A few days ago, a business owner who runs a platform came to me with questions about payment settlement. This issue is somewhat typical and also fairly common, so today let us briefly discuss it.
As a platform company grows, it hosts many merchants. Buyers place orders and pay at the merchant, the money first enters the platform account, the platform deducts its commission, and then settles the purchase price to the merchant according to the order. Do you also think this fund flow is normal?
Collecting money and then distributing it to merchants is not itself illegal, but the key is who is collecting it: if an institution with a payment license does it, it is called compliant clearing and settlement; if the platform itself has no license and the money first enters its own account and is then distributed to merchants a second time, the payment industry calls this "second-tier clearing."
I. Why is it still second-tier clearing even after connecting with a licensed institution?
At this point, many business owners have a misconception: I have already connected with WeChat, Alipay, or another licensed payment institution, so will I not cross the line of "second-tier clearing"? Not necessarily.
The criterion for second-tier clearing is not what channel you have connected to, but whether the transaction principal has landed in an account controllable by your platform, and whether you actually hold the authority to clear funds.
In practice, there are four most common situations that cross the line:
1. The large-merchant model, which is also the most common one.
The platform uses its own merchant number to connect with a payment institution. User payments first enter the platform's own corporate account. After the platform deducts its commission, the finance department or the system makes batch payments to the hosted merchants.
Even if the accounts are clear, the funds do not stay overnight, and not a single cent is misappropriated, at the regulatory level this still constitutes the administrative illegality of second-tier clearing. The logic is simple: once the money enters your account, you have the possibility of misappropriating it, and this is precisely the risk that regulation seeks to prevent. However, this does not necessarily mean it constitutes a criminal offense.
Even if objectively it already constitutes second-tier clearing, namely engaging in fund payment settlement without a license, constituting the crime of illegal business operations at the criminal level still requires meeting the "serious circumstances" standard stipulated in judicial interpretations. In judicial practice, this is mainly determined by the amount of illegal business operations and the amount of illegal gains.
2. Splitting part online and making up the difference offline.
The native split-payment interfaces of WeChat and Alipay set a default upper limit of 30% on the split ratio; in some scenarios, an upward adjustment may be applied for with the payment institution. Many platforms have very high distribution and livestreaming profit-sharing ratios, and even after applying for an upward adjustment, business needs still cannot be met. As a result, part of the funds is split online through the split-payment interface, and the remaining share is transferred offline through corporate accounts or personal cards of the legal representative or shareholders.
On the surface, compliant split payments are used, but in reality, the principal of large-value transactions circulates outside the books, which constitutes disguised secondary clearing and incidentally gives rise to tax issues...
3. Purchasing "pseudo split-payment" SaaS.
Many SaaS products on the market claim to solve secondary clearing, but on closer inspection, they merely help you record orders and generate reconciliation Excel sheets; the funds still first enter the platform's own account, and the SaaS software itself never touches the money.
The core of genuine split payment is the complete separation of the information flow and the fund flow: the platform can only configure split-payment rules, the transaction principal remains throughout in a supervised sub-account of a licensed institution, and the licensed institution directly clears and distributes the funds to merchants, with the platform itself not touching a single cent.
If this cannot be achieved, calling it split payment, whatever the name, is self-deception.
4. Incomplete rectification, with old and new models running side by side.
After receiving the rectification notice, some orders were switched to compliant split payments, while legacy business and private-domain orders continued to use the old large-merchant model.
From a criminal-law perspective: every record of funds still being pooled after receipt of the rectification notice is the most direct evidence of "knowledge" in practice.
II. How such cases come to light in practice
There are three common routes by which such cases come to light:
1. A merchant settlement dispute arises, a complaint is filed, and investigation reveals that the platform itself is pooling funds;
2. Gambling and fraud merchants infiltrated the platform; after the upstream operation was shut down, the police traced the transaction flows backward and discovered that the platform was pooling funds without a license;
3. A payment institution reported anomalies as required by regulators, or the platform had previously received a rectification notice but did not cease operations.
The three paths share one common feature: the case-handling authorities first had the transaction records in hand, and then identified the platform.
Before formal case filing, accounts are often frozen first—not only the platform's settlement accounts, but also the personal accounts of the boss and finance staff may be frozen together. Many platform bosses at this stage believe they are merely "cooperating with an investigation," and only after completing the interrogation transcript do they realize that the police had already been conducting the investigation on the basis of illegal business operations.
