1. What is illegal fundraising?
The Regulations on the Prevention and Handling of Illegal Fundraising (hereinafter referred to as the "Regulations") stipulate that the so-called illegal fundraising refers to the act of absorbing funds from unspecified targets by promising to repay principal and interest or giving other investment returns without the permission of the financial management department of the State Council in accordance with the law or in violation of the national financial management regulations. The definition clarifies three elements of illegal fundraising:
The first is "without the permission of the financial management department of the State Council in accordance with the law or in violation of the state's financial management regulations," that is, illegality; second, "promising to repay principal and interest or giving other investment returns," that is, inducements; and third, "absorbing funds from unspecified targets," that is, being social.
2. How to understand the "social" issues of suspected illegal fundraising cases?
The basic feature of illegal fundraising cases is that illegal fundraising cases attract funds from unspecified targets in society, that is, there are no requirements for the qualifications, age, occupation, etc. of the fundraising targets.
With regard to fundraising from relatives and friends or from units, according to the "Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising", where funds are not publicly publicized to the public, and funds are collected from relatives, friends, or units for specific targets, it is not illegal absorption or covert absorption of public deposits. However, in any of the following circumstances, it shall be found to be the public absorbing funds: in the course of absorbing funds from relatives, friends, or internal personnel of the unit, clearly knowing that relatives, friends, or internal personnel of the unit are soliciting funds from unspecified targets and allowing them to do so;
3. What are the main manifestations of illegal fundraising?
According to the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising, illegal fundraising mainly takes the following forms:
(1) Illegally absorbing funds by means such as return to principal sales, after-sales leases, agreed repurchases, or sales of real estate shares, without the true content of real estate sales or without the main purpose of real estate sales;
(B) the transfer of forest rights and on behalf of the management and other methods of illegal absorption of funds;
(3) Illegally absorbing funds by means of substitution planting (breeding), renting planting (breeding), joint planting (breeding), etc.;
(4) Illegally absorbing funds by means such as repurchasing commodities or depositing and selling goods without having the true content of selling goods or providing services, or not with the main purpose of selling goods or providing services;
(5) Illegally absorbing funds by means such as false transfer of equity or sale of fictitious bonds without the true content of the issuance of stocks or bonds;
(6) Illegally absorbing funds by means such as pretending to be an offshore fund or selling a fictitious fund without the true content of the fund-raising;
(7) Illegally absorbing funds by means such as impersonating insurance companies or forging insurance documents without the true content of selling insurance;
(8) Illegally absorbing funds through methods such as online lending, investment in shares, or virtual currency transactions;
(9) Illegally absorbing funds by means such as entrusted wealth management or financial leasing;
(10) Illegally absorbing funds by providing "pension services", investing in "pension projects", or selling "products for the elderly";
(11) Using non-governmental organizations such as "associations" and "societies" to illegally absorb funds;
(12) Other acts of illegally absorbing funds.
4. What are the common methods of illegal fundraising activities?
One is the promise of high returns. Criminals fabricate the myth of "pie in the sky" and "overnight rich", promising investors high returns. In order to deceive more people into participating in fundraising, illegal fundraisers often honor their promised principal and interest on time and in full at the initial stage of fundraising, and when the fundraising reaches a certain scale, they secretly transfer funds or abscond with the funds, causing the fundraising participants to suffer economic losses.
The second is to fabricate false projects. Most of the criminals have registered legitimate companies or enterprises, and under the guise of responding to national industrial policies and carrying out entrepreneurship and innovation, they fabricate all kinds of false projects, and some even organize free tours and inspections to deceive the public's trust.
The third is to build momentum with false propaganda. Criminals often spend a lot of money on publicity, hiring celebrity endorsements, celebrity platforms, publishing advertisements in major radio and television, the Internet and other media, publishing exclusive interviews in famous newspapers and periodicals, hiring people to widely distribute leaflets, making social donations, etc., to create a false momentum.
Fourth, the use of family affection to deceive. In order to accomplish or increase their own achievements, some participants in illegal fund-raising sometimes adopt methods similar to pyramid schemes, and do not hesitate to take advantage of family ties and geographical ties to fabricate lies that they have obtained high returns, and to attract relatives, friends, classmates, or neighbors to join, so that the number of participants spreads rapidly and the scale of fund-raising continues to expand.
