In practice, many people have this cognitive bias:
That foreign exchange or introduction behaviors may be illegal, but absolutely do not constitute criminal offenses;
That their private foreign exchange activities are very hidden and will not easily be discovered by law enforcement agencies;
That helping others exchange foreign currency without profit definitely does not constitute administrative violations or criminal offenses;
That selling their only US dollars and other foreign exchange to others to earn exchange rate differences should not be illegal;
That whether family or friends are making money through foreign exchange is not my concern; I am just providing them with my bank account number for free, and I have not done anything illegal;
That when a client asks for help in introducing foreign exchange channels, and I just happen to know someone, introducing them to each other shouldn't involve any risk since I am not charging anything for it;
So, does the above behavior have legal risks?
If it is illegal, how should it be classified? Is it an administrative violation or a criminal offense?
What are the boundaries for foreign exchange activities constituting administrative violations or criminal offenses?
On May 8, 2025, the Supreme People's Procuratorate and the State Administration of Foreign Exchange jointly released typical cases of reverse connection between administrative and criminal enforcement in the foreign exchange field, addressing the above questions.
This article interprets the guiding cases published this time.
Providing your bank card to help others collect payments actually constitutes a crime?
In the typical cases released this time, there are two instances where the individuals provided bank accounts for illegal foreign exchange activities, receiving funds. So, is this behavior an administrative violation or a criminal offense? How should it be classified?
"I am just following my friend's arrangement to help him collect payments. I don't care about how he and the supplier connect, and I am not involved. Will I have risks?"
Case 1: Li is suspected of illegal business activities in the reverse connection case.
Li utilized the convenience of his engagement in cross-border logistics services between China and Vietnam to illegally exchange foreign exchange with a Vietnamese national.
During their cooperation, Li arranged for Li to be responsible for collecting RMB from Chinese clients within China and then transferring it to Li, who then transferred it to a designated bank card in China to exchange for Vietnamese dong.
The procuratorate determined that Li provided assistance to Li's illegal financial settlement service and illegal foreign exchange transaction activities. Due to relevant mitigating circumstances, it ultimately made a decision of non-prosecution (for criminal conviction) due to minor circumstances.
The court determined that Li was an accomplice and sentenced him to one year and three months in prison.
Lawyer Shao's analysis:
In this case, Li actually harbored a significant sense of luck. He might think that he was merely helping to collect payments per Li's instructions, and that these funds were not dirty money, but legitimate business payments, so he should not have any risks. However, in reality, he was engaging in helping with foreign exchange counter-trade.
"My wife uses my account to help others collect payments. I believe I am not lending my account to strangers, and I have not profited. Am I committing a crime?"
Case 2: Chen and Wu are suspected of illegal business activities in the reverse connection case.
Chen had her husband register a sole proprietorship and open multiple personal foreign exchange settlement accounts at a bank, then used a fictitious trade form to provide these accounts to an underground money laundering gang for receiving foreign exchange, and transferred RMB to the designated domestic account of the underground money laundering gang after settling at the bank, collecting handling fees and rebates given by the bank.
The court found that Chen and Wu were accomplices, sentencing Chen to four years and eight months, and Wu to one year and ten months with a two-year suspended sentence.
In addition, Chen had her relatives Chen and Wu set up e-commerce businesses and bank settlement accounts with foreign exchange settlement functions for her use, but the procuratorate considered that the two did not profit and were relatives, recognizing that they constituted a crime but decided not to prosecute them.
Lawyer Shao's analysis:
According to Article 44, Section 2 of the (Regulations on the Management of Foreign Exchange Accounts), lending, colluding, or transferring foreign exchange accounts can result in a maximum fine of 300,000. However, providing foreign exchange accounts does not equal directly engaging in illegal buying and selling of foreign exchange.
Thus, in practice, individuals who only provide foreign exchange accounts generally only constitute administrative violations and are often not subject to criminal liability.
But in this case, the court found that both Chen and her husband constituted illegal business activities and sentenced them to prison.
Although a non-prosecution decision was made for the two relatives, it should be noted that the procuratorate also recognized that the two constituted a crime, resulting in a non-prosecution decision due to minor circumstances (for criminal conviction).
Lawyer's reminder:
Do not provide foreign exchange accounts to help others collect payments out of 'good intentions' or 'to help.' Otherwise, even if you did not participate in specific illegal foreign exchange activities, there may still be legal risks of criminal conviction in the future.
How high are the risks of introducing or helping foreign exchange transactions to maintain customer relationships or facilitate transactions?
