Professor of China Finance and Economics writes a long article criticizing the current situation of card freezing and its deviation from the rule of law. How should it be improved?

In recent years, some suspects of telecommunications fraud and gambling at home and abroad have used bank cards to transfer huge amounts of money and commit crimes, which has attracted great attention from the public security department. According to the People's Daily, since 2020, a total of 155,000 telecommunications network fraud cases have been cracked nationwide, and more than 100 billion yuan of funds involved in the cases have been successfully stopped and frozen. At the same time, a reporter from Southern Metropolis Daily learned that Huizhou City, Guangdong Province, successfully cracked down on a cross-border online gambling and illegal criminal gang that used USDT (a stable currency based on blockchain technology that claims to be 1:1 convertible with the US dollar).

In the same year, the Ministry of Public Security passed the "Decision of the Ministry of Public Security on Amending the Procedures for Public Security Organs to Handle Criminal Cases", which amended the original 16 articles and expanded the jurisdiction of public security organs over crimes that are directed against or primarily committed using computer networks.

While illegal and criminal acts have been severely cracked down and the rights of victims have been protected, the legitimate exercise of property rights by some well-intentioned bank card holders has been restricted or affected. For example, when some merchants sell goods online and collect legal tender from the purchaser, their bank cards are frozen by the public security department due to problems with the legality of the source of the legal tender received by the bank card. This may last for as short as three or four days or as long as more than half a year, which has an impact on their transactions and even their normal lives. Unfortunately, the academic community has paid little attention to this issue, and the corresponding research is lacking. This article will analyze the legal issues existing in the judicial freezing of bank cards and explore ways to solve the problem from the perspective of the rule of law.

I. Main Problems with Judicial Freezing of Bank Cards

First, the freezing procedure is simple and the process is not prudent enough. When handling relevant cases, some grassroots public security organs capture all relevant bank cards on the account path in the system at one time and freeze them in batches. In the absence of specific law enforcement targets, the one-size-fits-all approach of "better to kill a thousand by mistake than to let one go" is adopted without considering the impact of freezing bank cards on all cardholders. The law enforcement is simple and rough, the scope of authority to freeze bank cards is decentralized to a large extent, and the corresponding initiation process is not prudent. In addition, there are unreasonable aspects in the freezing scope. In practice, only part of the amount of transactions on frozen bank cards are related to the property involved in the case, but some public security organs directly freeze all the balances of bank cards without necessity when enforcing the law, which affects the normal use of bank cards by cardholders and is suspected of infringing on their exercise of property rights.

Second, it is difficult to unfreeze and the channels for relief are limited. The judicial freezing of bank cards can be as short as a few days or as long as several years. The time and cost for some cardholders to unfreeze their bank cards sometimes even exceed the amount of money in the frozen card. For example, it is necessary to explain the situation to the local public security department where the bank card is frozen. If the public security agency has "long-arm jurisdiction" across cities or provinces, the process of the party trying to unfreeze the bank card will be more difficult and costly. Corresponding to this is the lack of channels and means for citizens to obtain relief. First, after discovering that their bank cards have been frozen, ordinary people need to spend a lot of time and energy to understand the situation from banks and public security agencies, but even so, it is difficult to obtain comprehensive and effective information. The case-handling agency usually refuses to disclose details on the grounds that "the case is under investigation and it is not convenient to disclose information", while the right of the parties to know is difficult to be guaranteed. Secondly, due to the above reasons and the limitations of current laws, cardholders lack corresponding administrative reconsideration procedures or litigation procedures to seek relief from higher-level agencies or judicial organs.

Third, the freezing process is initiated without regard to procedures, and the rights and responsibilities are unclear. The initiating authority of judicial freezing of bank cards has a large degree of discretion, lacks external constraints, and the pre-procedure is in name only. The judicial freezing process is simple, forming a "one-size-fits-all" model that only pursues "efficiency" and ignores fairness. There are many subjects involved in judicial freezing, including public security organs, procuratorates, judicial organs, and financial institutions such as banks. The boundaries of rights and responsibilities are not clear, and there may even be overlaps and confusion, which complicates the accountability of the freezing process and lacks effective constraints. In the process of seeking relief measures such as unfreezing, the financial institutions that cardholders can often directly face are only assisting entities that only fulfill the obligation to inform, and even the financial institutions themselves have no provisions for defense and objection rights.

