China: $2B Channeled Through Bogus E-commerce Into Offshore Gambling Sites
Posted on: September 18, 2020, 06:59h.
Last updated on: September 18, 2020, 10:10h.
Chinese authorities say they believe around $2 billion per year is channeled through some of the country’s most popular online retail sites before ending up with offshore gambling sites, The Financial Times reports.
Gambling is illegal in China. But there is a thriving online gambling market targeting Chinese citizens from abroad.
Swerving Chinese financial controls can be tricky business, and offshore operators are increasingly turning to fake e-commerce purchases as a means for gamblers to fund their accounts.
Typically, gamblers pay money to a bogus merchant for nonexistent goods, and a corresponding sum is then entered into an online gambling account, a process known in the fintech industry as “transaction laundering.”
600 Million Fake Tracking Numbers
In August, police in the eastern city of Wuxi busted an operation that controlled 2,600 websites that sent out empty packages to disguise fake e-commerce transactions. It was also selling 600 million express delivery courier numbers, which could be inserted into courier firms’ tracking systems by company insiders to make it appear nonexistent items had been delivered.
Authorities said this week illegal gambling operators have infiltrated some of China’s biggest retail platforms, notably Pinduoduo. With around 600 million users, Pinduoduo is the largest interactive e-commerce platform in China and the world, and the second-largest online marketplace, after Alibaba.
According to the FT, gamblers demonstrated outside Pinduoduo’s headquarters in Shanghai over the summer, demanding reimbursement for losses. They wore T-shirts that said: “Pinduoduo’s unscrupulous merchants — repay my hard-earned money.”
A spokesperson for Pinduoduo told the FT that the company had referred more than 1,000 suspicious merchants to authorities since 2019, which resulted in the arrests of more than 200. However, it acknowledged that “gambling syndicates operating under false pretenses on e-commerce platforms is an industry-wide problem.”
Tether Payments Platform Busted
China has stepped up its fight against illegal cross-border gambling this year, with a particular focus on payments.
On Thursday, Chinese state media reported authorities arrested 76 people in Guangdong province who were suspected of involvement in an illegal payment processing platform.
According to police, the operation channeled money to and from around 120 online gambling sites and fraudulent investment platforms using the Tether cryptocurrency token. Around 3,000 accounts tied to the platform allowed gamblers to make payments disguised as e-commerce transactions.
In June, China’s Ministry of Public Security launched a “comprehensive reporting platform to combat cross-border gambling,” which promised rewards for citizens who informed on neighbors involved in gambling.
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