Underground Bank Network Targeting National Security Shut Down in China

• Chengdu Bust Exposes Complex Network of Underground Banking.
• Cryptocurrency Used for Illicit Transfers.
• Crackdown Highlights National Security Risks of Organized Crime.

Authorities in Chengdu, China, dismantled a large-scale underground bank operation in a months-long investigation , dealing a significant blow to illegal financial activity in the region. The investigation, which uncovered a network handling 13.8 billion yuan ($2.07 billion), led to the arrest of 193 suspects and the freezing of 149 million yuan in assets.

The saga began in November 2022 when the Longquanyi District Public Security Bureau stumbled upon a case linked to drug offenses. This initial investigation revealed a complex network of underground banking intertwined with illegal foreign exchange activities.

Responding swiftly, authorities formed a dedicated task force to investigate what later became known as the “2·27” money laundering case.

A turning point in the investigation came on June 1, 2023, when six teams dispatched by national and regional security forces conducted coordinated raids in major cities across China. The raids resulted in the apprehension of 25 additional suspects and the seizure of significant evidence, including bank cards and U-shield devices.

Further investigation exposed a sprawling criminal network led by individuals identified as Lin, Weng, and Chen. These individuals, operating under the guise of import-export businesses, used Tether (USDT), a cryptocurrency, to facilitate illegal money transfers for clients seeking to move funds overseas.

The network’s activities extended beyond financial crimes, encompassing drug and cosmetic smuggling and fraudulent tax refund schemes. Utilizing USDT , a popular cryptocurrency, as a conduit, they facilitated illicit fund transfers for clients seeking to move money overseas. Their repertoire extended to aiding in smuggling drugs and cosmetics and orchestrating fraudulent tax refund schemes.

Authorities emphasized the national security implications of the network’s operations, citing threats to foreign exchange stability, financial security, and the potential for credit card fraud. 

Faced with these threats, authorities launched a nationwide crackdown in August 2023, resulting in the arrest of an additional 168 suspects across 26 provinces.