Central Bank, Public Security Ministry Join to Fight Financial Crimes

China’s financial regulator will work closely with law enforcement departments to crack down on irregularities in internet finance, underground banks and illegal foreign exchange trading, the central bank said Monday in a statement.

The People’s Bank of China will join forces with the Ministry of Public Security by sharing information, enhancing collaboration, toughening punishments and strengthening public education, according to the statement. The statement followed a meeting between a team from the monetary authority led by Vice Governor Pan Gongsheng and Meng Qingfeng, vice public security minister.

The central bank’s comment reflects the regulator’s continued commitment to clean up market misconduct, especially violations emerging with the rise of internet finance.

“In the internet era, the financial regulator finds it difficult to rely on itself. A joint department mechanism involving cooperation between central and local authorities will be the next step of internet finance regulation,” a person close to the central bank said.

After years of unchecked growth, China’s internet finance industry continues to befuddle regulators with scandals of fraud and illegal fundraising. Last year, financial regulatory bodies teamed up with the public security department in cracking a number of high-profile financial crime cases, including illegal financing by online lending platforms Ezubao and Qbao.

The central bank has launched a nationwide campaign to inspect and crack down on irregularities related to internet finance since 2016. The campaign, which was set to conclude at the end of June, is expected to be extended as regulating internet finance has been listed as one of the major tasks over the next three years, Caixin learned from sources close to the central bank.

In November, the public security ministry issued a directive to enhance oversight of financial crimes, especially misconduct involving internet finance, illegal fundraising and illegal trading on stock markets.

In February, the State Administration of Foreign Exchange under the central bank launched a joint task force with the public security ministry to crack down on unlawful currency trading that has thrived on the internet.

Financial violators are increasingly using internet finance and innovation to hide fraud, which requires criminal investigation measures to tackle, said Zeng Gang, director of the banking research institute at the China Academy of Social Sciences.

Contact reporter Han Wei (weihan@caixin.com)