3. After the case comes to light, the four key investigative focuses of the police
1. Characterization: whether what you are doing is actually a "payment business"
Whether you have a payment license can be determined by a simple check; there is nothing to dispute here.
The key is how the funds flow: do buyers' funds first enter your platform's account, and then you distribute them to merchants? If so, the fact of "secondary clearing" is established: you do not have a license, but you are performing the work of a licensed payment institution.
2. Accounting: how much flowed through and how much was earned
Total transaction volume is cross-checked across three sources: the payment channel, the platform's settlement accounts, and the merchant backend;
Illegal gains are the commissions and handling fees deducted by the platform.
The amount of illegal business operations and the illegal gains—one determines the criminalization threshold, and the other determines the sentencing range.
3. Examine the fund pool: how long the money sat in your account, and what you did with it
If the money was settled to genuine merchants intact according to orders, merely passing through your hands, then even if the transaction volume is large, its nature still leans toward "collection and payment on behalf of others."
However, if the money formed a pool in the platform account and was used to cover the platform's own operational shortfalls, to make investments, or even to be appropriated personally by the boss, the degree of harm in the case will rise significantly. Such circumstances will directly increase the sentencing for the crime of illegal business operations; in some situations, they may also give rise to charges of misappropriation, and the issue will no longer be merely that of second-tier clearing.
4. Examine subjective intent: did you know this was non-compliant
This is not about asking you verbally whether you "knew"; it is a series of objective traces: whether you received any rectification notice, whether you received any account-control warning from a bank or payment institution, and whether, after the channel was cut off, you switched to another shell to continue pooling funds...
IV. After the case comes to light, the things bosses most easily get wrong
1. Deleting records.
Do you think deleting the split-payment records and chat records makes things "clean"?
The payment institution has complete backups, and the public security authorities obtain all transaction records; what is deleted cannot change the facts at all. If the boss instructs employees to delete them, the employees themselves also face the risk of being implicated in obstruction of justice.
2. Switching channels and continuing to operate.
Business cannot stop for a single day, so the fund pool continues to be pooled under a new guise; this is essentially pushing an administrative issue toward the criminal track with one's own hands.
3. Pushing finance or operations staff out to "take the hit."
In a unit crime, the investigation focuses on the decision-making chain: who made the call, who signed off, and where the money ultimately went. When the transaction records and contracts are laid out together, the picture is clear.
The person pushed forward to take the blame never had the full picture to begin with. Once in the interrogation room, three questions in and they cannot answer, and instead they end up implicating the boss himself.
V. Correct Actions After Becoming Involved in the Case
First, stop any new pooling of funds: every additional receipt adds another slice to the amount involved in the case. At this point the concern is not whether the business can keep operating, but first putting a stop to the numbers.
Then sort out the accounts thoroughly. Do not simply hand over the finance team's own Excel spreadsheets; reconcile against three sources of data: the payment channel's back-end transaction records, the platform settlement account's bank statements, and the merchant back-end settlement details. Put them together and classify the funds into four categories:
First, funds already settled to genuine merchants against orders. This portion is clean, and it must be traceable to specific merchants and specific orders.
Second, funds still sitting in the platform's accounts, or funds for which settlement has been initiated but has not yet reached the merchants' accounts. These are in transit, and the status of each transaction must be clearly stated.
Third, funds withheld by the platform itself or diverted to cover operating shortfalls. List these separately.
Fourth, whether the settlement recipients include "insiders": affiliated companies, employee accounts, shell merchants. If so, the nature of the matter may change.
Once these accounts are solidly established, whether it comes to returning illicit gains and making compensation, pleading guilty and accepting punishment, or negotiating sentencing with the prosecutor, you will have something in hand and a stronger footing.
Lawyer's Observations
If a rectification notice has already reached you, do not treat it as ordinary official correspondence and shelve it. It is often the last stop before criminal assessment begins, and every record of continued pooling of funds after the notice is, in practice, the most direct evidence of "knowledge."
For platforms that have already formed a fund pool, any restructuring must leave a documentary trail sufficient at least to prove that all funds were paid to genuine merchants and that the platform neither withheld nor misappropriated any of them. Only those who have been through it know how much that chain of evidence is worth on the day a case breaks.