II. The deviation of judicial freezing of bank cards from the rule of law

my country's Criminal Procedure Law, Administrative Procedure Law, Administrative Penalty Law and other laws and regulations have given public authorities the power to freeze citizens' property. For example, Article 144 of the Criminal Procedure Law stipulates that public security organs can freeze the property of criminal suspects according to the needs of investigating crimes. At the same time, departmental regulations such as the "Regulations on the Application of Seizure and Freezing Measures by Public Security Organs in Handling Criminal Cases" and the "Regulations on Banking Financial Institutions Assisting the People's Procuratorate, Public Security Organs and State Security Organs in Inquiry and Freezing" (hereinafter referred to as the "Regulations on Banking Financial Institutions Assisting in Inquiry and Freezing") also provide detailed provisions on the assistance obligations of financial institutions. There are many provisions in laws and regulations on freezing procedures, but in fact, as the right holder of frozen property, the current law provides broad and vague protection for cardholders.

First, there is controversy over the legal status of the cardholder in the judicial freezing of bank cards. Whether they are regarded as interested parties of the property involved or just outsiders is related to the basis of the cardholder's claim when seeking judicial relief, whether it is to appeal to the administrative agency, administrative review or accusation, or to conduct litigation procedures through the court. As the "imperial principle" in public law, the principle of proportionality is a principle that must be followed in the exercise of public power. If the judicial freezing of bank cards violates the principle of necessity in the principle of proportionality, that is, the means adopted are necessary and the damage is minimal, then the cardholder whose property rights are restricted or violated actually becomes an indirect victim of criminal activities such as fraud, money laundering or gambling. The unclear legal status also makes the initiation and termination of the freezing procedure ignore the interests of the cardholder, thereby increasing the difficulty of the cardholder's rights protection.

Second, the rights of good-faith cardholders are not fairly protected. The Criminal Procedure Law, the People's Procuratorate Criminal Procedure Rules and other laws and regulations have repeatedly mentioned that "property not related to the case shall not be frozen" in the freezing procedures. From the perspective of system interpretation, if the definition of property involved in the case is based on Article 2 of the "Regulations on the Application of Seizure and Freezing Measures by Public Security Organs in Handling Criminal Cases", can the funds that the criminal suspect has transferred to the account of the good-faith cardholder in normal transactions with the cardholder still be regarded as "proceeds of crime and interest" in the first item of the definition of property involved in the case, or can it be regarded as "other property that can prove whether the crime has occurred and the severity of the crime" in the third item? If none of the above belongs to it, can it be identified as property unrelated to the case? In practice, the public security organs trace the source for the purpose of combating illegal crimes and helping victims to stop losses in time. As long as part of the transaction amount in the bank card involves stolen money, the bank card can be frozen. However, transactions between bona fide cardholders and criminal suspects are not within the same legal relationship as crimes such as fraud and money laundering. If the funds are arbitrarily frozen simply because their source is related to the case, or if funds in the bank card other than the amount involved in the case are frozen, although it will help compensate the victim's losses, it will be unfair to the cardholder who conducted the transaction in good faith.

Third, the right to know is one of the manifestations of the property rights enjoyed by bank card holders, and the corresponding rights are not adequately protected. Protecting citizens' right to know is a basic requirement of the principle of due process. For example, Article 44 of the Administrative Penalty Law stipulates that administrative organs shall inform the parties of the content, facts, reasons and basis of the proposed administrative penalty, and shall also inform the parties of their rights to make statements and defenses in accordance with the law. However, in the judicial freezing of bank cards, the cardholder's right to know is generally difficult to be guaranteed due to factors such as preventing funds from being transferred and the case being investigated. Article 25 of the "Regulations on the Application of Seizure and Freezing Measures in Criminal Cases by Public Security Organs" stipulates that after the relevant units have completed the freezing procedures, they can inform the parties when they inquire. Article 25 of the "Regulations on the Assistance of Banking Financial Institutions in Inquiry into Freezing" stipulates that after assisting public authorities in completing the freezing procedures, banks should inform the parties when they inquire. Regardless of whether the above provisions are "may" or "should", the right to know can only be exercised after the freezing procedures are completed, and the parties need to actively inquire with the financial institutions. The regulations do not specify in detail under what circumstances the public security organs "may" inform or not inform. Only Article 103 of the Civil Procedure Law stipulates that the person whose property is frozen should be notified. In practice, many cardholders only know that their bank cards have been judicially frozen when they encounter obstacles in exercising their property rights, and the scope of being informed is also very limited for the purpose of confidentiality of public security agencies. This shows that the current laws and regulations do not adequately protect citizens' property rights.