Financial practitioners need to be wary of the 'introducing foreign exchange' minefield—why do they face double penalties for helping clients exchange currency for free?
Case 3: Fan, Zhao, and Luo are suspected of illegal business activities in the reverse connection case.
He Wei utilized the resources accumulated during the promotion of insurance business, such as overseas accounts and foreign exchange channels, to connect mainland insurance clients with foreign exchange needs, facilitating two-way exchanges between RMB and HKD, USD for paying overseas premiums or for domestic investment and consumption.
Under the proposal of He Wei, Fan and others used overseas insurance sales channels to indirectly buy and sell foreign exchange in a 'counter-trade' manner.
For He Wei, the court sentenced him to four years in prison and fined him 4 million.
For Fan and others, the procuratorate determined that due to the minor criminal circumstances of Fan and others, it decided not to prosecute (for criminal conviction). At the same time, for the illegal introduction of foreign exchange transactions that did not yield profit, an administrative fine ranging from 1.4 million to 2.8 million was imposed in accordance with foreign exchange management regulations.
Lawyer Shao's analysis:
Based on Lawyer Shao's experience in handling related cases, one common behavioral pattern of illegal foreign exchange business is that intermediaries facilitate exchanges between parties with foreign exchange needs, introducing foreign exchange transactions. For example, immigration companies, overseas real estate consultants, trusts, insurance, funds, and practitioners in financial industries often inevitably encounter customer inquiries about foreign exchange channels. To maintain customer relationships or facilitate transactions, they often act as information intermediaries, providing trading information and introducing foreign exchange transactions.
In this case, the insurance industry is mentioned. According to the regulations of the State Administration of Foreign Exchange, individuals in China are entitled to a facilitative purchase limit of the equivalent of 50,000 US dollars per year, which cannot be used for overseas real estate purchases, securities investments, purchasing life insurance, and investment-type return dividend insurance and other capital projects that have not been opened.
For example, for mainland residents, if they want to purchase Hong Kong insurance, there will be many restrictions, such as:
Any insurance policy not signed locally in Hong Kong (such as domestic signing or premium payment) is illegal. The insured must go to Hong Kong personally to sign the insurance policy and provide documents such as a Hong Kong and Macau travel permit, entry records, etc., to prove that the insurance action occurred in Hong Kong.
Personal foreign exchange purchases cannot be used for purchasing overseas investment-type insurance (such as dividend insurance, universal insurance);
Some insurance companies require the policyholder to have residency or work status in Hong Kong;
Premiums must be paid directly to the insurance company's account and cannot be transferred through the intermediary's personal account; otherwise, it may be deemed illegal operation;
Some insurance agents, for various reasons (such as performance pressure, maintaining customer relationships, or profiting from their informational advantages), help clients exchange currency, either for a fee or not. However, this behavior constitutes illegal business activities related to foreign exchange transactions, and even if the introduction is unpaid, it may be recognized by judicial authorities as a minor circumstance and not prosecuted, but they will still face huge administrative fines.
Can Chinese citizens open private foreign exchange companies abroad to evade domestic legal risks?
Why do overseas legal businesses still involve domestic criminal risks?
Case 4: Zhao and Yao are suspected of illegal business activities in the reverse connection case.
Yao Cheng undertook the business of exchanging rubles for RMB in Russia, profiting from the foreign exchange difference or handling fees, illegally buying and selling more than 24 million RMB worth of foreign exchange, illegally earning 485,000 yuan.
The court sentenced him to two years and three months in prison, with a three-year suspended sentence, and fined him 500,000 RMB.
Lawyer Shao's analysis:
I have to complain first; this guy is indeed a bit miserable. He worked in foreign exchange for six years in Russia and only made 485,000, which is equivalent to just over 6,000 yuan a month. After six years, when the case broke, he was sentenced to two years and three months with a suspended sentence, and fined 500,000. So essentially, after working for six years, he lost 15,000.
In the article (Is it reliable to find foreign exchange companies with proper licenses abroad? What are the legal risks for foreign exchange traders, introducers, and foreign exchange companies? (Part 2)), Lawyer Shao mentioned that if a foreign exchange company operates in a country or region without foreign exchange control and obtains the relevant qualifications and licenses, there is no problem in conducting foreign exchange business. Unless the business content involves money laundering, it generally will not be investigated by foreign regulatory authorities.
