Xiao Sa: Is there a new “pocket crime” emerging in the cryptocurrency circle?

According to relevant information, Zhao, CEO of a certain Bitcoin company, was taken away by the police on suspicion of concealing criminal proceeds and profits, and has now entered the review and prosecution stage. It can be found that the criminal risks caused by the anonymity and decentralization of the cryptocurrency circle are no longer limited to the single crime of money laundering, but have a tendency to expand. Here, the Sister Sa team further analyzes the crime of concealing criminal proceeds and profits to help practitioners and participants clarify the risks involved.

Why is money laundering crime a “pocket”?

Judging from the time when it was written into my country's criminal law, the crime of concealing and hiding criminal proceeds and profits was earlier than the crime of money laundering. The crime of money laundering is specially stipulated for special crimes such as ***** crimes and financial crimes. According to the determination of the International Anti-Money Laundering Organization, the criminal legislation of my country to defend against money laundering includes both the crime of concealing and hiding criminal proceeds and profits and the crime of money laundering. The crime of money laundering has long been a common crime in the currency circle, but the crime of concealing and hiding criminal proceeds and profits is often forgotten, and some industry insiders even believe that OTC platforms will not constitute this crime. Here, the Sister Sa team reminds that the crime of concealing and hiding criminal proceeds and profits belongs to the broad sense of money laundering. When analyzing the criminal risks of this crime, OTC platforms are not special for any reason.

Distinctions beyond predicate offences

In professional terms, many people believe that the crime of money laundering and the crime of concealing and hiding the proceeds of crime are in conflict with each other. In previous articles, the Sajie team has reminded everyone that one of the main differences between the two crimes is that the crime of money laundering has clear limitations on the types of upstream crimes, while the crime of concealing and hiding the proceeds of crime has no such provisions. In addition, the crime of money laundering is clear.

Money laundering is the act of disguising and concealing the source and nature of criminal proceeds and their proceeds by "(i) providing a capital account; (ii) assisting in converting property into cash, financial instruments, or securities; (iii) assisting in the transfer of funds through transfers or other settlement methods; (iv) assisting in remitting funds abroad; or (v) disguising and concealing the source and nature of criminal proceeds and their proceeds by other means." The types of behavior specified in the crime of disguising and concealing criminal proceeds and proceeds are: harboring, transferring, purchasing, selling on behalf of others, or disguising and concealing by other means. The provisions of the crime of disguising and concealing criminal proceeds and proceeds are more vague and do not list the types of behavior in detail.

At the same time, the crime of money laundering requires that the perpetrator's behavior changes the source and nature of the proceeds of crime and its profits, while the crime of concealing and hiding the proceeds of crime only requires concealment and concealment, and does not stipulate the change of the nature of the funds.

Legal ambiguity: good news? bad news?

The ambiguity of the crime of concealing and hiding criminal proceeds and profits is mainly reflected in two aspects. First, the types of behaviors are relatively broad and the threshold for conviction is low. Second, it is impossible to directly know from the legal provisions how to deal with the concealment and concealment of behaviors that change the nature of funds.

As for the first aspect, the low threshold for criminalizing behavior means a higher criminal risk, and the umbrella provisions of other methods have greatly expanded the scope of identification of this crime.

As for the second aspect, purely from the legal point of view, the act of changing the nature of funds should be considered as money laundering, but the establishment of money laundering has clear requirements for the type of upstream crime (although the amendment will tend to relax the upstream crime of money laundering in the future). The crime of concealing and hiding the proceeds of crime, which is more lenient in the identification of upstream crimes, does not mention the change of the nature of funds.

The team of Sister Sa believes that although strictly in accordance with the principle of legality of crime and punishment, the concealment and concealment of the nature of funds without explicit provisions should not be regulated by the criminal law, since the change of the nature of funds often means the increase of harmfulness, the criminal law that appears in the form of social governance will not turn a blind eye to the objectively existing socially harmful behavior. Due to the anonymity and decentralization of virtual currency, the behavior of converting criminal proceeds and profits into virtual currency and then exchanging them for legal currency cannot but change the nature of the funds. This behavior is not a virgin land of extra-legal freedom, but a beach with undercurrents of risk.

How to help yourself

When suspected of concealing or hiding criminal proceeds and profits, judicial authorities may adopt a "presumption" method to determine whether the suspect "knew". In this context, it is difficult for a neutral platform to prove its innocence. In order to reserve space for "self-help" for cryptocurrency practitioners, the Sister Sa team believes that at least the following points need to be achieved:

• Fulfill anti-money laundering obligations without compromise;

• Strengthen KYC screening of user access to eliminate risks at the source;

• Actively take compliance assessment actions, clarify the business scope, and retain evidence that is beneficial to you;

• If you have a Singapore foundation, a Japanese financial license, or a financial license from Hong Kong, my country, it is recommended that you only retain business forms recognized by Chinese law in my country and do not break the law.

Final Thoughts

The problems in the cryptocurrency industry reflect the friction between the law and practical operations. It is difficult to completely eliminate the cryptocurrency industry. After all, as long as there is demand, there will be supply. However, cryptocurrency practitioners should understand legal common sense and be cautious about the boundaries of behaviors prohibited by the law. At the same time, the times are developing, and it is unknown whether blockchain technology will lead to further financial innovation in the future. Only by surviving can we develop again. I hope you will not become a money laundering machine, identify risks, and survive the winter.