This article is reprinted with permission from Mankun Blockchain Legal Services, author: Lawyer Zhang Yonghai, copyright belongs to the original author.

Recently, we have noticed that many clients are inquiring about the same question: According to the latest legal provisions, the act of a perpetrator laundering their own criminal proceeds, known as "self-money laundering," now constitutes an independent money laundering crime. Previously, we often said "no punishment after the fact," meaning that if a criminal took the illicit funds and hid or spent them, it was considered a "natural continuation" of the upstream crime and should not be separately charged as a money laundering crime.

However, with the introduction of the "Criminal Law Amendment (XI)" and the latest judicial interpretation (2024 judicial interpretation), this old rule has been completely overturned. Now, if a suspect handles their own criminal proceeds, under specific circumstances, it may also constitute an independent "money laundering crime." This means that after being charged with the upstream crime (such as financial fraud), they will also be charged with a money laundering crime, and both charges will be punished cumulatively.

In judicial practice, distinguishing "self-money laundering" from the "natural continuation" of upstream crimes has always been a key and challenging point in defense.

In simple terms, if a user merely holds or conceals illicit funds or uses them for general living expenses, it is usually regarded as a "natural continuation" of the upstream crime and does not yet constitute a money laundering crime; however, once their disposal actions "exceed the natural scope of the upstream crime" and "violate new legal interests"—mainly the national financial management order and the judicial authorities' recovery efforts—they may be recognized as committing a money laundering crime.

The core judgment point for constituting "self-money laundering" lies in whether the perpetrator has the subjective intent to "conceal or hide" the criminal proceeds and their source. For example, actions such as transferring illicit funds to relatives' accounts, engaging in complex transactions using virtual assets, exchanging currency through underground banks, or transferring to accounts of companies with no substantial connection, pose a higher risk; whereas depositing illicit funds into a personal fixed-term account, using them only for daily consumption, or directly transferring between one's different bank cards generally poses a lower risk.

It is worth noting that with the increasingly stringent legal provisions, both individuals and enterprises currently face unprecedented criminal risks, necessitating an enhancement of legal awareness and a careful clarification of behavioral boundaries.

For enterprises

To avoid being involved in the risks of "being used for money laundering" or actively "laundering money," the first priority is to establish compliance awareness and prepare in advance. Enterprises should comprehensively build an anti-money laundering internal control culture from management to grassroots employees, improve internal policies and processes, and strengthen due diligence on customer identities, ensuring that services are not provided to individuals with unknown identities or using pseudonyms, while implementing enhanced management measures for high-risk customers and transactions.

For high-risk businesses such as virtual assets, third-party payments, and large cross-border transactions, it is essential to establish a professional monitoring mechanism to promptly identify and report abnormal transaction behaviors; once suspicious situations such as short-term large or high-frequency transactions are detected in accounts, immediate investigation and restriction measures should be taken, and regulatory authorities should be proactively informed.

For individuals

The core of avoiding the "self-money laundering" trap lies in not engaging with funds of unknown origin, ensuring that the handling of funds is natural and reasonable, including never using others' accounts for transactions, avoiding transaction behaviors that are significantly inconsistent with one's income and consumption habits, and being cautious with cash to prevent concealing the flow of funds through dispersed deposits or frequent transfers.

If unfortunately accused of "self-money laundering," the choice of defense strategy should revolve around the two key points of "independent legal interest infringement" and "subjective intent," for example: arguing that the handling of funds did not substantially hinder the state's recovery of illicit funds or infringe upon financial order, and should only be regarded as a natural continuation of the upstream crime, thus not warranting separate charges; providing reasonable justifications to refute the intent to "conceal or hide," or proving that the perpetrator lacked knowledge of the illegal nature of the funds; also invoking the "principle of proportionality between crime and punishment," emphasizing that if the money laundering behavior is closely related to the upstream crime and is of minor circumstances, it should be treated as an aggravating circumstance of the upstream crime to reflect the principle of criminal law restraint, aiming for a reduction in the overall sentence.

The importance of this new regulation lies in its three fundamental transformations:

First, the intensity of the crackdown has been unprecedentedly enhanced, fundamentally changing the previous notion of "heavy on upstream crimes, light on subsequent money laundering," achieving "double punishment" through the independent crime of "self-money laundering," greatly enhancing the deterrent effect of the law;

Second, there has been a profound change in law enforcement strategies, with the Supreme People's Procuratorate implementing the "dual investigation" mechanism, requiring that money laundering clues must be simultaneously examined when handling upstream cases, directly driving an explosive growth in the number of money laundering prosecutions, with the number of prosecutions in 2023 surging to nearly 20 times that of 2019;

Finally, this marks China's full alignment with international standards in the field of anti-money laundering, with the independent criminalization of "self-money laundering" not only being a necessary requirement for fulfilling international obligations but also a core measure for actively safeguarding national financial security and integrating into the global governance system.

The criminalization of "self-money laundering" is an irreversible legal trend, and both individuals and enterprises must remain vigilant. For lawyers, this is one of the main battlefields for future criminal defense, and it is essential to deeply understand the judicial boundaries of "independent legal interest infringement" in order to secure the maximum legal rights for clients in the face of dual charges.

Related Reading: Opinion: Compliance should not come at the cost of sacrificing privacy

Original article: “Web3 Compliance Research Group | Understanding the Risks and Countermeasures of Self-Money Laundering Criminal Offenses”

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