5. Who will bear the losses of participating in illegal fundraising?
Article 25 of the Regulations stipulates that the losses incurred by the participants as a result of participating in illegal fundraising activities shall be borne by the participants. This means that once the public participates in illegal fundraising, their interests are not protected by law, and if the illegal fundraiser is still unable to return the fundraising funds after enforcement by the people's courts, the participants shall bear the losses themselves, and the government, relevant departments and judicial organs shall not be required to bear the losses.
6. What legal responsibilities should be borne by organizing or assisting in the implementation of illegal fundraising?
Illegal fundraisers are units and individuals that initiate, lead, or organize the implementation of illegal fundraising, and illegal fundraising facilitators are units and individuals that provide assistance to them and obtain economic benefits with the knowledge that they are illegally fundraising. According to the "Regulations", the "Criminal Law" and relevant judicial interpretations, as long as the financial management department of the State Council absorbs funds from an unspecified target by promising to repay principal and interest or giving other investment returns without the permission of the financial management department of the State Council in accordance with the law or in violation of the state's financial management regulations, it constitutes illegal fundraising, and the legal responsibility of the illegal fundraiser and the illegal fundraising assistance shall be investigated and administrative punishment shall be imposed;
(1) Illegally absorbing or covertly absorbing public deposits in the amount of 1,000,000 RMB or more;
(2) Illegally absorbing or covertly absorbing 150 or more public deposits;
(3) Illegally absorbing or covertly absorbing deposits from the public, causing direct economic losses of 500,000 yuan or more to depositors.
Where the amount of deposits illegally absorbed or indirectly absorbed from the public is 500,000 yuan or more, or the amount of direct economic losses caused to depositors is more than 250,000 yuan, and there are any of the following circumstances at the same time, criminal responsibility shall be pursued in accordance with law:
(1) Those who have been criminally prosecuted for illegal fundraising;
(2) Having received an administrative punishment for illegal fundraising within two years;
(3) Causing a vile social impact or other serious consequences.
7. What are the provisions of the Regulations in clarifying legal responsibilities and increasing penalties?
First, in terms of the targets of punishment, in addition to illegal fund-raising units and individuals, the principal responsible persons and directly responsible persons of illegal fund-raising units and the facilitators of illegal fund-raising are also punished. At the same time, punishment is to be imposed on advertising agents and publishers, internet information service providers, financial institutions, and non-bank payment institutions that fail to perform their obligations to prevent illegal fundraising.
Second, in terms of the types and severity of punishments, in accordance with the principle of matching the severity of punishment with the degree of harm, it is stipulated that warnings, fines, orders to suspend production and business, revocation of permits, and revocation of business licenses or registration certificates are given; the severity of punishment is increased, and a fine of between 20 percent and one time of the amount of funds raised by illegal fundraisers and between 1 and 3 times the amount of illegal gains is imposed on those who assist in illegal fundraising.
8. What are the provisions of the Criminal Law in terms of clarifying legal responsibilities and increasing penalties?
Article 176 [Crime of Illegally Absorbing Public Deposits] Whoever illegally absorbs public deposits or covertly absorbs public deposits, disrupting the financial order, shall be sentenced to fixed-term imprisonment of not more than three years or short-term detention and/or a fine; where the amount is huge or there are other serious circumstances, a sentence of between 3 and 10 years imprisonment and a concurrent fine is to be given; where the amount is especially huge or there are other especially serious circumstances, a sentence of 10 or more years imprisonment and a concurrent fine is to be given.
Where a unit commits the crime in the preceding paragraph, the unit is to be fined, and the directly responsible managers and other directly responsible personnel are to be punished in accordance with the provisions of the preceding paragraph.
Article 192: [Crime of Fundraising Fraud] Where fraudulent methods are used to illegally raise funds for the purpose of illegal possession, and the amount is relatively large, a sentence of between three and seven years imprisonment and a concurrent fine is to be given; where the amount is huge or there are other serious circumstances, a sentence of 7 or more years imprisonment or indefinite imprisonment is to be given, and a concurrent fine or confiscation of property.
Where a unit commits the crime in the preceding paragraph, the unit is to be fined, and the directly responsible managers and other directly responsible personnel are to be punished in accordance with the provisions of the preceding paragraph.
