The US election ended recently, and Trump's victory was seen as a major positive for the virtual currency market. The price of Bitcoin has broken through the historical high and is approaching $100,000 per coin. As the popularity of the virtual currency track has reached an unprecedented high, the influx of new users has also made some lawbreakers excited. Many new users have accidentally transferred the criminals' black and gray industries when conducting related transactions. Although they did not participate in upstream crimes, in practice, it is common for them to be arrested by public security organs for "assisting in the crime of trust" or "covering up the crime".
This article will focus on the crime of aiding and abetting trust, and will use typical cases to deeply analyze situations where Web3 practitioners may cross legal red lines in transactions and related projects, and put forward compliance recommendations to help avoid potential legal risks in the early stages.
Case Study
Case 1:
Since 2022, in order to seek profits, Shen raised funds to purchase computers, IoT cards and other equipment, recruited four people including Li and Chen to participate, and further recruited more than ten people to rent houses in Hefei, Anhui and other places to set up USDT trading studios, and set up over-the-counter trading groups through Telegram software to buy low and sell high to make profits. The court found that the U coins received by Shen and others came from black and gray industries such as online gambling and telecommunications fraud, and it was presumed that they knew about it. The payment settlement exceeded 5.9 million yuan and the profit exceeded 880,000 yuan. The court determined that Shen and others constituted the crime of assisting information network criminal activities.
Case 2:
Li was mainly engaged in mobile phone software development and other businesses and ran a company. He accepted Zhang's commission to develop a "cash recharge system" and a restricted withdrawal function in a virtual trading platform, and charged a development fee and maintenance fee of RMB 300,000 in USDT. Later, the platform was used for fraud by Zhang and others. After review by the court, it was presumed that Li knew that Zhang was committing fraud. In the end, the court sentenced Li to the crime of assisting information network criminal activities.
It can be seen from the above cases that although the behavior of the practitioners themselves does not involve any crime, if their upstream or counterparty is involved in a crime, they may easily be implicated and, in serious cases, be identified as an accomplice or meet the standard for aiding and abetting the crime.
So, how can we avoid being involved in such illegal and criminal activities? We can start by analyzing its nature.
Definition and standards for conviction of the crime of aiding and abetting
According to Article 287-2 of the Criminal Law, the crime of assisting information network criminal activities refers to acts of providing payment settlement, network technical support and other assistance for information network crimes, including but not limited to advertising promotion, traffic import, provision of servers and other support, with serious circumstances.
The key criteria for conviction require that the following three conditions be met simultaneously:
1. Whether the behavior provides "helping" support for other people's criminal activities
2. Whether the requirement of knowing or should have known that others used information networks to commit crimes is met
3. Whether the case has reached the level of “serious circumstances”
Among them, according to relevant judicial interpretations, if any of the following circumstances is met, the perpetrator can be determined to have known: ① After being notified by the regulatory authorities, the relevant behavior is still carried out; ② Failure to perform statutory management duties after receiving a report; ③ The transaction price or method is obviously abnormal; ④ Providing programs, tools or other technical support and assistance specifically used for crimes; ⑤ Frequently adopting measures such as hidden Internet access, encrypted communications, data destruction, or using false identities to evade supervision or circumvent investigations; ⑥ Providing technical support and assistance to others to evade or circumvent investigations; ⑦ Other circumstances sufficient to determine that the perpetrator knew: Comprehensive determination is made based on subjective and objective factors such as the perpetrator's cognitive ability, past experience, transaction objects, relationship with the perpetrator who commits information network crimes, the time and method of providing technical support or assistance, profit situation, and the perpetrator's publicity.
If any of the following circumstances exists, it shall be deemed as a serious circumstance: ① providing assistance to more than three persons; ② paying a settlement amount of more than 200,000 yuan; ③ providing funds of more than 50,000 yuan by means of advertising, etc.; ④ obtaining illegal income of more than 10,000 yuan; ⑤ having been subject to administrative penalties for non-trust, aiding in trust, or endangering the security of computer information systems within two years, and aiding in trust again; ⑥ the crime committed by the person being assisted causes serious consequences; ⑦ other serious circumstances.
It should be noted that if it is impossible to verify whether the person was "knowingly" guilty due to objective conditions, but the total amount of the relevant amount reaches more than five times the standards specified in the second to fourth items of the "serious circumstances", or if it causes particularly serious consequences, he should be convicted of the crime of aiding and abetting.
