Three criminal scenarios for virtual currency

Authors: Shi Jinghai, Su Qing, Southwest University of Political Science and Law

On October 26, the People's Court published an article entitled "Determination of the Crime of Virtual Currency Settlement and Payment Assistance". The article points out that virtual currency settlement and payment-type assistance is the use of virtual currency to provide financial transfer assistance for others to commit telecommunication fraud. In the determination of the crime of virtual currency settlement and payment, it is necessary to grasp the characteristics of the criminal proceeds, the dividing point between the upstream telecommunications fraud and the subsequent acts of covering up and concealing the criminal proceeds and their proceeds, as well as the impact of the time and content of the helper's subjective knowledge and "conspiracy" on the determination of the crime, so as to distinguish the crimes that are easy to mix.

First of all, it is necessary to determine whether the object of the transfer of virtual currency has the three characteristics of criminal proceeds, namely, property, criminal illegality, and certainty. Secondly, the crime of fraud is taken as the demarcation point to define whether the act of virtual currency settlement and payment is an act of covering up or concealing criminal proceeds and its proceeds, or an act of helping upstream telecommunications fraud. Finally, whether the helper conspired with others in advance, whether he only knew that others were illegally using information networks to carry out criminal activities, or whether he knew that others were committing fraud, and whether the act of virtual currency settlement and payment constituted an accomplice to the crime of telecommunications fraud.

To sum up, there are three types of criminal determinations for virtual currency settlement and payment-type assistance:

The first is that the helper did not conspire with others before the end of the fraud, and after the crime of fraud was completed and the fraudster obtained property, illegal and definite property, he deliberately provided him with assistance in the settlement and payment of virtual currency, which constituted the crime of covering up or concealing the proceeds of crime or the proceeds of crime.

The second is that although the helper objectively carried out the act of covering up or concealing the proceeds of crime, but formed a contact with others about the fraud at the end of the fraud, his conduct should be found to be an accomplice to the crime of fraud; If the helper reaches a contact with another person with the content of committing cybercriminal activities at the end of the fraudulent act, his or her conduct constitutes the crime of aiding information cybercriminal activities.

Third, where the crime of fraud has not been completed or the property does not have the three characteristics of criminal proceeds, but the helper clearly knows that others have committed fraud and provides virtual currency settlement and payment services, it shall be found to be an aider in the crime of fraud; Where the helper clearly knows that others are committing cybercriminal activities, but does not know the specific crime being committed, they should be pursued for criminal responsibility for the crime of aiding information cybercriminal activities.

The following is the full text of the article:

Virtual currency settlement and payment-type assistance is the use of virtual currency to provide assistance in the transfer of property for others to commit telecommunications fraud. In 2021, the Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security jointly issued the Opinions on Several Issues Concerning the Application of Law in the Handling of Criminal Cases such as Telecommunications Network Fraud (II) (hereinafter referred to as the "Opinions (II)"), which proposes that in the absence of prior conspiracy, the helper's act of converting or cashing out the property through virtual currency constitutes a cover-up or concealment of criminal proceeds. The crime of proceeds of crime clearly includes such conduct as a key link in the whole chain of cracking down on illegal and criminal activities of telecommunications fraud, effectively curbing the high incidence of related crimes.

However, with the deepening of governance activities, the disadvantages of distinguishing this crime from other crimes based on whether or not they were 'knowingly' and 'prior conspiracy' have also emerged. Due to the fact that virtual currency settlement and payment-type assistance acts are time-sensitive, may occur during or after the implementation of telecommunications fraud, and the degree of 'conspiracy' and 'knowing' is not the same, and also arise at different stages of the implementation of telecommunication fraud, there are problems in judicial practice such as inconsistent standards for determining whether the transferred property is criminal proceeds, imperfect rules for determining whether the settlement and payment act is a crime of fraud or a crime of stolen goods, and the subjective aspect has not clarified the impact of the characterization of the act, resulting in the helper of the crime of fraud. The dilemma of the crime of aiding information network criminal activities, as well as the confusion of the application of the crime of covering up and concealing criminal proceeds and the proceeds of criminal proceeds, affects the precise crackdown of the criminal law on such acts, and is not conducive to the long-term governance of telecommunications fraud.

