China Payment and Clearing Association: The use of virtual currency and other forms of illegal and criminal activities are gradually rising

Using virtual currency and blockchain technology to evade fund traceability, using virtual currency as a gambling running medium or using virtual currency for top-up transactions.

China Payment and Clearing Association: The use of virtual currency and other forms of illegal and criminal activities are gradually rising

Recently, China Payment Clearing Association (hereinafter referred to as “the Association”) organized some of its members to hold a symposium on industry risk information and special merchant information sharing and joint prevention, analyzed the overall situation and characteristics of current payment risk prevention and control, exchanged new initiatives for risk management in the payment industry, and studied and proposed to optimize and improve the industry information sharing and joint prevention mechanism. The Association also proposed to optimize and improve the information sharing and joint prevention mechanism of the industry, and strengthen the risk management of the whole process of payment business and other work requirements. The association summarized and sorted out the following risk tips to the whole industry.

I. The overall situation and changing characteristics of the current payment risk

(A) rent, lend, sell other people’s accounts to collect funds, involved in gambling and fraudulent transactions situation is still serious

Statistics show that the number of people involved in renting, lending and selling bank cards and phone cards (including individuals and merchants) is growing in 2020, and presents accounts (including bank accounts and payment accounts) are used to collect money for gambling sites, telecommunications network fraud activities and money laundering, and some accounts have typical features such as normal transactions mixed with abnormal transactions and rapid switching. The main techniques include: fraudulent use of information and accounts for illegal activities of subjects or old and weak groups in areas with weak prevention awareness. Generally take money as bait, conceal the intention, deceive remote mountainous areas left behind the elderly, small and micro merchants and other real information, apply to open a personal account or become a special merchant engaged in illegal transactions funds settlement. Driven by high returns and other interests, some account owners gradually cooperate with criminals in response to bank inquiries, and even take the initiative to verify their identities and restore account functions after banks or public security authorities restrict account transactions; by renting and buying and selling normal users’ bank accounts or bank cards in large quantities, they build “running score” pools and conduct multi-layer On the one hand, it avoids the police to stop the payment of the fraudulent bank cards, on the other hand, it confuses the capital chain and makes it more difficult for the police to trace the whereabouts of the funds, so as to finally realize the purpose of “laundering” the stolen money.

(2) Using telecom operators, e-commerce platforms and other fictitious transaction background to collect money and avoid crackdown

The Association’s investigation found that in recent years, a large proportion of payment risk cases involving telecommunications operators, e-commerce platforms, through well-known e-commerce platform fictitious transaction background collection has become the main channel to avoid transaction monitoring and crackdown governance, to complete the settlement of funds. The main techniques are: through the purchase of merchant qualifications, brand authorization and other materials, fictitious commodity transactions, the use of external false contact information, empty package logistics information layer by layer packaging for e-commerce platform stores, engaged in illegal and illegal transactions, fraudulent transactions more hidden; or the establishment of new cash APP, “running score” platform and other illegal payment platform, through Fictitious merchant information, falsification of real merchant information and other ways to falsely register acquirers.

(3) Using virtual currency and blockchain technology to evade fund traceability, using virtual currency as a medium for gambling points or conducting top-up transactions with virtual currency

The use of virtual currencies and other forms of illegal criminal activities is gradually on the rise, and because of their anonymity, convenience and global nature, they have gradually become an important channel for cross-border money laundering. At the same time, there has been a pattern of using virtual currency as a medium for gambling runs. The main technique is: the gambler pays the money to the runner, the runner pays the virtual currency to the gambling platform to complete the bet, and finally the dealer uses the virtual currency to exchange the cash back to the runner or the virtual currency acceptor. Statistics show that nearly 13% of gambling websites support virtual currency platform top-ups, using the anonymity of blockchain technology to conceal the gambling fund transfer path through a large number of C2C transactions, enhancing the difficulty of tracing the capital chain.

(D) The trend of gambling-related fraudulent funds flowing through personal bank settlement accounts II and III accounts, credit cards, and microfinance accounts is obvious

With the increasingly strict management of personal bank settlement account category I accounts, criminals gradually transferred gambling-related fraudulent funds through category II and III accounts, credit cards, and small loan accounts. The gambling-related fraudulent funds settlement method has changed from debit cards to credit cards, resulting in the intertwining of “cash out risk” and “gambling-related fraud risk”. At present, the use of debit card money laundering cases are obvious downward trend, criminals use credit cards for large amounts of POS consumption transfer of funds is a rapidly increasing trend, to circumvent the debit card frequent large transactions of risk control rules. The main techniques are: card-raising intermediaries through the collection of the cardholder’s credit card, the company to go running water and swipe the amount of the corresponding proportion as payment to the cardholder or the cardholder itself knowingly and participate in money laundering charge the corresponding fees.