Fourth, Article 56 of the Administrative Litigation Law stipulates that the execution of administrative actions shall not be suspended during the litigation, that is, the administrative counterpart must first obey the actions of the executive agency before asserting his rights. Similarly, the role played by financial institutions in the judicial freezing of bank cards is similar to that of auxiliary agencies. When they disagree with the public authority, they need to first handle the freezing and then ask the legal department of the banking regulatory authority to coordinate and resolve the issue. Cardholders and assisting agencies cannot exercise the right to defense during the entire freezing process. The current relevant laws and regulations mainly consider the convenience and efficiency of judicial organs in executing freezing procedures, but do not fully respect the rights and obligations of cardholders and financial institutions as participating entities. This reflects to a certain extent that financial institutions as auxiliary agencies are actually regarded as having a status similar to that of state agencies, but this status is only reflected in the assumption of obligations, and there is no clear conclusion on whether they have rights such as the right to object. In practice, it is inevitable that individual public security organs will act arbitrarily and ultimately infringe on the rights of good-faith cardholders.

Fifth, the current laws of my country on the power of investigation are not limited to public security organs. To a certain extent, other administrative organs, procuratorates, judicial organs, and supervisory organs are granted the power of investigation and the corresponding power to freeze property for similar cases, and the emphasis is placed on the punishment power of relevant departments when they fail to perform their assistance obligations. However, the provisions on the review and supervision of improper exercise of power to infringe the rights and interests of the parties are relatively broad. Article 33 of the "Regulations on the Application of Seizure and Freezing Measures by Public Security Organs in Handling Criminal Cases" stipulates that there are many accounts involved in the case, and the accounts involved are opened in different provinces, autonomous regions, and municipalities directly under the Central Government. In the case of centralized freezing, the freezing needs to be "reviewed by the head of the public security organ, reported to the Ministry of Public Security step by step, and approved in accordance with the prescribed procedures." However, it is still unclear how the "head of the public security organ" should be identified, whether the review standard is a formal review or a substantive review, and whether the procedures followed are clearly stipulated in the corresponding laws and regulations. In practice, it may depend on the discretion of the public security organs, which reflects the lack of an effective judicial review mechanism in the judicial freezing of bank cards.

The above-mentioned problems in judicial freezing of bank cards are fundamentally caused by the possible infringement of citizens' property rights in the process of exercising public power, which in turn affects citizens' production and life. In the course of the development of democracy and the rule of law, property rights have always been an important part of human rights protection, and are generally regulated at the constitutional level. my country stipulates in Article 13 of the Constitution: "The lawful private property of citizens shall not be infringed. The state shall protect citizens' private property rights in accordance with the law..." Those who have constant property have constant heart. The protection of citizens' property rights helps to encourage people to work and invest in the process of market economic development to create more social wealth. Corresponding to this is the public power supported by state coercive force. In the construction of a country ruled by law, in order to realize the state's criminal power, the state prosecution agency has a legitimate basis for taking measures to restrict or interfere with the property rights of the person being prosecuted, but there is a boundary between the realization of state functions and the protection of citizens' property rights. When the judicial freezing of bank cards has an adverse impact on the exercise of property rights by non-parties, the exercise of public power will exceed reasonable limits. Therefore, it is necessary to improve the problems in the judicial freezing system of bank cards under the perspective of the rule of law.

