Chinese Banks Strengthen Security Measures to Combat Money Laundering in Digital Yuan System
Chinese banks are taking proactive measures to prevent money laundering and identity theft in relation to the digital yuan. In accordance with updated guidelines from the Central Bank Digital Currency (CBDC), several banks, including the state-owned Postal Savings Bank of China, have implemented new security protocols. These protocols primarily focus on anti-money laundering and counter-terrorism financing efforts.
To enhance security, the Postal Savings Bank of China now requires wallet holders to undergo verification and authenticate their wallets using personal data. This includes providing customers’ names, gender, nationality, occupation, residential or work addresses, and contact telephone numbers. Customers must also prove their identity using official identification documents, which will be checked for validity.
The bank stated that if customer identity information is incomplete or the proof of ID documents has expired, appropriate action will be taken. If customers fail to respond within 90 days, transaction limits will be reduced, and financial services on CBDC wallets will be restricted. However, customers can lift these restrictions by submitting their data through the digital yuan app or mobile banking platforms, or by visiting bank branches nationwide.
One customer expressed their support for these security measures, noting that it provides a sense of security knowing that the real user of a wallet is conducting transactions. However, concerns about privacy have been raised. The People’s Bank of China has emphasized that the CBDC will include features to protect user anonymity. Nevertheless, bankers argue that in the case of anonymous CBDC wallets, it is crucial to strike a balance between privacy protection and risk management.
The move to strengthen security measures comes in response to an increase in criminal activity targeting the digital yuan. Criminals have been enticing financial consumers into fraudulent schemes, prompting banks to take action. In Inner Mongolia, police reported that residents lost over 50,000 yuan ($6,900) in digital yuan due to scams involving fake loan programs. Therefore, experts anticipate that other Chinese commercial banks will follow suit in implementing enhanced security measures.
In addition to banks, mobile operators have also issued warnings about digital yuan-themed scams. Hunan Mobile, a telecoms giant, alerted its users to the rise in such scams, where criminals impersonate bank officials and operate fake customer service centers to steal digital yuan funds. Fraudsters employ phishing attacks, sending out fake links, bogus QR codes, and text messages to obtain customer data. Some criminals even use this stolen information to open digital yuan wallets and commit further crimes. Hunan Mobile has collaborated with the police to crack down on these fraudsters, resulting in the identification of numerous individuals and organized groups involved in digital yuan fraud.
As the digital yuan continues to gain popularity, it is crucial for Chinese banks and mobile operators to prioritize security measures to safeguard users from money laundering and fraud.
