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Third-party payment systems enabling theft
From:chinadaily  |  2018-01-19 08:14

BEIJING-About a year ago, a man surnamed Song, a programmer in Shenzhen, received a mysterious call and lost 280,000 yuan ($43,460) via Alipay, one of China's most popular online payment platforms. This was odd as Song did not have a single penny in his Alipay account. It turned out the swindlers had taken three steps to transfer his loan via Alipay's micro-loan provider Ant Micro.

Almost at the same time, about 1,400 km away, Lin Liangquan rushed to the police department, reporting that more than 27 million yuan was missing from his company account in Haining city, East China's Zhejiang province.

Lin said a stranger called and faxed a wanted poster, claiming the company had been involved in a pyramid scheme and demanded an immediate check of their bank accounts. A malware program was later implanted and the vast sum of money was soon transferred via multiple third-party payment platforms.

China has been cracking down on rampant online and telecom fraud in recent years. It has tightened the number of multi-function accounts a person can open and stipulated a "frozen time" of 24 hours for money transfer on ATMs. However, third-party payment platforms have emerged as a leading method for fraudsters to bypass such obstacles.

The Public Security Bureau of Beijing said that since 2015, up to 70 percent of stolen money has been scammed through third-party payment platforms. In the first three quarters of 2017, the anti-fraud center in Shenzhen had frozen more than 9,800 suspected accounts, retrieving 315 million yuan.

"The money recovered was only a small fraction; most of it was untraceable," said Wang Zhengtu at the anti-fraud center. "It was easier to track the flow of money when most transactions were done through bank cards. But now, the swindlers first transfer the money to third-party payment platforms before putting it into their bank accounts. These platforms are like a big pool. It is almost impossible to track its origin," Wang said.

It is estimated that more than 20 trillion yuan of capital was transacted via third-party payment platforms in 2016.

Many people have complained about the complex procedures and extremely long feedback period involved in dealing with online and telecom fraud cases.

Chinese banks now demand strict real-name registration in the application process for bank cards, leaving almost no room for fraudsters. But opening an account on a third-party payment platform needs nothing much more than an email account. Moreover, a person can hold multiple accounts, making it the perfect channel to move money.

During police investigations, gathering evidence is very complicated. Enquiries for online transactions from a company often need at least three days, more than enough for money to be transferred elsewhere.

Wen Yanbing, associate professor at Zhejiang University of Finance and Economics, said the government should improve the cybersecurity law to set up a cross-sector supervision mechanism to intensify the crackdown on fraud through third-party payment platforms. The authorities should also take supervision responsibilities.