In order to clarify the path for the determination of virtual currency settlement and payment-type assistance behavior, and to punish this conduct in accordance with law, the principle of unifying subjectivity and objectivity and the criminal policy of blending leniency and severity should be adhered to, and the objective and subjective aspects of the constitutive elements of the crime should be organically combined to comprehensively grasp the circumstances of the crime, and avoid one-sided determination of the crime from objective or subjective aspects, resulting in inappropriate criminal responsibility and punishment. Based on this, in the determination of the crime of virtual currency settlement and payment, it is necessary to grasp the characteristics of the criminal proceeds, the dividing point between the upstream telecommunication fraud and the subsequent acts of covering up and concealing the criminal proceeds and their proceeds, and the impact of the time and content of the helper's subjective knowledge and 'collusion' on the determination of the crime, so as to distinguish the crimes that are easy to mix.

First of all, according to Article 64 of the Criminal Law, 'the proceeds of crime are all property illegally obtained by criminals', it is necessary to determine whether the object of the transfer of virtual currency has the three characteristics of criminal proceeds, namely, property, criminal illegality, and certainty. In detail, first, the proceeds of crime are property, which has a property nature, that is, negotiability and objective property value, but does not have a necessary feature of physique, including property interests such as deposits, creditor's rights, and equity. Second, the proceeds of crime must be generated by illegal acts and have a criminal illegality, so they do not include property obtained by criminals as a result of lawful acts, civil breaches of contract or administrative violations. Thirdly, the proceeds of crime need to belong to the criminals and cover 'all' of their illegal gains, so there is certainty in terms of both the subject and the amount. In the determination of the crime of covering up or concealing criminal proceeds or the proceeds of criminal proceeds, the certainty of the subject means that the criminal proceeds have truly belonged to the perpetrator of the predicate crime; For example, in a fraud case of impersonating a qualified person to recommend stocks, the handling fee or membership fee paid by the victim to the fraudster is the proceeds of crime, and the funds used for stock speculation and investment are ultimately not owned by the fraudster and should not be included in the criminal proceeds. Accordingly, the property settled and paid by virtual currency can only be recognized as criminal proceeds if it meets the above three characteristics, otherwise such acts cannot be evaluated as the crime of covering up or concealing criminal proceeds or the proceeds of criminal proceeds.

Secondly, the crime of fraud is taken as the demarcation point to define whether the act of virtual currency settlement and payment is an act of covering up or concealing criminal proceeds and its proceeds, or an act of helping upstream telecommunications fraud. However, in 2018, the Supreme People's Procuratorate issued the Guidelines for the Handling of Telecommunications Network Fraud Cases, which clearly stipulates that the judgment of completed telecommunication network fraud should adopt the out-of-control theory, that is, the victim loses actual control over the defrauded money. Accordingly, the completion of upstream telecommunication fraud not only means that the fraud has ended, but also indicates that the subject and amount of criminal proceeds have been determined. Therefore, the virtual currency settlement and payment behavior that occurs after the completion of the transaction is a typical act of covering up and concealing the criminal proceeds and their proceeds. Before the consequence was completed, even if the victim disposed of the property due to misunderstanding, and the fraudster obtained the property, because the fraud was still being carried out or the property was still under the control of the victim, it was impossible to determine the final amount of defrauded, so the virtual currency settlement and payment behavior that occurred at this stage was the helping act of upstream telecom fraud. Taking the case of virtual currency stock speculation fraud as an example, the victim first transfers funds to the helper after being deceived and has a misunderstanding, so as to obtain virtual currency for stock trading on an artificially manipulated securities platform, and the helper then transfers the funds to the fraudster. Then, the fraudsters will adjust the rise and fall of the stock on the securities platform, so that the victim will first make a partial profit and then lose all of the money. In such cases, since the victim can also control the funds on the platform by buying up and down after the fraudster obtains the property, the crime of fraud has not yet been completed, and the settlement and payment of virtual currency cannot constitute the crime of covering up or concealing criminal proceeds.

