More important developments related to China’s efforts against fraud
China has paid closer attention to fighting online and telecom fraud in recent years. With the boom of e-commerce also came an increasing threat of online and telecom fraud. This Draft Law, once approved, will enable authorities to better target fraudsters and protect consumers.
In this context, a “Draft Law against telecommunication network fraud” was recently submitted for review to the Standing Committee of the National People’s Congress. The Draft Law will be the first one dedicated to target telecom and online fraud.
Telecom and online fraud
Telecom and online fraud have become the offense with the high incidence of cases. From January to September this year, Chinese law enforcement authorities cracked down 262.000 telecom and online fraud cases and arrested 373.000 suspects, a year-on-year rise of 41.1% and 116.4%, respectively. The police have intercepted 122 million fraudulent calls avoiding a collective financial loss and busted lots of gangs involved in SIM card or bank card fraud (as of October last year) .
A Joint Mechanism System
The Draft stipulates responsibilities for different departments, enterprises, and local governments in combating telecom and online fraud, organizes the cooperation between these entities, and the establishment of a joint mechanism system to coordinate the fight against telecom and online fraud.
The Law will apply to fraud activities in China but also to fraud committed abroad by Chinese citizens and overseas organizations or individuals who commit fraud against China and urges the promotion of international cooperation in combating cross-border telecom and online fraud.
The Draft will strengthen real-name registration and account management in telecommunication, finance and cyberspace. Telecom business operators, financial institutions and network service providers are required to establish real name registration, account management and risk management systems to prevent fraud.
The Draft propose to establish a system which immediately freezes bank accounts that are suspected of fraud. Besides that, public security organs shall work together with financial institutions to stop victims from making payments to suspected accounts and help those who have been cheated by retrieving the money.
Illegal equipment, software and services
It will be illegal to manufacture, sell, provide or use equipment and software such as batch card insertion equipment, batch account and automatic network address switching systems, that can change the calling number, uses virtual dialing or has illegal internet phone access.
It will also be illegal to offer services to illegally buy, sell, lease or lend cards, bank accounts and internet accounts with real-name verification assistance for fraudulent activities.
For organizations, personnel in charge or directly responsible and individuals who violate the law, the Draft stipulates liabilities such as restrictions, suspension of using services, corrections, warnings, fines, suspension of business, revocation of business license and detention.
Our lawyers are regularly called upon to assist clients in situations of online fraud or telecom fraud. Some of the cases we have handled involved large corporations or even banks who were defrauded of very substantial sums. We therefore advise everyone to remain vigilant and to never underestimate the risks that you or your company face. Applying tight procedures and keeping proper records will go a long way in protecting you. Nevertheless, when an incident occurs we are often confronted with the difficulty of tracing the origin of the fraud, which often spans countries and even continents. In such circumstances speed of intervention is of the essence, as money is usually channeled across bank accounts across the world within a few days or even hours. As such, we believe the Draft could become an excellent tool in helping authorities and law enforcement effectively combat these illicit practices which cause significant losses in China and elsewhere.
If you have any questions about this subject, please feel free to reach out to us.