A security official from China has recently warned about the billions of dollars that flow out of the country to illegal gambling and casino platforms overseas. Chinese gamblers are using digital currencies to move these funds, which is making it difficult for security practitioners to trace the transactions to the source. The expert fears these illicit transactions could undermine the economy.
Chinese gamblers are causing a massive outflow of fund
During a recent event on payment and clearing in Beijing, the director-general of the International Cooperation Department under the Ministry of Public Security, Liao Jinrong, precisely admitted that Chinese gamblers contribute at least $145.5 billion in funds flowing out of the country yearly. Jinrong raised concerns that such a massive outflow could aggravate the economy of the country and also worsen the financial security risks.
Cryptocurrencies facilitate the process of transferring the funds to illegal gambling and casino operators overseas. As Jinrong explained, the operator receives those funds from Chinese gamblers in digital currencies. However, it becomes difficult for tracing and further investigations on such illicit transactions owing to the anonymity property of cryptocurrencies.
Zhu Min, one of the officials at the National Institute of Financial Research at Tsinghua University, recently highlighted a possible risk that might follow such a massive outflow. He said:
The volume and speed of cross-border capital flows are unprecedented. This will not only result in sustained fluctuations in major world currencies but will also lead to higher volatility in global financial markets. Therefore, we must be prepared for potential risks.
Inadequate security measures
Jinrong was led to mention that there is some sort of collaboration between the payment industry and Chinese gamblers. The security expert blamed inadequate risk controls and inspection of transactions as the major factor encouraging the outflow of funds from the country.
However, the country authorities have been able to crack down on illegal gamblers by enforcing, among others, the use of real names in opening payment accounts at non-financial institutions.