The Supreme People’s Procuratorate and the State Administration of Foreign Exchange Jointly Release Typical Cases on the Interface between Administrative Enforcement and Criminal Justice in the Foreign Exchange Sector
Special Disclaimer: This article is an original work by Attorney Shao Shiwei. It reflects only the author’s personal views and does not constitute legal advice or a legal opinion on any specific matter. For article reprints, legal consultations, or professional exchanges, please add: sswls66.
In practice, many people hold the followingmisconceptions：
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Currency exchange or referral activities may be unlawful, but they certainly do not amount to criminal offenses;
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My private currency exchange activities are discreet and unlikely to be detected by judicial authorities;
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I did not profit from helping others exchange currency, so my conduct certainly does not constitute an administrative violation or a criminal offense;
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Selling U.S. dollars or other foreign exchange that I solely own to others to earn exchange-rate spreads should not be unlawful;
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I do not care whether family members or friends are making money through currency exchange; I merely provided them with my bank account number free of charge, and I have not engaged in any unlawful conduct;
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A client asked me to help introduce channels for currency exchange. As I happened to know someone, I introduced them to each other. Since I did not receive any payment, there should be little risk;
Therefore,Do the above behaviors entail legal risks?
If the conduct is unlawful, how should it be characterized? Does it constitute an administrative violation or a criminal offense?
Where exactly lies the boundary between currency exchange activities that constitute administrative violations and those that amount to criminal offenses?
On May 8, 2025,the Supreme People’s Procuratorate and the State Administration of Foreign Exchange jointly released typical cases involving the reverse linkage between administrative enforcement and criminal proceedings in the foreign exchange sector, thereby addressing the foregoing questions.
This article provides an analysis of the guiding cases released on this occasion.
Author: Attorney Shao Shiwei
Can providing one’s own bank card to receive payments on behalf of others constitute a criminal offense?
Among the typical cases released this time, two involved individuals who provided their bank accounts to upstream operators engaged in illegal currency exchange activities for the purpose of receiving funds. Should such conduct be characterized as an administrative violation or a criminal offense? How should it be legally characterized?
“I merely followed my friend’s instructions to receive payments on his behalf; I was not involved in, nor did I concern myself with, how my friend coordinated with the upstream operator.” Would I still face legal risk?
Case 1: Reverse Linkage Between Administrative Enforcement and Criminal Proceedings in the Suspected Illegal Business Operations Case Involving Li Mouyi
Li Moujia leveraged the convenience afforded by his engagement in cross-border logistics and transportation services between China and Vietnam to illegally exchange foreign currency with Huang Mou, a Vietnamese national.
During their collaboration, Li Mou Jia arranged for Li Mou Yi to be responsible within the territory of China for collecting RMB from Chinese clients, which was then transferred to Li Mou Jia. Li Mou Jia subsequently transferred the funds to bank cards within China designated by Huang Mou, thereby exchanging them for Vietnamese dong.
The procuratorate determined thatLi Mou Yiprovided assistance to Li Mou Jia in illegally engaging in fund settlement services and illegally trading foreign exchange. Due to the presence of relevant mitigating circumstances warranting lighter or reduced sentencing, a final decision was made not to prosecute Li Mou Yi on grounds of minor circumstances (although the conduct constituted a crime).
The court determined thatLi Mou Jiawas an accessory offender and was sentenced toone year and three months of fixed-term imprisonment.
Attorney Shao’s Analysis:
In this case, Li Mou Yi acted with significant reliance on luck. He may have believed that he was merely assisting with fund collection pursuant to Li Mou Jia’s instructions, and that these funds were not illicit but rather legitimate payments for goods, thus posing little risk. In reality, however, his actions constituted aiding and abetting illegal foreign exchange offsetting transactions.
“My wife used my account to collect payments on behalf of others. I believed that I was not lending my account to strangers, and I did not derive any profit. Does my conduct constitute a crime?”
