China has tightened its measures to curb financial scams with its new anti-fraud rules which aim to phase out frauds from cryptocurrency swindles to fake patriotic fundraising that capitalizes on the coming 100th anniversary of the ruling Communist Party.
Last week, China’s banking regulator called for a tougher crackdown as the frauds are mutating in their complexity and expanding across the country. Over the past few years, the government has closed nearly 6,000 peer-to-peer (P2P) platforms in a purge of an industry that still owed victimized investors over $100 billion as of last August.
In 2020, China busted over 7,500 financial scams, up 27 percent from the previous year the regulator pointed out. The clampdown on frauds comes as rules combating illegal fundraising come into force on May 1. The new regulations make the local officials responsible to put an end to investment scams at an early stage and those who fail to promptly tackle fraud will be punished.
“Previously, you asked victims to go to court. Now, victims can bring officials to court for the negligence of duty,” said the official, who declined to be identified. The crackdown also aims at ensuring social stability ahead of the party anniversary, a highly sensitive event.
In Shanghai, over 20 platforms had been crowd-funding for alleged “red” movies and TV programs dedicated to the political event, which is not permitted without the consent of the government.
Banks are now collaborating with local governments to identify suspected illegal investment schemes in cryptocurrencies. As bitcoin prices surge, there has been a boom in trading of the digital payment system, Filecoin in lower-tier cities as investors seek alternative digital assets to bet on. Some banks have also signaled scams using China’s sovereign digital currency, e-CNY, as bait. Other targets of the crackdown include private equity, wealth management, and real estate investment schemes, the banking regulator has said.
In early April, the city of Shenzhen launched a probe into the operator of real estate content provider Shenfangli for possible illegal fundraising, while the Shanghai government probed an illegal stock recommendation business under financial news aggregator Wallstreetcn.com.
“These are high-profile cases with which the local governments hope to send a clear warning signal to others in the market,” said the regulatory source.