Solving the mystery of OTC card freezing: the Ministry of Public Security has increased its authority and is freezing cards across regions to combat telecom fraud

The mystery of OTC card freezing that has shrouded the cryptocurrency circle has gradually been dispelled as the nationwide card cutting operation is launched.

On October 10, the State Council announced a crackdown on new telecom network crimes and required local public security departments to deploy a "card-cutting" operation across the country starting immediately. Local public security departments in Guangdong, Sichuan, Zhejiang and other places responded positively, arrested several suspects and notified them recently.

The cryptocurrency industry was the first to be affected, and the impact was widespread. According to industry insiders who revealed to Babbitt, many OTC merchants and ordinary users had their cards frozen more than a year ago, and some bank cards are still frozen. The "card cutting operation" has pushed the previous card freezing storm to a climax.

OTC merchants: This wave of card freezing is mainly due to negotiations with the Anti-Fraud Center of the Criminal Investigation Department

The previous wave of frozen credit cards was once interpreted as being related to anti-money laundering management. However, this statement was denied by Ms. Li (pseudonym), a broker in the cryptocurrency circle: "I have come into contact with many people whose credit cards have been frozen. It is not necessarily because of suspected money laundering, but mainly because of the tightening of telecommunications fraud supervision."

Ms. Li mainly deals with major exchanges, institutions, big investors, etc. According to her, many of her friends have had their cards frozen, and they are not all big investors. The card freezing has nothing to do with the amount of funds involved.

"The background is that the Ministry of Public Security has expanded its authority, and can freeze cards across regions, and even multiple public relations agencies can freeze the same account at the same time. Personally, I think it depends on whether the money in your card is circulating very tightly along the entire line. Generally, after being frozen, you need to go to the local public security agency to get proof, but this proof is not very reasonable because it is enforced compulsorily." said Ms. Li.

On July 4, 2020, the Ministry of Public Security passed the "Decision of the Ministry of Public Security on Amending the Provisions on the Procedures for Handling Criminal Cases by Public Security Organs", which amended several clauses, including the addition of "cross-regional crimes". For serious cases, public security organs at or above the municipal level have jurisdiction. According to the Henan Legal Daily, the newly revised regulations have already been implemented in specific case handling.

A large OTC merchant whose cards have been frozen repeatedly told Babbitt that the situation of having his cards frozen by public security authorities in other places had already occurred in August last year.

"In fact, it is not uncommon for cryptocurrency circles to have their cards frozen. Card freezing happened one after another in 2018. But this wave of card freezing is different from the past. It started to happen frequently at the end of last year. There are two main types of freezing. One is bank risk control freezing. In such a case, you only need to go to the bank to prove the current account. The other is judicial freezing, which mainly involves gray industries. In fact, the Ministry of Public Security freezes bank cards based on the transfer of funds. For this wave of card freezing, we mainly deal with the Criminal Investigation and Anti-Fraud Center of the Ministry of Public Security."

The OTC merchant pointed out that the anti-money laundering authority is the People's Bank of China, while the anti-fraud authority is the Ministry of Public Security. The two are different in nature, and "the former may prevent you from opening a new card."

Bank personnel: Card freezing is mainly for gambling and fraud

People in the banking industry said that this round of card freezing is mainly aimed at gambling and fraud. "Anything related to casinos and telecommunications fraud, as long as the money passes through the relevant accounts, the account will be frozen. For example, a customer received 150,000 yuan from a Thai casino, and his bank card was frozen. As far as I know, encrypted digital currency is also a hard-hit area. Although there may be misjudgments in this process, the discretion lies with the economic investigation department, and it is difficult to appeal. And it was originally said that the freezing period during the investigation was 6 months, but now it seems that it will be a long time. At present, I have not heard of other bank cards under the same name being frozen, unless there are transactions between accounts. It does not affect the opening of new cards."

According to the "Regulations on the Division of Jurisdiction over Criminal Cases of the Ministry of Public Security", the Economic Investigation Department is mainly responsible for economic crimes such as fundraising fraud, loan fraud, and securities fraud, while the crime of fraud is mainly under the jurisdiction of the Criminal Investigation Bureau of the Ministry of Public Security. Telecommunications fraud is a criminal offense and is therefore under the jurisdiction of the Criminal Investigation Brigade.

In other words, after the card was frozen, the main person they dealt with was the Criminal Investigation Brigade, which meant they were mainly suspected of telecommunications fraud.

Although there are cases of misjudgment, the aforementioned OTC merchants told Babbitt that the freezing of their cards has had a relatively serious impact on them: "The economic losses are immeasurable. At the worst time, the frozen liquidity accounted for 30% of our liquidity, and the largest frozen card had nearly 10 million yuan frozen. Not only the OTC business level was affected, the capital cost and opportunity cost losses are immeasurable."

When faced with a frozen card, the OTC merchant took proactive measures, contacted the bank, and found the relevant local police through the bank. "Sometimes the police will automatically unfreeze our card within 1-3 days. But if the other party wants us to go there immediately, we will go there immediately. If the police say that they will freeze it for half a year and ask us to go there to prove it, we will generally handle the matter within three days."

As for the rumor online that "cards opened by small banks are less likely to be frozen" (referring to local banks, etc.), the above-mentioned OTC merchant disagrees. He said, "Last year, small banks were not connected to the public security system. This year, all banks, big and small, have been connected to the system. There is no such difference. We are now doing one thing, screening customers, especially large customers. We need to understand what customers do and try to prevent cards from being frozen by screening upstream accounts."

Ms. Li said that the big or ordinary users around her were not in a hurry to deal with the frozen cards. "It's useless to deal with it. We have to wait until the Ministry of Public Security closes the case before we can deal with it. I know that some people whose cards have been frozen have not been unfrozen for more than a year. No one has only one card."

The Ministry of Public Security's official website shows that so far this year, a total of 155,000 telecom fraud cases have been uncovered nationwide, and 145,000 suspects have been arrested, up 65.6% and 74.1% year-on-year respectively; more than 100 billion yuan of funds involved in the case have been successfully stopped and frozen.

(According to the interviewee's request, all invited interviewees are anonymous or use a pseudonym)