Web3 Compliance Research Group: Understanding the Risks and Countermeasures of "Self-Laundering" Criminal Offenses in One Article

With the release of the XIth Amendment to the Criminal Law and the latest judicial interpretation (the 2024 Judicial Interpretation), this old rule has been completely overturned. Now, under certain circumstances, a suspect's handling of their criminal proceeds will also constitute an independent "money laundering crime."

By Zhang Yonghai, Attorney at Mankiw Blockchain Legal Services

What is "self-laundering"?

Recently, we've noticed many clients asking the same question: According to the latest legal provisions, the act of laundering one's own criminal proceeds, known as "self-laundering," now constitutes a separate money laundering offense. Previously, we often said "no punishment after the fact," meaning that if a criminal hid or spent the stolen money, it was considered a "natural continuation" of the upstream crime and should not be designated as a separate money laundering offense.

However, with the release of the XIth Amendment to the Criminal Law and the latest judicial interpretation (the 2024 Judicial Interpretation), this old rule has been completely overturned. Now, under certain circumstances, a suspect's handling of their criminal proceeds can constitute a separate "money laundering" offense. This is equivalent to being convicted of the underlying crime (such as financial fraud) and then being charged with money laundering, resulting in the combined punishment of both offenses.

Core Problems and Risk Boundaries

In judicial practice, how to distinguish "self-laundering" from the "natural continuation" of upstream crimes has always been the key and difficulty of defense.

Simply put, if the user merely holds, hides the stolen money or uses it for general living expenses, it is usually regarded as the "natural continuation" of the upstream crime and does not constitute the crime of money laundering; but once your disposal behavior "goes beyond the natural scope of the upstream crime" and "infringes on new legal interests" - mainly the national financial management order and the judicial organs' work of recovering stolen money, it may be deemed as the crime of money laundering.

The key to determining whether self-laundering constitutes "self-laundering" lies in the perpetrator's subjective intent to conceal and hide the proceeds of crime and their source. For example, transferring illicit funds to the accounts of relatives and friends, conducting complex transactions using virtual assets, exchanging currency through underground banks, or transferring funds to unrelated corporate accounts pose a higher risk. Depositing illicit funds into a personal account, using them solely for daily consumption, or transferring them directly between personal bank accounts generally carries a lower risk.

It is worth noting that with the increasingly stringent legal regulations, the criminal risks currently faced by both individuals and enterprises are unprecedented. It is urgent to enhance legal awareness and prudently clarify the boundaries of behavior.

Risk prevention and defense strategies

• For enterprises

To avoid the risk of being involved in money laundering , or actively laundering it , the primary focus is to cultivate a compliance consciousness and proactively prepare for the worst. Companies should establish a comprehensive anti-money laundering internal control culture from management down to the grassroots level, improve internal policies and procedures, strengthen due diligence on customer identities, avoid providing services to unidentified individuals or those using pseudonyms, and implement enhanced management measures for high-risk customers and transactions.

For high-risk businesses such as virtual assets, third-party payments, and large-scale cross-border transactions, a professional monitoring mechanism must be established to promptly identify and report abnormal trading behavior; once suspicious situations such as short-term large-scale or high-frequency transactions are discovered in an account, an immediate investigation should be conducted, restrictive measures should be taken, and the regulatory authorities should be proactively reported.

• For individuals

The key to staying away from the "self-laundering" trap is to avoid touching funds of unknown origin and ensure that the handling of funds is natural and reasonable, including never using other people's accounts to receive or pay money, avoiding transactions that are obviously inconsistent with one's own income and consumption habits, and handling cash with caution to prevent the flow of funds from being concealed through dispersed deposits or frequent transfers.

If you are unfortunately accused of "self-laundering", the defense strategy you choose from a lawyer should revolve around the two key points of "independent legal interest infringement" and "subjective intent" . For example: argue that the fund disposal behavior does not substantially hinder the state's recovery of stolen money or infringe on financial order, but is merely a natural continuation of the upstream crime and should not be convicted separately; provide reasonable grounds to refute the intention of "covering up and concealing" or prove that the perpetrator lacks knowledge of the illegal nature of the funds; you can also invoke the "principle of consistency between crime, responsibility and punishment", emphasizing that if the money laundering behavior is closely related to the upstream crime and the circumstances are minor, money laundering should be treated as an aggravating circumstance of the upstream crime to reflect the modesty of criminal law and strive for a reduction in the overall sentence.

Why are the new regulatory changes so important?

The new regulations are crucial because they bring about three fundamental changes:

• First, the crackdown has been unprecedentedly strengthened, completely changing the previous concept of "focusing on upstream crimes and neglecting subsequent money laundering." By making "self-laundering" an independent crime, "double punishment" has been achieved, greatly enhancing the deterrent effect of the law.
• Secondly, law enforcement strategies have undergone profound changes. The Supreme People's Procuratorate has implemented a "double investigation" mechanism, which requires that money laundering clues must be examined simultaneously when handling upstream cases. This shift has directly driven an explosive growth in the number of money laundering prosecutions, with the number of prosecutions in 2023 surging to nearly 20 times that of 2019.
• Finally, this marks that China has fully aligned itself with international standards in the field of anti-money laundering. Making "self-laundering" an independent crime is not only an inevitable requirement for fulfilling international obligations, but also a core measure to proactively safeguard national financial security and integrate into the global governance system.

Summarize:

The criminalization of self-laundering is an irreversible legal trend, necessitating heightened vigilance for individuals and businesses alike. For lawyers, this will be one of the key areas of future criminal defense. A deep understanding of the judicial boundaries of "independent infringement of legal interests" is crucial to securing the maximum legal benefits for clients facing dual charges.

Disclaimer: As a blockchain information platform, the articles published on this site solely reflect the personal views of the authors and guests and do not represent the position of Web3Caff. The information within these articles is for reference only and does not constitute any investment advice or offer. Please comply with the relevant laws and regulations of your country or region.