OTC traders conclude multi-million dollar deals in the “gray zone”. Interestingly, the decision to add a trader to the blacklist depends entirely on the opinion of the client’s bank.
The People’s Bank of China (PBoC), the entity that serves as the country’s central bank, has begun blacklist the bank accounts of large over-the-counter (OTC) traders. According to journalist Colin Wu, traders on the PBoC blacklist cannot use bank cards for three years and carry out digital transactions for five years.
Wu writes that the move is part of broader anti-money laundering measures in China. The PBoC has hired commercial banks to collect account and transaction information in order to prevent illegal financial transactions, including cryptocurrency payments among others.
The regulator pays special attention to OTC traders and organizers of OTC trading. These players enter into agreements outside the public market, with deals typically valued in the millions of dollars.
The decision to add a trading participant to the blacklist is made on the basis of data received from the risk analysis system of a particular commercial bank. When a lending institution detects suspicious activity, it is obliged to notify the regional PBoC office in its jurisdiction. This ensures that information on accounts blacklisted by the regulator is shared with other Chinese banks, thus preventing traders and dealers from registration with new organizations.
Wu believes that such tough actions taken by the authorities can bring to the situation when many organizers of OTC trading close their businesses due to the threat of sanctions. In addition, respectable traders also run the risk of being blacklisted, because the decision on this issue depends entirely on the opinion of the banks.
Note that this is not the first time that OTC market participants have been targeted by the Chinese authorities. In June, local police began blocking the accounts of OTC platform owners and OTC traders. The pretext for the freezing of funds was suspicion of the illegal origin of assets. Police actions then affected several thousand people.