(E) The risk of transferring illegal funds through payment terminals is on the rise, and the situation of “one person with multiple machines” is common

Recently, there have been a number of cases of illegal fund collection and transfer involving gambling and fraud using payment acceptance terminals in China-Myanmar border areas and Macau, and the risk of cross-border transfer of domestic POS machines to Macau for illegal foreign exchange is still prominent. The main method is: the lawless elements will be involved in gambling and fraudulent illegal funds pooled into a bank card, through the mastery of the payment acceptance terminal for large amounts of consumption, the relevant funds in the form of settlement payments withdrawn to its mastery of the bank account (card) to complete the transfer of illegal funds. The specific features are single terminal, single bank card transactions with high frequency, time dispersion, and large cumulative amounts. After investigation, the relevant terminal applicants generally exist “one person, multiple machines”, most of which are small and micro merchants or individuals who do not provide business licenses.

(F) telecom network fraud and other fraudulent practices continue to renovate, endless

First, the unscrupulous elements use the victim’s fraud identification ability and risk prevention awareness is weak and other characteristics, for different groups of people to take different fraudulent techniques for accurate fraud, the main way part-time job brush single fraud, lottery fraud, online shopping fraud, recharge fraud, fraudulent familiar fraud, loan fraud, fraudulent impersonation of mainstream financial APP. The second is the use of gambling running score task to implement fraud. As the gambling running score mode only requires the runner to provide a bank card or payment account, there is a low threshold, simple operation, fraudulent gangs promise a high draw, cheat the runner payment account and password, theft of account class funds. Third, the risk of gambling and fraud related to barcode payment business is gradually increasing, such as lending the information of the collection code, “running score platform” collection QR code provided to the use of gambling sites, etc. Fourth, the risk of fraud in bank card acquiring business shifted from counterfeit card theft fraud to QR code fraud, cloud flash payment fraud and small double-free theft.

(vii) illegal transaction activities began to spread to rural areas. With the gradual popularization of bank cards, Internet payments, mobile payments and other electronic payment methods in rural areas, there is a clear tendency for crime objects to spread to rural areas and organize rural customers to carry out illegal activities, such as illegal transaction platforms, telecommunication fraud, credit card skimming, and theft of fees. In particular, the organization of criminals has obvious characteristics, and they operate in a corporate manner, which is confusing to customers in rural areas.

Second, the main problems and weak links in the current payment risk management

In recent years, the members continue to strengthen compliance and risk management, in the joint efforts of the regulatory departments and industry participants, the industry’s overall risk management capabilities and levels gradually improved. At the same time, in view of the new trends and changes in the current payment risks, some members have revealed weaknesses and shortcomings in strengthening payment risk management and implementing joint prevention mechanisms for information sharing in the industry, mainly in the following areas.

First, the requirements of real-name management of special merchants and accounts are not strictly implemented. There are irregularities and laxity in the auditing of contract merchants and accounts entering the network, and incomplete or falsified information on merchants and personal licenses retained, leading to false, fraudulent and problematic merchants and accounts entering the payment market from the source. Second, the inspection of special merchants is not in place. The merchant inspection and continuous identification work of some member units are in a formal manner, and they do not conduct regular and effective inspections of special merchants as required, and do not clearly set the inspection frequency and content, and take a laissez-faire attitude towards the actual business contents and scenarios of merchants that do not match. Third, the effectiveness of payment risk monitoring means still needs to be strengthened. It fails to effectively set or strictly enforce transaction monitoring rules, and fails to conduct timely and effective verification or take corresponding restrictive measures on suspicious transactions and transaction characteristics of merchants that do not match with actual business or business scope, so that the authenticity and integrity of transactions are affected. Fourth, the management of payment acceptance terminals is not standardized. Payment acceptance terminals are irregularly shifted, deployed and used in excess of the scope, and the sale and purchase of terminals are not only prohibited, but also easily used by criminals in the black and gray industry such as cross-border gambling and telecommunication network fraud to transfer funds and other purposes. Fifth, the merchant and account risk disposal efforts are insufficient. For merchants and accounts found to be at risk, they adopt a tolerant and acquiescent attitude and fail to take measures such as setting collection limits, delaying fund settlement, freezing accounts, suspending services, terminating cooperation, and transferring to public security authorities as required by regulatory and self-regulatory provisions. Sixth, the enthusiasm and initiative to participate in industry risk information sharing and other industry sharing and joint prevention mechanisms is not strong. The implementation of the risk information sharing mechanism provided by the association is not in place, and they do not fully use the functions of the industry risk information sharing system in the course of conducting payment business, do not actively report and query the use of relevant risk information as required, and do not provide timely feedback on the use of risk information (including blacklist).