Article 191: [Crime of Money Laundering] Whoever commits any of the following acts in order to cover up or conceal the source and nature of the proceeds of drug crimes, organized crimes of an underworld nature, terrorist activities, smuggling, corruption and bribery, crimes of undermining the order of financial management, or financial fraud, shall be sentenced to up to five years imprisonment or short-term detention and/or a fine; where the circumstances are serious, a sentence of between 5 and 10 years imprisonment and a concurrent fine is to be given:
(1) Providing a funding account;
(2) Converting property into cash, financial instruments, or negotiable securities;
(3) Transferring funds through transfer or other payment and settlement methods;
(4) cross-border transfer of assets;
(5) Using other methods to cover up or conceal the source and nature of criminal proceeds and their proceeds.
Where a unit commits the crime in the preceding paragraph, the unit is to be fined, and the directly responsible managers and other directly responsible personnel are to be punished in accordance with the provisions of the preceding paragraph.
9. Which authority is the administrative punishment department for illegal fundraising?
According to the Regulations on the Prevention and Handling of Illegal Fundraising, local people's governments at or above the county level shall specify that the lead department of the working mechanism for the prevention and handling of illegal fundraising shall be responsible for organizing the administrative investigation and determination of illegal fundraising within their respective administrative regions, and shall impose administrative penalties on illegal fundraisers and illegal fundraising facilitators in accordance with the law. At present, the local financial supervision and administration departments at all levels in Shandong are responsible for handling administrative cases of illegal fundraising within their respective administrative areas in accordance with the designation of the people's governments at all levels, and specifically undertake the above-mentioned duties.
10. What should I do if I participate in illegal fundraising?
Once the people participate in illegal fundraising, they may report to the local financial regulatory department at the place where the illegal fundraiser is registered (or to the place of residence or habitual residence of the illegal fundraiser), or they can directly report the case to the local public security organ.
11. What should I do if I have organized or assisted in the implementation of illegal fundraising?
According to the Regulations on the Prevention and Handling of Illegal Fundraising, no entity or individual may obtain economic benefits from illegal fundraising. Therefore, the illegal fundraiser should immediately stop the fundraising and return the funds to the fundraising participants in order to seek leniency.
According to the "Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising", where an illegal fundraiser actively returns stolen goods and makes restitution before initiating a public prosecution, and reduces the occurrence of harms, the punishment may be mitigated or commuted; Illegally absorbing or covertly absorbing deposits from the public, mainly used for normal production and business activities, and being able to return the absorbed funds before initiating a public prosecution, may be exempted from criminal punishment;
12. What is the scope of the liquidation of illegal fundraising funds?
The "Regulations" stipulate that no unit or individual may obtain economic benefits from illegal fundraising. The sources of the funds to be withdrawn include: the balance and income of the illegal fundraising, the economic benefits obtained by the illegal fundraiser and other relevant persons from the illegal fundraising, the illegal fundraising funds or related assets concealed or transferred by the illegal fundraiser, the advertising fees, endorsement fees, agency fees, benefit fees, rebate fees, commissions, commissions and other economic benefits obtained in the illegal fundraising, as well as other assets that can be used as the funds for the removal of the fundraising. The funds that fall within the scope of the above-mentioned liquidation shall be returned by the relevant beneficiary on their own initiative.
13. What are the responsibilities of citizens to prevent illegal fundraising?
The "Regulations" stipulate that any unit or individual has the right to report suspected illegal fundraising to the lead department or other relevant departments for the disposal of illegal fundraising. On January 7, 2022, the Provincial Local Financial Supervision Bureau, together with the Provincial Department of Finance, the Provincial Public Security Department, the Provincial Administration for Market Regulation, the Jinan Branch of the People's Bank of China, and the Shandong Banking and Insurance Regulatory Commission, issued the Measures for Rewarding Illegal Fundraising Cases in Shandong Province, which clearly stipulates the conditions, standards, and procedures for rewarding illegal fundraising cases. Whistleblowers may report clues of illegal fundraising to the lead department for the disposal of illegal fundraising and other departments through letters, e-mails, telephones, networks, faxes, visits, and through the "Jinan Reporting Center" mini program, and will be rewarded for meeting the requirements.
Source: Yantai Bank
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