In order to prevent the illegal outflow of capital, the China’s Supreme Court and the Supreme Procuratorate recently issued a judicial interpretation that if an underground bank conducts illegal trading of foreign exchanges and the amount is more than 5 million yuan (US$ 0.8 million), or the illegal income is more than 100,000 yuan (US$ 14,800), the crime will be punished under the charge of illegal business acts and the “circumstances are serious.”
According to the official media, in practice, the underground banks’ illegally trading in foreign exchanges mainly takes the traditional form of direct transactions within borders. The current, more popular and disguised ways of trading in foreign exchanges are across borders.
The disguised trading of foreign exchanges is not a direct exchange between the yuan and the foreign exchange, but an act of repaying the yuan-denominated debt in foreign exchange, or repaying foreign exchange-denominated debt in yuan, or the swap of foreign exchange and the yuan to fulfill the trading. According to the report, the cross-border payment is a typical disguised trading of foreign exchange. Underground bank criminals would collude with foreign individuals, enterprises, and institutions, or make use of overseas bank accounts for the purpose of cross-border remittances and transfer of funds. At present, the main business of most underground banks is the cross-border payment, which leads to huge capital outflows.
According to the judicial interpretation, engaging in illegal payment settlement business or illegal trading of foreign exchange, if falling into one of the following two circumstances, should be regarded as illegal business acts and the “circumstances are serious.” One, the illegal business amount is more than 5 million yuan (US$ 0.8 million). Two, the amount of illegal income is more than 100,000 yuan (US$ 14,800). The interpretation of illegal business acts and “circumstances are particularly serious” is either the illegal business amount is more than 25 million yuan (US$ 3.7 million) or the amount of illegal income is more than 500,000 yuan (US$ 74,000).
Article 225 of the Chinese Criminal Law stipulates that those who commit the illegal business acts, and when the circumstances are serious, are to be sentenced to not more than five years of fixed-term imprisonment in criminal detention, and may, in addition, or exclusively, be sentenced to a fine not less than 100 percent and not more than 500 percent of their illegal income and, where the circumstances are particularly serious, be sentenced to not less than five years of fixed-term imprisonment and a fine of not less than 100 percent and not more than 500 percent of their illegal income or the confiscation of their property.
Source: Central News Agency, February 9, 2019
http://https://www.cna.com.tw/news/acn/201902090145.aspx