Chinese Banks Bolster Digital Yuan Security to Fight Money Laundering

Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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July 3, 2024

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Chinese banks say they will fight back against digital yuan-themed money laundering and identity theft schemes by rolling out new security protocols.

Per the Beijing Business Daily, “some banks” have “taken action” following updated CBDC guidelines.

These guidelines pertain to anti-money laundering and combating the financing of terrorism efforts.

Chinese Banks Step Up Digital Yuan Security

The group of banks includes the state-owned Postal Savings Bank of China. The bank will now require wallet holders to submit “verification” and authenticate wallets with personal data.

This includes customers’ names, gender, nationality, occupation, residential or work addresses, and contact telephone numbers.

The bank’s customers will need to prove their identity using identity documents. Banks will also perform checks to ensure all of these documents are valid.

The bank explained that in cases where customer identity information is “incomplete” or proof of ID documents are expired, it will take action.

If customers fail to respond within 90 days, the bank will “take measures.” These include “reducing transaction limits and restricting financial services” on CBDC wallets.

The Postal Savings Bank of China said that customers could lift these restrictions by submitting their data via the digital yuan app or mobile banking platforms.

They can also submit data and ID documentation at bank branches nationwide.

China’s services activity expanded at the slowest pace in 8 months in June, a private gauge showed, amid concerns over the economy’s outlook as a property downturn extends to drag on confidence https://t.co/G7o4eriYTW

— Bloomberg Markets (@markets) July 3, 2024

An unnamed customer stated that the “digital yuan” platform “also needs to check whether” the “real” user of a wallet was making transactions. “This increases our sense of security,” the customer explained.

The move will raise questions about privacy. The central People’s Bank of China has insisted that its CBDC will build in anonymity-protecting features.

However, bankers are now claiming that “especially” in the case of anonymous CBDC wallets, “it is important to balance user privacy protection with risk management.”

Criminals Target Digital Yuan Funds

The media outlet quoted a banking industry expert as stating that the Postal Savings Bank was responding to a rise in criminal activity.

The expert said criminals have “set their sights on the digital yuan,” and have been “luring financial consumers” into fraudulent schemes.

Financial sector experts said they expect other Chinese commercial banks to follow suit.

Police in Inner Mongolia recently reported that residents in the region had lost over 50,000 yuan ($6,900) in digital yuan by scammers pretending to operate bona fide loan programs.

Experts said that the Postal Savings Bank’s move was mainly aimed at stopping criminals from using CBDC wallets.

Mobile Operators Issue Warning

In late June, the telecoms giant Hunan Mobile warned its users to be aware of a rise in digital yuan-themed scams.

The firm said criminals were posing as bank officials, operating fake customer service centers to steal digital yuan funds.

Per the Changsha Evening News, the firm warned that fraudsters were sending out fake links, bogus QR codes, and text messages.

These are all phishing attacks, the company said, as fraudsters try to steal customer data.

Additionally, the bank said some criminals are then “using victims’ information to open digital yuan wallets and commit crimes.”

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— Reuters Business (@ReutersBiz) July 3, 2024

The telecoms firm said that it has responded by launching anti-fraud operations.

Hunan Mobile said that it had cooperated with police to close the net on several gangs of suspected digital yuan fraudsters.

The company said it had helped law enforcers identify 128 individual fraudsters and 13 organized groups of criminals. The firm warned:

“Do not click on links in text messages from recipients you don’t know. Ensure you always protect your personal information. If in doubt, contact the police.”