III. Legal Path to Judicial Freezing of Bank Cards

First, promote the application of the principle of proportionality. From the perspective of achieving justice, the recovery of illegal proceeds combats crime and protects the rights and interests of victims. At the same time, the property rights of bona fide cardholders should also be guaranteed; in terms of formal justice, public authorities have a legal basis for freezing bank card accounts, but the frozen person should have the most basic right to know. In the context of good laws and good governance, the principle of proportionality is elevated to a constitutional provision, providing a guiding principle for the exercise of state power, prompting public authorities to exercise power prudently, broadening the rights and remedies for bona fide cardholders, and making judicial relief more operational. The restriction of public power on citizens' property rights should be limited to the extent that it is necessary. Public power that loses legal control will only deviate from the path of the rule of law, and the people who lose confidence in public power will eventually resort to other means and cause social instability. As a concept introduced from abroad, the principle of proportionality still needs to be further improved on the basis of combining China's actual national conditions. For example, the principle of minimum infringement can be applied to determine whether the judicial freezing of bank cards complies with the principle of proportionality. At the same time, the legal status of the cardholder during the freezing process should also be clarified, which is related to how or whether his or her right to relief can be realized.

Second, implement the principle of procedural justice. The order established by the law makes social life predictable, which is the value embodiment of order as the rule of law principle. The order established by the law allows each subject to have an expected scope for the consequences of their actions, so that they can move and communicate freely. The exercise of public power must also follow order. If there is dereliction of duty, malfeasance, or behavior beyond authority, it is a break in predictability, which not only damages the public's trust in public power, but also erodes the authority of the rule of law. Therefore, the premise for public authorities to intervene in citizens' property rights is to obtain legal authorization and administer according to law. A unified standard should be issued for the disposal procedures of the property involved in the case, which actually provides a legitimate basis for the behavior of public authorities while limiting the abuse of public power. In addition, the right to know of the parties should also be protected, the openness and participation of the freezing procedure should be increased, and channels for the parties to obtain relevant information in a timely manner should be provided, and their corresponding right to participate should be granted, such as actively informing the parties and listening to their opinions. When judicial freezing of bank cards is indeed necessary and the infringement on the cardholder is minimal, the frozen person should be informed of the situation and reasons for the freezing in a timely manner, and the ways to obtain relief should be informed.

Third, establish a judicial review system. Property rights are one of the most important basic rights of human beings and one of the fundamental guarantees of human value and dignity. The internal self-examination of public authorities is limited in efficiency and effectiveness, and may often fail to realize or ignore the problems in the law enforcement process. Establishing a judicial review system in the process of judicial freezing of bank cards will make the act of judicial freezing of bank cards actionable, broaden the channels for citizens to exercise their rights of relief, and connect with relief systems such as state compensation, so that the judicial review system can be implemented.

Fourth, investors’ risk management and industry self-discipline. In recent years, judicial freezing of bank cards has often occurred in online commodity trading businesses, and buyers and sellers themselves should also learn from such incidents. Strict risk management should be carried out during transactions, and it should not become a tool to encourage illegal behavior. For example, before a trader provides a bank card number to a counterparty and accepts the counterparty’s funds, he should fulfill his duty of care to identify the counterparty’s true identity and make a preliminary judgment on the legal source of the counterparty’s funds. The corresponding online commodity trading platform should also require it to fulfill its reminder obligations within a reasonable range, such as informing investors which acceptors have had their funds frozen, identifying the acceptors’ identities, and requiring the acceptors to provide their own credit enhancement measures to reduce the risk of freezing cards for bona fide holders.

In our country, the concept of focusing on the realization of public power while neglecting the protection of individual rights needs to be changed.

The current provisions and practices of judicial freezing of bank cards in laws and regulations reflect a certain degree of disregard for citizens' property rights, which is somewhat contrary to the legalization of the business environment that the Party Central Committee and the State Council have been promoting since 2020. With the rapid development of technologies such as financial technology and blockchain, it is an important responsibility of public security organs to combat new economic crimes and new criminal methods. However, the exercise of public power cannot only focus on efficiency and ignore justice, and cannot only focus on combating crime and ignore the protection of citizens' property rights. To this end, we should optimize the system design under the guidance of the rule of law, promote administration according to law, create a systematic and effective judicial review mechanism, and establish a bank card judicial freezing system with clear powers and responsibilities, so as to ultimately achieve a balance between the exercise of public power and the protection of citizens' property rights.