Legal consequences of illegal foreign exchange from typical cases in the foreign exchange field released by the Supreme People's Procuratorate

In practice, many people have such cognitive misunderstandings:

• Currency exchange or introduction behavior may be illegal, but it definitely does not constitute a criminal offense;

• One's own private currency exchange behavior is very concealed and will not be easily discovered by judicial authorities;

• Helping others to exchange currency does not make any profit, so it certainly does not constitute an administrative violation or criminal offense;

• Selling only US dollars and other foreign currencies to others to earn exchange rate differences should not be illegal;

• I don’t care whether my family and friends are making money by exchanging currency. I just give them my bank card number for free, and I haven’t done anything illegal. The customer asked me to introduce a channel for currency exchange. I happened to know someone, so I introduced them. I didn’t receive any money from it, so there shouldn’t be any risk. So, are there any legal risks in the above behaviors? If it is illegal, how should it be defined? Is it an administrative violation or a criminal offense? Where is the boundary between currency exchange behavior constituting an administrative violation or a criminal offense?

  On May 8, 2025, the Supreme People's Procuratorate and the State Administration of Foreign Exchange jointly released typical cases of reverse connection of execution in the foreign exchange field, which answered the above questions.

  This article interprets the guiding cases announced this time.

  Is it a crime to provide your own bank card to help others collect money?

  Among the typical cases released this time, there are 2 cases in which the perpetrators provide bank accounts for upstream companies engaged in illegal foreign exchange activities and receive money. So is this behavior an administrative violation or a criminal offense? How should it be characterized?

  "I just follow my friend's arrangements and help him collect money. I don't care how my friend connects with the upstream company, and I don't participate in it." Will I be at risk?

  Case 1: Li Mouyi suspected of illegal business operations and the case of reverse connection of criminal penalties

  Li Moujia took advantage of his convenience in cross-border logistics and transportation services between China and Vietnam to illegally exchange foreign exchange with Vietnamese Huang.

  During the cooperation between the two, Li Moujia arranged Li Mouyi to collect RMB from Chinese customers in China, and then transferred it to Li Moujia, who then transferred it to the bank card designated by Huang in China in exchange for Vietnamese dong.

  The procuratorate determined that Li Mouyi assisted Li Moujia in illegally engaging in fund settlement services and illegal foreign exchange transactions. Because of the relevant circumstances of mitigation of sentencing, the court finally made a decision not to prosecute him (constituting a crime) for minor circumstances.

  The court determined that Li Moujia was an accomplice and sentenced him to one year and three months in prison.

  Shao's Comment:

  In this case, Li B actually had a great sense of luck. He may have thought that he was just helping to collect the money according to Li A's instructions, and that these funds were not black money, but legitimate payments for goods, so there should be no risk. But in fact, he was helping with foreign exchange arbitrage.

  

  “My wife used my account to help someone collect money. I don’t think I lent the account to strangers, and I didn’t make any profit. Do I commit a crime?”

  Case 3: Chen Mouhong and Wu Mourong suspected of illegal business operations and reverse connection of criminal penalties

  Shao's Comment:

  According to the second item of Article 44 of the "Regulations on the Administration of Domestic Foreign Exchange Accounts", those who lend, collude with, or transfer foreign exchange accounts shall be fined up to 300,000 yuan. But after all, providing foreign exchange accounts does not mean directly engaging in illegal foreign exchange trading.

  Therefore, in practice, people who only provide foreign exchange accounts generally only constitute administrative violations and are often not held criminally liable.

  However, in this case, the court found Chen and her husband guilty of illegal business operations and sentenced them to fixed-term imprisonment.

  Although the decision not to prosecute the two relatives was made, it should be noted that the procuratorate also found that the two had committed a crime and made a decision not to prosecute them for minor circumstances (constituting a crime).

  Lawyer's Tips:

  Do not provide foreign exchange accounts to others to help collect payments out of "good intentions" or "help". Otherwise, even if you do not participate in specific illegal foreign exchange transactions, there may be legal risks of constituting a crime in the future.

  

  How high is the risk of introducing and helping to exchange foreign exchange in order to maintain customer relationships or facilitate transactions?

  Financial practitioners should be careful of the minefield of "introducing foreign exchange" - why do they face double penalties for helping customers exchange foreign exchange for free?

