The Supreme People’s Court and the Supreme People’s Procuratorate have recently rendered an interpretation on the” the application of laws in handling illegal fund payment and settlement business and illegal trading in foreign exchange cases” (the “Interpretation”), which cover the following:
1. Determination of “illegal fund payment and settlement business” under Paragraph 3 of Article 225 of the Criminal Law
Pursuant to the Interpretation, the “illegal fund payment and settlement business” under Paragraph 3 of Article 225 of the Criminal Law will be constituted if any of the following circumstances is present: (1) the use of methods such as recipient terminals or network payment interfaces to pay funds to designated recipients through illegal means such as fictitious transactions, false prices, transaction refunds, etc.; (2) illegal provision of an entity’s bank settlement account to another person for cash-out arrangements or transfer service from an entity’s bank settlement account to a personal account; (3) illegal provision of check cashing services; or (4) other illegal fund payment and settlement businesses.
2. Conviction of illegal foreign exchange trading such as fraudulent foreign exchange transactions and disguised foreign exchange trading
Fraudulent foreign exchange transactions and disguised foreign exchange trading which has materially disrupted the financial market order will be subject to penalties for the offense of illegal operation in accordance with Paragraph 4 of Article 225 of the Criminal Law.
3. Determination of “material cases” and “especially material cases”
A “material case” of “illegal fund payment and settlement business and illegal foreign exchange trading” refers to (1) illegal operations in excess of RMB5,000,000; or (2) illegal proceeds in excess of RMB100,000.
In addition, if illegal operations goes beyond RMB2,500,000 or the illegal proceeds exceed RMB50,000, the matter may still be deemed “material” if any of the following conditions is present: (1) criminal prosecution in the past for illegal fund payment and settlement or illegal foreign exchange trading; (2) administrative sanctions in the past two years for illegal fund payment and settlement business or illegal foreign exchange trading; (3) refusal to disclose the whereabouts of the funds involved or cooperate with the recovery of such funds to the extent that the illegal proceeds cannot be recovered; or (4) there is any other serious consequence.
“Especially material cases” refer to when (1) illegal operations exceeds RMB25,000,000; or (2) illegal proceeds exceeds RMB500,000. If the amount of illegal operations exceeds RMB12,500,000 or if the amount of illegal proceeds exceeds RMB250,000 under one of the four circumstances set forth in Paragraph 2 of Article 3 of the Interpretation (as stated in the preceding paragraph), the matter may also be considered as “especially material”.
4. Determination of unit crimes
According to the Interpretation, a unit that conducts the illegal fund payment and settlement business or engages in illegal foreign exchange trading under Articles 1 and 2 of the Interpretation shall be subject to a fine, and its directly responsible supervisors and other directly responsible personnel will be convicted and penalized pursuant to the sentencing criteria therein.
The Interpretation also covers issues such as joinder of multiple offenses, exemptions, number of crimes, crime locations and the calculation of illegal proceeds. Enterprises whose business involves payment, settlement and foreign exchange trading are advised to take note of this development.