Case 2: Reverse linkage between criminal and administrative proceedings in the suspected illegal business operations case involving Chen Mouhong and Wu Mourong
Chen XX instructed her husband, Wu Moulin, to register as an individual industrial and commercial household and to open multiple personal foreign exchange settlement accounts at banks. Subsequently, through fabricated trade transactions, the aforementioned accounts wereprovided to an underground banking syndicate for the receipt of foreign exchange, and after converting the foreign exchange into RMB at the banks, the RMB funds were transferred to domestic third-party accounts designated by the underground banking syndicate, from which Chen XX collected handling fees and rebates provided by the banks for the foreign exchange conversions.
The court held that Chen XX and Wu Moulin were accessories to the crime. Chen XX was sentenced to four years and eight months of fixed-term imprisonment, and Wu Moulin was sentenced to one year and ten months of fixed-term imprisonment, with a two-year probation period.
In addition, Chen XX also instructed her relatives, Chen Mouhong and Wu Mourong, to establish e-commerce businesses and open bank settlement accounts with foreign exchange conversion functions for her use. However, considering that these two individuals did not derive any profit and were related by kinship, the procuratorate determined that their conduct constituted a crime but decided not to initiate public prosecution.
Attorney Shao’s Analysis:
Pursuant to Article 44, Item 2 of the Provisions on the Administration of Domestic and Overseas Foreign Exchange Accounts,the lending, commingled use, or transfer of foreign exchange accounts may be subject to a maximum fine of RMB 300,000.Nevertheless, providing foreign exchange accounts is not equivalent to directly engaging in illegal foreign exchange trading.
Therefore, in practice, individuals who merely provide foreign exchange accountsgenerally commit only administrative violations and are typically not subject to criminal liability.。
However, in this case, the court, with respect to Chen XX andHer husband was found to have committed the crime of illegal business operationsand was sentenced to fixed-term imprisonment.
Although non-prosecution decisions were made with respect to two relatives, it should be noted that the procuratorate likewise determined that both individuals had committed crimes, issuing non-prosecution decisions on the grounds that the circumstances were minor (despite constituting a crime).
Attorney’s Note:
Do not provide foreign exchange accounts to assist others in receiving payments out of “goodwill” or a desire to “help.” Otherwise, even if you did not participate in specific unlawful currency-exchange activities, you may still face legal risks of criminal liability in the future.
How high are the risks of introducing or assisting with currency exchanges in order to maintain client relationships or facilitate transactions?
The “introducing currency exchanges” pitfall that financial practitioners must beware of—why does providing gratuitous assistance to clients with currency exchanges expose one to dual penalties?
Case 3: Reverse linkage between criminal and administrative proceedings in the suspected illegal business operations case involving Fan Mou, Zhao Moumou, and Luo Moumou
He Mouwei leveraged resources accumulated during the promotion of insurance business, such as overseas account-opening and currency-exchange channels, to match and introduce mainland China insurance clients with currency-exchange needs, facilitating two-way conversions between RMB and HKD/USD for purposes including payment of overseas insurance premiums, domestic investment, and consumption.
At He Mouwei’s suggestion, Fan Mou and others utilizedoverseas insurance sales channels to conduct disguised foreign-exchange trading through cross-border “matching”arrangements.
With respect to He Mouwei, the court imposed a four-year fixed-term imprisonment and a fine of RMB 4 million.
With respect to Fan Mou and others, the procuratorate determined that, given the minor nature of their criminal conduct, it would issue adecision not to prosecute (although the elements of a crime were met).At the same time, with respect to Fan Mou and others’non-profit-makingillegal acts of introducing foreign exchange transactions, administrative fines ranging fromRMB 1.4 million to RMB 2.8 millionwere imposed in accordance with foreign exchange administration regulations.
Attorney Shao’s Analysis:
Based on Attorney Shao’s experience in handling related cases,one common modus operandi in illegal business operations involving foreign exchange trading is for intermediaries to broker between parties seeking currency exchange by introducing foreign exchange transactions. Examples includeimmigration companies, overseas property consultants, and practitioners in the financial industry, such as those in trust, insurance, fund, and banking sectors.In the course of carrying out their primary business activities, such groups are often inevitably approached by clients inquiring about channels for foreign exchange conversion. In order to maintain client relationships or facilitate transactions, they frequently act as information intermediaries, providing buy-sell information and introducing parties for foreign exchange transactions.The case in question pertains to the insurance industry. According to the regulations of the State Administration of Foreign Exchange (SAFE), each individual within the mainland is entitled to an annual facilitated foreign exchange purchase quota equivalent to USD 50,000. This quota shall not be used for overseas property purchases, securities investments,the purchase of life insurance and investment-linked endowment insurance policies with dividend features,or other capital account items that have not yet been opened.