  Case 4: Case of reverse connection of criminal penalties for suspected illegal business operations by Fan, Zhao and Luo

  He Mouwei used the overseas account opening and foreign exchange channels accumulated during the promotion of insurance business to match and introduce mainland insurance customers with foreign exchange needs, and exchanged RMB with Hong Kong dollars and US dollars in both directions for paying overseas insurance premiums or domestic investment and consumption.

  At the suggestion of He Mouwei, Fan Mou and others used the sales of overseas insurance channels to buy and sell foreign exchange in disguised form in the form of "counter-knocking" between domestic and foreign countries.

  For He Mouwei, the court sentenced him to four years in prison and a fine of 4 million yuan.

  For Fan Mou and others, the procuratorate determined that because the circumstances of Fan Mou and others' crimes were minor, it made a decision not to prosecute (constitute a crime) against them. At the same time, according to the foreign exchange management regulations, Fan and others were fined an administrative fine ranging from 1.4 million to 2.8 million yuan for their illegal introduction of foreign exchange transactions without making a profit.

  Analysis by Lawyer Shao:

  Based on Lawyer Shao's experience in representing related cases,one of the common behavior patterns of illegal foreign exchange transactions is that intermediaries match parties who have a need for foreign exchange transactions and introduce foreign exchange transactions. For example, immigration companies, overseas property consultants, trusts, insurance, funds, banks and other financial industry practitioners, in the process of doing their own business, these groups often inevitably have customers asking if there are channels for foreign exchange transactions. In order to maintain customer relationships or facilitate transactions, they often act as information media to provide customers with trading information and introduce foreign exchange transactions.

  

  In this case, the insurance industry is mentioned. According to the regulations of the State Administration of Foreign Exchange, each domestic individual enjoys a convenient foreign exchange purchase quota equivalent to US$50,000 per year, which cannot be used for overseas real estate purchases, securities investment, purchase of life insurance and investment return dividend insurance and other capital projects that have not yet been opened.

  For example, for mainland residents, if they want to buy Hong Kong insurance, there will be many restrictions, such as:

  • Any insurance policy not signed in Hong Kong (such as signing and paying premiums on behalf of others in China) is illegal. The person must go to Hong Kong to sign the insurance policy and provide a Hong Kong and Macau Pass, entry record, etc. to prove that the insurance behavior took place in Hong Kong;

  • Personal purchase of foreign exchange may not be used to purchase overseas investment insurance (such as dividend insurance, universal insurance);

  • Some insurance companies require the insured to have Hong Kong residence or work status;

  • The premium must be paid directly to the insurance company account and cannot be transferred through an intermediary personal account, otherwise it may be deemed as an illegal operation;

  Case 5: Zhao Mouping and Yao Mou suspected of illegal business operations and reverse connection of criminal penalties

  Yao Mouchen undertook foreign exchange business for rubles and RMB in Russia, earning foreign exchange price differences or handling fees, illegally buying and selling foreign exchange of more than 24 million RMB, and illegally making a profit of 485,000 RMB.

  The court sentenced him to two years and three months in prison, suspended for three years, and fined him 500,000 RMB.

  Lawyer Shao's analysis:

  I have to complain first, this guy is really miserable. He worked in Russia for 6 years in foreign exchange business and only earned 485,000 RMB, which is equivalent to more than 6,000 RMB a month. 6 years later, the case was discovered, and he was sentenced to two years and three years suspended for illegal business operations, and fined 500,000 RMB. This is equivalent to working for 6 years and still losing 15,000 yuan.

  

  In the article "Is it reliable to find a regular and licensed foreign exchange company to exchange money? What are the legal risks of exchangers, introducers, and exchange companies? (Part 2)" (see the picture below), Lawyer Shao mentioned that if a foreign exchange company operating in a country or region without foreign exchange controls obtains the relevant qualification license, there is no problem in operating the foreign exchange business. Unless the business involves money laundering, it will generally not be investigated by foreign regulatory authorities.

  

  However, my country's criminal law is subject to personal jurisdiction. In other words, if a Chinese person violates domestic laws while abroad, there will also be criminal legal risks. As for the foreign exchange business, even if you operate a private foreign exchange company abroad and even obtain a license issued by the local government, it is of course legal to operate locally, but if you touch domestic money and do foreign exchange business in a "counter-knocking" manner, there will inevitably be criminal risks.