Finally, whether the helper conspired with others in advance, whether he only knew that others were illegally using information networks to carry out criminal activities, or whether he knew that others were committing fraud, and whether the act of virtual currency settlement and payment constituted an accomplice to the crime of telecommunications fraud. Specifically, the first is whether the helper conspired in advance to determine whether the act of covering up or concealing criminal proceeds and their proceeds constitutes the crime of covering up or concealing criminal proceeds, or whether they are accomplices to the crime of fraud. Among them, 'beforehand' refers to the end of the crime, and 'conspiracy' refers to the formation of a relationship between the helper and others, but it is not the same as 'conspiracy', that is, there is no need for both parties to plan and negotiate the crime. In the case of telecommunications fraud, if the helper conspires with others to commit fraud before the fraud is completed, he should be held accountable as an accomplice to the crime of fraud. After the fraud is carried out, even if the helper and others jointly conspire with others about the fraud, it does not constitute an accomplice to the succession, and its conduct only constitutes the crime of covering up and concealing the proceeds of crime. In addition, judging from the existing judicial interpretations, one-sided accomplice does not constitute a joint crime of fraud. This is because in 2016, the Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security promulgated the "Opinions on Several Issues Concerning the Application of Law in the Handling of Criminal Cases such as Telecommunications Network Fraud" and "Opinion (II)", which changed the previous practice of treating the helper as an accomplice as long as the helper who provided the settlement of expenses knew that others were fraudulent, and emphasized that the act of transferring, cashing out, or withdrawing the proceeds of crime and its proceeds to constitute a joint crime should be premised on the circumstance of prior conspiracy, so a helper with unilateral intent to commit a joint crime does not constitute an accomplice. Second, if the act of virtual currency settlement and payment is characterized as an act of aiding upstream fraud, whether the helper knowingly commits fraud or only knowingly that others are committing crimes on the Internet, distinguishing between aiding and aiding information network criminal activities in the crime of fraud. In the course of the trial of a specific case, the proof of 'conspiracy' and 'knowingly' should be based on a combination of objective evidence, including the helper's life experience, the channels and content of contact with the telecommunications fraudster, the time and method of settlement and payment, and the profits, and then the conduct should be characterized accordingly.

To sum up, there are three circumstances in which the criminal determination of virtual currency settlement and payment assistance is made, the first is that the helper did not conspire with others before the end of the fraud, and intentionally provided virtual currency settlement and payment assistance to the fraudster after the crime of fraud was completed and the fraudster obtained property with property, illegality and certainty, which constituted the crime of covering up or concealing criminal proceeds or the proceeds of criminal gains. The second is that although the helper objectively carried out the act of covering up or concealing the proceeds of crime, but formed a contact with others about the fraud at the end of the fraud, his conduct should be found to be an accomplice to the crime of fraud; If the helper reaches a contact with another person with the content of committing cybercriminal activities at the end of the fraudulent act, his or her conduct constitutes the crime of aiding information cybercriminal activities. Third, where the crime of fraud has not been completed or the property does not have the three characteristics of criminal proceeds, but the helper clearly knows that others have committed fraud and provides virtual currency settlement and payment services, it shall be found to be an aider in the crime of fraud; Where the helper clearly knows that others are committing cybercriminal activities, but does not know the specific crime being committed, they should be pursued for criminal responsibility for the crime of aiding information cybercriminal activities.

In addition, in order to severely punish and prevent telecommunications network fraud and assistance in accordance with the law, while clarifying the rules for the application of the criminal law and the identification of crimes, it is also necessary to uphold the thinking of comprehensive governance and governance at the source, use new technologies outside the criminal law system to strengthen the supervision of virtual currency circulation, take timely measures to intercept the transfer of funds when illegal acts occur, and strengthen publicity and education on anti-telecom fraud, speculation in virtual currency transactions, and early warning of investment risks on informal online platforms, so as to fundamentally prevent telecommunication fraud and the illegal use of virtual currencyto ensure the security of people's network information and property.