In the article titled (Is it reliable to find foreign exchange companies with proper licenses abroad? What are the legal risks for foreign exchange traders, introducers, and foreign exchange companies? (Part 2)), Lawyer Shao mentioned that if a foreign exchange company operates in a country or region without foreign exchange control and obtains the relevant qualifications and licenses, there is no problem in conducting foreign exchange business. Unless the business content involves money laundering, it generally will not be investigated by foreign regulatory authorities.
However, China's criminal law is subject to personal jurisdiction. This means that if a Chinese person commits acts that violate domestic laws abroad, there will still be criminal legal risks. In terms of foreign exchange business, even if a private foreign exchange company is operated abroad and has obtained local licenses, conducting business there is legal. However, if domestic money is involved in 'counter-trade' foreign exchange business, criminal risks will inevitably exist.
Is there a legal risk in selling legally earned foreign exchange such as US dollars and Hong Kong dollars to others?
Is it illegal to legally resell foreign exchange?
Case 5: A technology company is suspected of illegal business activities in the reverse connection case.
From 2017 to 2021, the legal person of a freight forwarding company, Qi, colluded with multiple companies to use agricultural products that others could not refund taxes for as their own export goods, forging contracts, invoices, and other materials, and sought to purchase foreign exchange (about 113 million yuan) from technology company legal person Yao to fabricate overseas payment records to defraud the state of export tax refunds of 245 million yuan.
Yao transferred the foreign exchange earned from selling electronic products to Qi via overseas accounts, assisting in completing the tax fraud at an additional fee of several hundred yuan for every ten thousand dollars.
The court sentenced Qi to life imprisonment for fraudulently obtaining export tax refunds.
The procuratorate believed that there was insufficient evidence to conclude that Yao committed illegal business activities and decided not to prosecute.
Lawyer Shao's analysis:
In this case, the main offender was sentenced to life imprisonment, while the accomplice was found not guilty.
It is conceivable that the mental state of the legal person of the technology company in this case must have been like riding a roller coaster. Although the procuratorate ultimately decided not to prosecute due to insufficient evidence, from the occurrence of the case to the judgment, it was a torment of more than two years. Seeing a partner sentenced to life imprisonment, they must have been thinking about how many years they would be stuck on the sewing machine.
After the complaints, let's analyze: why is Yao not guilty?
One of the patterns of illegal business activities is the buying and selling of foreign exchange, where the actor purchases foreign exchange at a low price and sells it at a high price for profit. However, in this case, all the foreign exchange held by the actor was obtained from the sale of products rather than being illegally purchased at a low price from other sources. Moreover, the purpose of selling was also to settle foreign exchange rather than using the sales income to buy foreign exchange for profit. Therefore, in terms of the elements of the crime of illegal business activities related to foreign exchange, the behavior does not constitute this crime.
However, Lawyer Shao also reminds: personnel from trading companies must not engage in similar behaviors just because the procuratorate did not recognize the behavior in this case as a crime. This is because the understanding of this type of model among case handlers is not uniform, and there are many cases in practice where such behavior has been recognized as a crime. Furthermore, even if it is ultimately determined not to constitute a crime, there are risks of administrative penalties. For example, in this case, the technology company was fined 15 million, which is not a small amount.
Written at last
As mentioned at the beginning of this article, many people have cognitive biases, believing that their foreign exchange activities are very hidden, especially when using 'counter-trade' methods, thinking that law enforcement agencies cannot discover them. Some people simply believe that even if discovered, they would only face fines.
However, in practice, illegal foreign exchange activities often involve large amounts of money. Once the amount exceeds 25 million or the profit exceeds 500,000, the parties may face more than five years of imprisonment. However, for defense lawyers, as experience accumulates in handling such cases, it becomes possible to find corresponding breakthroughs and seek a certain degree of defense space for individual cases, even if large amounts are involved, it may still be possible to obtain a suspended sentence or even a non-prosecution result.
With the development of financial technology, illegal foreign exchange methods have evolved from traditional cash transactions to more hidden methods such as virtual currency transactions, POS machine smuggling abroad, and fake trade contracts, with the amounts involved also increasing dramatically. Therefore, in recent years, China's crackdown on illegal foreign exchange activities has also significantly intensified. Against this backdrop, we should not be overly optimistic about the future enforcement agencies’ efforts to combat illegal foreign exchange activities.
Illegal foreign exchange activities can lead to funds escaping regulatory systems, resulting in abnormal cross-border capital flows, which may trigger issues such as exchange rate fluctuations and foreign exchange reserve depletion. Therefore, as individuals, it is essential to abide by the law and not harbor a sense of luck; foreign exchange transactions must be conducted through legal channels.
Author of this article: Lawyer Shao Shiwei