  Is there a legal risk in selling US dollars, Hong Kong dollars and other foreign exchange that you have legally earned to others?

  Is it illegal to resell legal foreign exchange?

  Case 6: A case of reverse connection of criminal penalties for a technology company suspected of illegal business operations

  From 2017 to 2021, Qi, the legal person of a freight forwarding company, colluded with several companies, used agricultural products that others could not refund as their own export goods, forged contracts, invoices and other materials, and asked Yao, the legal person of a technology company, to buy foreign exchange (about 113 million yuan) to forge overseas payment records, thereby defrauding the state of 245 million yuan in export tax rebates.

  Yao transferred the company's foreign exchange for selling electronic products to Qi through an overseas account, and assisted in the tax fraud at a price of several hundred yuan in extra commissions for every 10,000 US dollars.

  The court sentenced Qi to life imprisonment for the crime of defrauding export tax rebates.

  The procuratorate believes that there is insufficient evidence to determine that Yao Moumou constitutes the crime of illegal business operation, and will not prosecute.

  Shao Lawyer's Analysis:

  In this case, the principal offender was sentenced to life imprisonment, and the accomplice was not guilty.

  It is conceivable that the psychological state of the legal person of the technology company in this case must be like a roller coaster ride. Although the procuratorate finally determined that the legal person would not be prosecuted due to insufficient evidence, it was also a torment of more than two years from the incident to the verdict. Seeing that his friend was sentenced to life imprisonment, he must have been thinking about how many years he would have to step on the sewing machine.

  After the rant, let's analyze: Why did Yao Mou not constitute a crime?

  

  One ​​of the patterns of illegal business operations is to buy and sell foreign exchange, that is, the perpetrators sell foreign exchange bought at a low price at a high price for the purpose of profit to earn the interest difference. However, in this case, the perpetrators obtained all the foreign exchange from the sale of products, not from other places illegally at a low price. Moreover, the purpose of selling is to settle the exchange, rather than to continue to buy foreign exchange with the income from the sale to make a profit. Therefore, from the perspective of the elements of the crime of illegal business operations such as buying and selling foreign exchange, his behavior does not constitute the crime.

  However, Lawyer Shao also wants to remind: trading companies and other personnel must not engage in similar behavior just because the behavior in this case has not been determined by the procuratorate to constitute a crime. Because the case-handling personnel have different understandings of such models, there are many cases in practice where such behavior is considered a crime. In addition, even if it is ultimately determined that it is not a crime, there is still the risk of administrative punishment. For example, in this case, the technology company was fined 15 million yuan, which is not a small number.

  Written at the end

  As mentioned at the beginning of this article, many people have cognitive misunderstandings and believe that their foreign exchange transactions are very hidden, especially when they use the "counter-knocking" method, and they think that law enforcement agencies cannot find them. Some people simply think that even if they are discovered, they will only be fined at most.

  However, in practice, the amount of money involved in illegal foreign exchange transactions is often large. Once the amount exceeds 25 million yuan, or the profit exceeds 500,000 yuan, the person involved may face a fixed-term imprisonment of more than 5 years. However, for defense lawyers, with more experience in this type of case, they will find that, in terms of individual cases, they can always find a corresponding breakthrough and a certain degree of defense space. Even if the amount involved is large, they may be able to obtain a suspended sentence or even a non-prosecution result. With the development of financial technology, illegal foreign exchange has evolved from traditional cash transactions to more covert methods such as virtual currency transactions, POS machine smuggling and card swiping, and false trade contracts, and the amount involved is also increasing. Therefore, in recent years, my country has significantly increased its crackdown on illegal and criminal activities in the foreign exchange field. Against this background, we cannot be too optimistic about the future efforts of law enforcement agencies to punish foreign exchange-related illegal and criminal activities.

  Illegal exchange of currency will lead to funds being out of the regulatory system, forming abnormal cross-border capital flows, which may cause exchange rate fluctuations, loss of foreign exchange reserves and other problems. Therefore, as an individual, you must abide by the law, do not take chances, and must conduct foreign exchange transactions through legal channels.

  This article is an original article by Lawyer Shao Shiwei, which only represents the author's personal views and does not constitute legal advice or legal opinions on specific matters.