By Dan Byrne
Chinese authorities have discovered that online shopping sites have been used to launder over €1.7 billion to offshore gambling companies.
Multiple allegations and arrests have been made within China in the last few months in relation to these cases, the Financial Times reports.
Local police forces say that many purchases on well-known Chinese online shopping websites are fake, with the money instead intended for topping up a given user’s online gambling account.
Gambling in all forms has been outlawed in China (excluding Hong Kong and Macau) since 1949, but the internet offers possible connections to offshore gambling agencies for Chinese citizens.
Networks facilitating this offshore gambling will typically involve Chinese gamblers – who will place and pay for fake orders on popular shopping sites – and insiders in those shopping companies – who will ensure the money is credited to their offshore gambling account instead.
The insiders will also create fake packages and tracking numbers to support the legitimacy of the transactions.
According to the FT, police in the city of Wuxi near Shanghai uncovered 600 million of these fake packages and tracking numbers. Some of those tracking numbers were also used in other Chinese cities.
China’s second-largest online marketplace, Pinduoduo, has been caught up in the scandal, as billions of Yuan are said to have been funnelled through its platform.
A spokesperson for the company acknowledged that the issue exists, but that it is an “industry-wide problem”.
She advised that Pinduoduo’s compliance with police investigations has resulted in more than 1,000 leads being handed to authorities and more than 200 arrests.
The company said that any transactions deemed fraudulent or illegal are not counted towards figures like its skyrocketing gross merchandise volume (GMV) – the total value of all sales in a given time. The company regularly touts this figure in public reporting.
Individual gamblers who have used Pinduoduo are finding their submitted funds are disappearing because of the investigations, with several protesting outside the company’s headquarters to demand reimbursement.
Given the illegality of gambling, Pinduoduo has said it refers any such matters to police.
The People’s Bank of China have since begun a publicity campaign aimed at attacking and controlling gambling through offshore agencies.
Share this on:
Follow us on:
We hope you enjoyed reading this article
If you would like unlimited access to AML Intelligence premium articles, newsletter delivered twice a week, access to our Global Bank Fines and Penalties database, free access to Boardroom Series events and much more, select one of our subscription options and become a subscriber!