For example, mainland residents face numerous restrictions when seeking to purchase Hong Kong insurance policies, including but not limited to the following:
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Any insurance policy not signed in person within Hong Kong (such as those signed or premiums paid on behalf of the insured within the mainland) is considered illegal. The policyholder must personally travel to Hong Kong to sign the policy and provide documentation, such as an Exit-Entry Permit for Travelling to and from Hong Kong and Macao and entry records, to prove that the insurance application occurred in Hong Kong;
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Individual foreign exchange purchases shall not be used to purchase overseas investment-type insurance products (such as participating policies and universal life insurance);
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Certain insurance companies require the policyholder to hold Hong Kong residency or work status;
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Premiums must be paid directly into the insurance company’s account and may not be transferred through an intermediary’s personal account; otherwise, such actions may be deemed illegal operations;
Meanwhile, some insurance agents, due to various reasons(such as performance pressure, maintaining client relationships, or profiting from their informational advantage),，whether for compensation or gratuitouslyassisting clients with foreign exchange conversions, or matching clients to buy and sell foreign exchange through offsetting transactions. However, such conduct constitutes the crime of illegal business operations involving the trading of foreign exchange. Even if it involvesuncompensated introductions, judicial authorities may deem the circumstances minor and decide not to prosecute, thereby exempting the individual from criminal liability; nevertheless, the individual will still facesubstantial administrative fines。
Can Chinese nationals operating private currency exchange companies abroad avoid domestic legal risks?
Why do overseas lawful businesses still entail domestic criminal risks?
Case 4: Reverse Coordination Between Criminal and Administrative Proceedings in the Suspected Illegal Business Operations Case Involving Zhao Mouping and Yao Mou
Yao Mouchen engaged in the exchange of rubles for renminbi in Russia, earning profits from foreign exchange spreads or fees. He illegally traded foreign exchange totaling more than RMB 24 million, with illegal gains amounting to RMB 485,000.
The court sentenced him to two years and three months of fixed-term imprisonment, suspended for three years, and imposed a fine of RMB 500,000.
Attorney Shao’s Analysis:
I must first express my sympathy: this individual truly had a misfortune. He conducted currency exchange business in Russia for six years, earning only RMB 485,000, which averages to just over RMB 6,000 per month. Six years later, when the case came to light, he was convicted of the crime of illegal business operations, receiving a sentence of two years’ imprisonment suspended for three years, along with a fine of RMB 500,000. In effect,after six years of work, he ended up with a net loss of RMB 15,000.
In the article titled “Is It Reliable to Exchange Currency Through Licensed Foreign Exchange Companies Abroad? What Are the Legal Risks for the Exchanger, the Introducer, and the Exchange Company? (Part II)” (see figure below), Attorney Shao noted that foreign exchange companies operating in countries or regions without foreign exchange controls, provided they have obtained the relevant qualifications and licenses, do not face inherent legal issues in conducting foreign exchange business. Unless the business activities involve money laundering, such companies are generally not subject to investigation by foreign regulatory authorities.
However, the Criminal Law of the People’s Republic of China applies on the basis of personal jurisdiction. This means that if a Chinese national commits acts abroad that violate domestic legal provisions, they may still face criminal liability. With respect to foreign exchange business, even if an individual operates a private foreign exchange company abroad and has obtained the locally issued permits and licenses, making such operations lawful in that jurisdiction, ifdomestic funds are involved, and foreign exchange transactions are conducted through “matched offset” arrangements, criminal liability will inevitably arise.
Are there legal risks in selling legally earned foreign currency, such as U.S. dollars or Hong Kong dollars, to others?
Is the Resale of Legally Obtained Foreign Currency Also Unlawful?
