Police Allege Money Launderers Are Using Chinese eCommerce Sites To Move Money

Chinese authorities have made a series of arrests alleging more than $2 billion was laundered at offshore gambling sites through faux eCommerce purchases.

The Financial Times (FT) reported police acknowledged that in a scheme to avoid China’s tough financial regulations, thieves have targeted sites including Pinduoduo Inc., the Shanghai-based company that calls itself the world’s largest online platform.

Under the scam, alleged cybercriminals make the online purchases while the same sum is then credited to their gambling account.

The People’s Bank of China, the country’s central bank, told the FT it is investigating the networks enabling these cross-border transfers.

In one large case in Wuxi, a city in eastern China, investigators uncovered 600 million fake packages had been entered into the shipper’s tracking systems by employees to complete the transactions, FT reported.

Ni Shiyuan, a police officer in the Public Security Bureau, told the news service the government should urge these platforms, especially new social eCommerce platforms, to strengthen internal controls.

In response to an inquiry from the FT, a Pinduoduo spokesperson said gambling syndicates operating under false pretenses on shopping platforms is an industry-wide problem.

The company said it has referred more than 1,000 suspected incidents to police since last year, and more than 200 suspects have been arrested.

Money laundering carries a maximum penalty of 14 years in prison as well as a fine.

Alibaba and JD.com, two of China’s largest shopping sites, declined to comment.

Zhao Yongdong, a self-described gambler, told the newspaper he became addicted to online games during the COVID-19 lockdown. He transferred 110,000 Chinese Yuan ($16,280) through Pinduoduo purchases this year, he said.

Another gambler, Wang Kai, told FT he had made 477 purchases through Pinduoduo to move the money.

The Pinduoduo spokesperson said some gamblers had come to its offices to demand their money back.

“As gambling is illegal in China, their cases were referred to the police for further investigation,” the spokesperson said.

In June, the Nikkei Asian Review reported that Chinese officials are considering an East Asia digital currency in a bid to combat money laundering.  

A member of the European Central Bank, the European Union’s central bank, told the FT such a currency would allow them to register transfers between users, thereby providing protection against money laundering and other illicit uses.

The plan would also establish a cross-border payment network that would use digital wallets tied to a free-trade agreement negotiated by Japan, China and South Korea, the publication reported.