "fixed-term imprisonment, criminal detention, or control of not more than three years," it does not require the act of concealing and disguising criminal proceeds to meet the standard of "serious circumstances," as long as it is "knowingly the proceeds of a crime" and assists in concealing and disguising it.

Returning to this case, the previous factual description pointed out that "Yuan, although aware that the source of the upstream's money was unclear," so Yuan meets the subjective constituent elements of "knowingly" concealing and disguising criminal proceeds. At the same time, Yuan's behavior is to have the merchant collect "dirty money" in digital RMB from the upstream, and then cash out the corresponding amount of cash for himself, and provide virtual currency to the upstream. This can be understood as Yuan providing a service to the overseas criminals to convert digital RMB "dirty money" into virtual currency, achieving the effect of "concealment and disguise" equivalent to concealing, transferring, purchasing, and selling on behalf of others. The concealment and disguise behavior pattern of Zhang and Kou in the same case is the same as Yuan's. The author speculates that the records of the suspects can confirm their knowledge of the unclear source of the digital RMB and the possibility that it belongs to dirty money. Based on the foregoing, the court finally determined that Yuan and others constituted the crime of concealing and disguising criminal proceeds.

2. What if they refuse to admit "knowingly"?

If Yuan and his co-defendants in this case refuse to promise that the source of the upstream funds is not legitimate, can it be determined that they have the "knowingly" criminal intent?

Article 1 of the "Interpretation of Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases Involving Money Laundering" provides for the determination of "knowingly" in the crime of concealing and disguising: The "knowingly" provided for in Articles 191 and 312 of the Criminal Law shall be determined in combination with the defendant's cognitive ability, the situation of contacting the criminal proceeds and their income, the types and amounts of the criminal proceeds and their income, the methods of conversion and transfer of the criminal proceeds and their income, and the defendant's statements and other subjective and objective factors.

If one of the following circumstances exists, it can be determined that the defendant knows that it is the proceeds of a crime and its income, except where there is evidence to prove that they really do 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 price significantly below the market without a legitimate reason; (4) Assisting in the conversion or transfer of property and charging a "handling fee" significantly higher than the market without a legitimate reason; (5) Assisting others in depositing large amounts of cash in multiple bank accounts or frequently transferring between different bank accounts without a legitimate reason; (6) Assisting close relatives or other closely related persons in converting or transferring property that is significantly inconsistent with their professional or financial status; (7) Other circumstances that can be determined that the person knows.

The practice of Yuan and others in this case to assist the upstream in converting digital RMB into virtual currency and charging a high handling fee conforms to the fourth situation stipulated in the judicial interpretation, which is sufficient to determine that the suspects in this case know that the digital RMB involved in the case is the proceeds of a crime and its income.

Based on this, we believe that even if Yuan and others in this case refuse to admit their subjective intent, the judicial authorities can still determine that they have the "knowingly" intent to conceal and disguise criminal proceeds, and Yuan and others will lose the opportunity for leniency and mitigated punishment due to confession and leniency.

3. Why is the dirty money in digital RMB?

Different from deposits in third-party payment institutions or banks, digital RMB can operate independently for payment through digital wallets. Even without electricity and network, digital RMB can still be used for payment. Compared to the inconvenience of carrying and measuring paper money, digital RMB is more convenient, and compared to bank deposits that are strictly regulated and restricted, digital RMB is safer. The aforementioned characteristics make some criminals choose to receive dirty money in the form of digital RMB.

Conclusion

Although China's digital RMB uses blockchain technology, it does not belong to decentralized virtual currency. Once completed, online payments or transfers to bank accounts will attract the attention of the anti-money laundering mechanism for digital RMB privacy, which is also the reason for the rapid solution of this case. However, the paper money characteristics of digital RMB may still make it the main form of dirty money for criminals in the near future. How to balance the risk supervision of circulation and the property disposal rights of users may be the next test for the further development of digital RMB.

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