Case 5: Reverse Coordination Between Criminal and Administrative Proceedings in a Case Involving Suspected Illegal Business Operations by a Technology Company
From 2017 to 2021, Qi Moumou, the legal representative of a freight forwarding company, colluded with multiple enterprises to disguise agricultural products ineligible for tax refunds as their own exported goods, forged contracts, invoices, and other documents, and purchased foreign exchange (approximately RMB 113 million) from Yao Moumou, the legal representative of a technology company, to fabricate records of overseas receipts, thereby fraudulently obtaining state export tax refunds amounting to RMB 245 million.
Yao Moumou transferred foreign exchange proceeds from the sale of electronic products through offshore accounts to Qi Moumou, charging an additional several hundred yuan per USD 10,000 as a facilitation fee to assist in the tax fraud.
The court convicted Qi Moumou of the crime of fraudulently obtaining export tax refunds and sentenced him tolife imprisonment.
The procuratorate held that the evidence was insufficient to establish that Yao Moumou committed the crime of illegal business operations.Non-prosecution.
Attorney Shao’s Analysis:
In this case,the principal offender was sentenced to life imprisonment, while the accessory was acquitted.。
It is easy to imagine that the psychological state of the legal representative of the technology company in this case must have been like riding a roller coaster. Although the procuratorate ultimately decided not to prosecute the legal representative due to insufficient evidence, the period from the initiation of the case to the judgment still involved more than two years of ordeal. Watching his colleague being sentenced to life imprisonment, he must have constantly worried about how many years he would spend in prison.
Having voiced these concerns, let us proceed with the analysis:Why does Yao’s conduct not constitute a crime?？
One form of the crime of illegal business operations involves the speculative buying and selling of foreign exchange, whereby the actor, for the purpose of profit, purchases foreign exchange at a low price and resells it at a high price to earn the spread. However, in this case, all the foreign exchange held by the actor was obtained from the sale of products, rather than being illegally acquired at a low price from other sources. Furthermore, the purpose of the sale was to convert the proceeds into local currency, not to reinvest the revenue into purchasing more foreign exchange for further profit. Therefore, in terms of the constituent elements of the crime of illegal business operations involving the trading of foreign exchange, the conduct does not satisfy the requirements for this offense.
Nevertheless, Attorney Shao wishes to issue a reminder: personnel of trading companies and similar entities must not engage in similar conduct merely because the procuratorate did not find such conduct criminal in this particular case. Because law enforcement and judicial personnel do not have a uniform understanding of such models, there are numerous cases in practice where such conduct has been determined to constitute a crime. In addition,even if the conduct is ultimately determined not to constitute a crime, there remains a risk of administrative penalties. For example, in this case, the technology company was fined RMB 15 million, which is not a insignificant amount.
Concluding Remarks
As stated at the beginning of this article, many people hold misconceptions, believing that their foreign exchange transactions are highly concealed, especially when using "matched offset" methods, and assuming that law enforcement authorities cannot detect them. Others simply believe that even if detected, the maximum consequence would be a fine.
However, in practice, cases of illegal business operations involving the buying and selling of foreign exchange often involve substantial amounts. Once the amount exceeds RMB 25 million, or the illicit gains exceed RMB 500,000, the individuals involved may face fixed-term imprisonment of more than five years. Nevertheless,for defense lawyers, with accumulated experience in handling such cases, it becomes evident that breakthroughs can always be sought on a case-by-case basis,allowing for a certain degree of defensive space. Even if the amounts involved are large, it is possible to strive for a suspended sentence, or even achieve a outcome of non-prosecution.
With the development of financial technology, methods of illegal foreign exchange have evolved from traditional cash transactions tovirtual asset transactions, smuggling POS machines abroad for card swiping, and fictitious trade contracts,among other more concealed methods, with the amounts involved becoming increasingly larger. Therefore, in recent years, China has significantly intensified its crackdown on illegal and criminal activities in the foreign exchange sector. Against this backdrop,we should not be overly optimistic about the intensity with which law enforcement authorities will punish foreign exchange-related illegal and criminal activities in the future.
Illegal foreign exchange activities cause funds to escape the regulatory system, forming abnormal cross-border capital flows, which may trigger issues such as exchange rate fluctuations and loss of foreign exchange reserves. Therefore, as individuals, it is essential to abide by laws and regulations, avoid relying on luck, and conduct foreign exchange transactions only through legal channels.
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