Fraud on the Rise: PRC Telecom and Internet Fraud Law Update
- Erica So
- Nov 24, 2022
- 4 min read
Updated: 2 days ago
Author: Anna Lau, Litigation Partner | Co-author: Erica So, Trainee Solicitor
Due to the pandemic and subsequent economic downturn since 2020, the number of telecom and internet fraud cases has climbed. Upgraded fraud tactics, like impersonating police officers or other government officials to prey on susceptible victims, and overseas operations in regions like northern Myanmar and Laos, have made fighting the fraudsters more challenging for local authorities.
Rising Fraud: Impact of the Global Pandemic
Currently, telecom and internet fraud, the act of swindling others’ property remotely via telecommunications or the internet with the purpose of illegal possession, are among the most rampant crimes occurring in Mainland China.
For 2021 alone, police authorities nationwide resolved more than 441,000 telecom and internet fraud cases, arrested over 690,000 suspects, dismantled more than 39,000 criminal gangs, and recovered approximately 12 billion yuan in defrauded funds, according to information published by the National People’s Congress of the People’s Republic of China earlier in March.
General provisions governing criminal prosecution in Mainland China normally require victims to go through preliminary investigation, prosecution by the Procuratorate, and trial at the People’s Court before a final judgment and sentencing. Punishments may include fines and fixed‑term imprisonment up to life imprisonment under Article 266 of the Criminal Law of the People’s Republic of China. Remedies available to victims are generally limited to return of property or compensation for actual losses through criminal proceedings.
“The legislation entitles the enforcement agencies to pursue suspects abroad and order telecom companies and banks to help hunt down fraudsters.”
The Law Against Telecom and Online Fraud (反電信網絡詐騙法)
To supplement existing criminal statutes, Chinese lawmakers passed the Law Against Telecom and Online Fraud on 2 September 2022.
The legislation empowers enforcement agencies to pursue suspects abroad and order telecom operators and banks to assist in identifying and disrupting fraud activities.
Coming into effect on 1 December 2022, the law applies to all telecom and internet fraud activities committed by national citizens or supported by overseas entities within the territory of China. It also applies to national citizens who commit fraud outside Mainland China.
In other words, PRC citizens defrauding persons outside Mainland China, as well as non‑PRC citizens committing fraud within Mainland China, may fall within the jurisdiction of this law.
“While a better foundation is being paved for tackling telecom and internet fraud, such crimes, with the help of ever-evolving technology and emerging fraud tactics, will not disappear overnight.”
Violation by the Assisting Parties
Targeting those who facilitate fraud, the law prohibits individuals and organisations from unlawfully manufacturing, selling, purchasing, supplying, or using devices or software linked to telecom and online fraud.
This includes technologies enabling:
Caller ID spoofing
Automatic account‑switching systems
Platforms sending SMS verification codes in bulk
Recognising the reliance of overseas fraud syndicates on SIM cards and bank accounts, the law also criminalises activities such as assisting with unlawful real‑name verification or opening accounts through impersonation, even where no direct fraud offence is proven.
Travel Restrictions and Criminal Control
Exit Ban on Fraudsters
The law authorises the imposition of exit bans on individuals suspected of engaging in telecom and online fraud abroad. Where convicted, offenders may be prohibited from leaving the country for six months to three years following completion of their sentence.
Prevention Mechanisms
System of Early Warning and Dissuasion
A System of Early Warning and Dissuasion (预警劝阻系统) will be implemented, requiring cooperation between police, financial regulators, telecom operators and cyber authorities to identify potential victims and prevent transactions before losses occur.
Responsibilities of Service Providers
Indeed, many provisions of the new law focus on fraud prevention by imposing extensive obligations on service providers.
These include:
Mandatory real‑name registration for telephone subscribers
Restrictions on the number of SIM cards per individual
Accurate display of callers’ true numbers
Suppression of spoofed calls
User identification requirements now extend to internet access, proxy services, domain registration, hosting, cloud services, content and software distribution, instant messaging, online payment, gaming, live streaming and advertising.
Institutions across telecom, internet and financial sectors must implement mechanisms to detect abnormal accounts and are empowered to suspend services when suspicious activity is detected.
Effectiveness of the Law Remains to Be Seen
While a stronger legal foundation for tackling telecom and internet fraud has been established, technology‑enabled fraud is unlikely to disappear overnight.
An effective balance must be struck between enhanced surveillance and the protection of privacy and data protection rights to ensure legitimate users are not adversely affected.
How Ravenscroft & Schmierer Can Help?
The PRC telecom and internet fraud law introduces significant compliance, enforcement and cross‑border implications for individuals and businesses connected to Mainland China. Ravenscroft & Schmierer advises clients on fraud‑related regulatory exposure, cross‑border legal risks, enforcement cooperation, and strategic response measures. I
f you require guidance on how these developments may affect your situation or operations, contact us to discuss your circumstances and available options.
FAQ: PRC telecom and internet fraud law
What is telecom and internet fraud under PRC law?
Telecom and internet fraud involves illegally obtaining property using telecommunications, online platforms or digital tools.
Does the PRC law apply to fraud committed outside Mainland China?
Yes. The law applies to PRC citizens committing fraud abroad and to overseas parties assisting fraud within Mainland China.
Are assisting parties criminally liable?
Yes. Supplying tools, accounts or software that facilitate fraud may constitute a violation even without direct participation.
Can travel bans be imposed on suspects?
Yes. Exit bans may be imposed on suspects and convicted offenders.
How can Ravenscroft & Schmierer assist with PRC telecom and internet fraud matters?
Ravenscroft & Schmierer advises on regulatory exposure, criminal risk assessment, compliance obligations, and cross‑border legal coordination relating to PRC telecom and internet fraud.
Does Ravenscroft & Schmierer advise businesses impacted by Mainland China fraud investigations?
Yes. We assist companies operating across borders with risk mitigation, internal reviews, and engagement with regulators and enforcement bodies.
Can Ravenscroft & Schmierer advise individuals targeted by fraud enforcement measures?
Yes. We provide guidance on legal exposure, procedural safeguards, and strategic responses for individuals implicated or affected by fraud‑related investigations.
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
For specific advice about your situation, please contact:
Partner
+852 2388 3899
Erica So
Trainee Solicitor
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