If the above conditions are not met and the standards for conviction are not met, administrative penalties may also be imposed. According to the provisions of the Cybersecurity Law and the Anti-Telecom Fraud Law, if a person knowingly provides technical support, advertising promotion, payment settlement and other assistance to others who are engaged in activities that endanger network security, the public security organs shall confiscate the illegal gains and detain him for up to five days, and may impose a fine of not less than 50,000 yuan but not more than 500,000 yuan; if a person illegally buys, sells, rents, or lends phone cards, Internet of Things cards, telecommunications lines, SMS ports, bank accounts, payment accounts, Internet accounts, etc., provides real-name verification assistance, or opens the above cards, accounts, etc. by impersonating others or fabricating agency relationships, the illegal gains shall be confiscated and the public security organs shall impose a fine of not less than one times but not more than ten times the illegal gains. If there is no illegal gains or the illegal gains are less than 20,000 yuan, a fine of not more than 200,000 yuan shall be imposed.
Combined with the situation in Case 1, the behavior of U-merchant Shen and others who bought low and sold high virtual currencies may not involve criminal risks in itself, such as the illegal operations mentioned in the article "Virtual Currency OTC Merchants Do Not Touch Foreign Exchange, Are They Still Suspected of Illegal Operations? | Web3 Entrepreneurship Criminal Risk Prevention Guide (III)" published by Mankiw Law Firm. However, due to negligence or profit-driven, the customer identity identification (KYC) procedures were not strictly implemented, and there were no monitoring measures for abnormal transactions. The receipt of black and gray funds, even if U-merchant may not have criminal intent subjectively, still involves considerable criminal risks. Once the upstream crime is verified to be true, their arbitrage will evolve into an act of helping to transfer criminal funds. Combined with the transaction volume, transaction frequency and profit situation of the funds involved in the case, it is easy to be presumed that they knew that the funds were involved in criminal activities, thus constituting the crime of aiding and abetting. Especially after the card-cutting operation began, the relevant entities in the chain involved in the case were targeted for crackdowns in the country. The extension of the presumed knowledge of the situation has been continuously expanded. Once there is an abnormality in the fund chain involved in the case, there is a high risk of criminal involvement.
Similarly, in Case 2, the provision of software technology itself does not involve any illegal or criminal circumstances. However, the function of the technology provided by Li, combined with the background of Zhang's demand and entrustment, can be inferred that Li continued to provide technical assistance when Zhang was involved in a crime. If Zhang's crime is verified to be true, then he will be identified as aiding and abetting. Similar situations, such as creating advertising delivery interfaces and building VPN tools to evade supervision, if it is verified that there is an objective and strong connection with upstream crimes, even if some project parties are subjectively unaware of it, there is a high risk of aiding and abetting.
Attorney Mankiw recommends
Therefore, with a clear understanding of Bangxin, how can we prevent such risks as much as possible? We can start from the following aspects:
1. Practitioners
Strengthen KYC process: Strengthen the customer identity review mechanism, clarify the source of customer funds, and avoid transactions with customers without clear sources of funds. At the same time, set customer transaction restrictions and regularly check suspicious transaction accounts.
Reject suspicious transactions: If you know or judge that the counterparty is likely to engage in illegal or criminal activities, you must decisively reject the business. If the counterparty uses the transaction funds for investment or other purposes, you should be alert to whether the investment object has the possibility of committing a crime, and avoid the criminal platform using itself as a medium to transfer funds.
Preventing the behavior of running points: U merchants should prevent large and frequent transactions, avoid providing assistance for potential illegal activities, and prevent themselves from being used by criminal gangs. At the same time, they should follow reasonable transaction prices and conform to market conditions.
2. Project Party
Strengthen the user agreement and liability exemption clauses: Add a "prohibition of illegal use" clause to the project's user agreement, and indicate that the legal consequences caused by improper use by the user shall be borne by the user. The agreement can further stipulate that if the user is found to be engaged in illegal activities, the platform has the right to terminate his/her use rights.
Implement API usage tracking and risk control: Perform hierarchical authorization management on open source technologies and API interfaces to ensure that high-risk activities require more information verification. At the same time, implement usage tracking systems and risk control strategies, and be vigilant about accounts that frequently call interfaces. If the red line is reached, access will be stopped.
Technical compliance review: Regularly conduct compliance reviews of technical services and platform structures, and implement special regulatory measures for high-risk usage scenarios. Be vigilant in handling large-value transactions to ensure that the platform is not used for illegal activities.
Attorney Mankiw's Summary
In the virtual currency industry, relevant practitioners and project parties and other participants have no subjective intent to commit crimes when conducting business, and have also taken certain preventive measures objectively. However, they are often prone to touch the legal red line of aiding and abetting crimes due to negligence or imperfect compliance measures. Therefore, on the one hand, we should remain sensitive to legal risks. Whether it is strict KYC/AML measures, or perfect customer use review mechanisms and compliance agreements, they can effectively reduce relevant criminal risks; on the other hand, when encountering potential legal problems or violating relevant laws and regulations, it is also a clear choice to seek the help of professional lawyers in a timely manner to avoid or reduce the harm caused by risks. Attorney Mankiw will continue to output various common compliance issues in blockchain to open up a safe and compliant future for more entrepreneurs and investors. Stay tuned!