III. Work Requirements

In view of the overall situation and changing characteristics of payment risks, member units should pay close attention to the new methods of cross-border gambling, telecommunication network fraud and other illegal crimes, analyze the new methods and features of gambling and fraud-related fund transactions, strictly follow the requirements of the payment supervision system and industry self-regulation norms, adopt effective management means and initiatives, strengthen the whole process of risk management of customers and special merchants before, during and after the process, actively participate in industry risk information sharing and other industry joint prevention mechanisms, jointly enhance the joint prevention and control of industry risks, and effectively prevent cross-border gambling, telecommunication fraud and other illegal fund settlement activities.

(A) Prior access to strengthen the management of merchant audit and account real-name system

First, strengthen the entry audit of special merchants. Strictly in accordance with regulatory requirements to review the application information of special merchants, take effective measures to verify the authenticity and legality of their business activities, not only with the identity documents of the main responsible person for the special merchants to provide acquiring services, it is recommended to adopt authentication means, including the verification of the four elements of corporate information; second, strengthen the management of the real-name account system. When opening an account to effectively identify the customer, strictly review the identity documents of the account opening subject and the willingness to open an account, standardize the retention of identity documents and due diligence records, and take effective measures to verify important information. It is recommended that member units adopt authentication means such as four-factor verification of corporate information, card tying verification, face recognition and live detection. At the same time, to strengthen the audit of abnormal account opening behavior, found that individuals fraudulently open accounts using the identity of others, units and individuals organize others to open accounts at the same time or in batches, corresponding measures should be taken in a timely manner and reported to the public security authorities; third, the establishment of special merchant information inquiry mechanism. When expanding the contracted merchants, the contracted merchant information management system of the China Payment Clearing Association or bank card clearing institutions should be queried for their contracting, replacement of acquirers and blacklist information, making full use of the industry information sharing joint prevention mechanism to strengthen merchant audit management.

(B) the monitoring link, strengthen the monitoring of transaction risks and contract merchants, acceptance terminal management

First, improve the risk management of unit customers. Sound risk rating management system for unit customers, according to the risk rating of unit customers, reasonably set and dynamically adjust the total payment limit of all payment account balances of the same unit; second, strict management of acceptance terminals. When installing payment acceptance terminals for special merchants, the geographical scope of the acceptance terminals should be limited in conjunction with the merchant’s business address, and effective measures should be taken to continuously carry out real-time monitoring of the location of payment acceptance terminals and record transaction location information on a transaction-by-transaction basis; third, strengthen risk monitoring and inspection. Continuously monitor and analyze transaction characteristics, improve the suspicious transaction monitoring model, and conduct on-site inspection and verification of suspicious merchants or take effective measures to inspect and verify their business content and transactions; fourth, improve the risk rating and classification inspection mechanism for special merchants. Taking into account the regional and industry characteristics, business scale, financial and credit status of the special merchants, the risk ratings of physical special merchants and network special merchants are conducted respectively. According to the risk rating of special merchants to determine the inspection mode and frequency, the implementation of inspection responsibilities. We insist on local management, and effectively play the important role of account management and daily inspection in deepening understanding with merchants and monitoring risks; fifth, we continuously verify the identity and willingness of customers and special merchants. During the business continuity period, we continuously verify the true will of customers and special merchants, and the authenticity and legality of special merchants’ business activities. For special merchants who apply for changes in key information, the merchant information should be re-verified before the change is processed; sixth, carry out special monitoring. Establish and improve the monitoring mechanism to conduct special monitoring of personal transfer receipt bar codes, special merchants using personal accounts as acquiring settlement accounts and payment acceptance terminals in border areas; seventh, use intelligent technology. Fully use big data, machine learning, graph computing and other intelligent technologies to build a suspicious transaction monitoring model, timely warning of abnormal transactions, and strengthen the analysis and research of suspicious money transactions involving gambling and fraud and monitoring and disposal.

(III) Post-event disposal link, strengthening the transfer of clues, information linkage, model optimization and industry joint prevention and joint control

First, if customers, special merchants or suspicious clues suspected of being involved in gambling and fraud are found, they should be verified immediately and transferred to the local public security authorities in a timely manner, and reported to the People’s Bank, associations and clearing institutions; second, to strengthen the sharing of suspicious clues, prevention and control experience and other information, such as regular synchronization of fraudulent practices and risk cases with operators and e-commerce platforms, joint modeling and joint control; third, according to the risk cases that have occurred Refine risk characteristics, continuously optimize risk monitoring models, dynamically improve risk prevention and control mechanisms, and deploy interception or early warning of future risky transactions; Fourth, the risk information confirmed and verified by the unit will be reported to the Association in accordance with relevant regulatory provisions and self-regulatory norms; Fifth, actively respond to and process industry risk information (including blacklist) shared by the Association, and take corresponding processing measures in accordance with the degree of risk and information level after Feedback the processing results to the Association in an accurate and timely manner.

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