The Potential Impact of the New Regulations by the State Administration of Foreign Exchange on Virtual Money Traders

Recently, the State Administration of Foreign Exchange released the "Administrative Measures for the Management of Bank Foreign Exchange Risk Trading Reports (Trial)", which sets higher requirements for transparency, compliance, and risk management in banks' foreign exchange trading activities. For foreign exchange traders, the implementation of these measures may affect multiple aspects such as trading operations, risk control, and reporting obligations.

Main Obligations and Responsibilities of Banks

1. Risk Trading Monitoring and Reporting: Banks need to monitor and promptly report foreign exchange risk transactions that may involve false trade or illegal cross-border financial activities.

2. Cooperation with supervision and inspection: Banks must provide relevant documents and information truthfully, accurately, completely, and in a timely manner, without obstructing or concealing.

3. Internal management measures: Banks should improve internal management systems, establish a foreign exchange risk trading information monitoring system, and achieve internal information sharing.

4. Liability for Violations: If regulations are violated, the bank will face penalties unless it can prove that it has acted diligently.

Standards for Banks to Assess the Risk of Cross-Border Fund Transfers

When banks assess the risk of cross-border fund transfers, they mainly focus on the following points:

1. Transaction amount: Is it in line with the client's economic strength and normal business scale.

2. Trading frequency: Are there any abnormal changes?

3. Capital Flow: Whether it matches the purpose claimed by the client and whether it flows to high-risk areas.

4. Industry characteristics and regulatory information: Whether it complies with industry norms and whether it is a type of transaction that is a regulatory focus.

Risk Assessment of Virtual Money Trading

Virtual Money trading is generally regarded as a high-risk activity. Financial institutions often remain highly vigilant regarding cross-border transfers involving Virtual Money, which may be flagged as high-risk transactions, and they may take corresponding measures.

Handling Large Fund Transfers and Frequent Cross-Border Transactions

Banks usually assess whether a transaction is unusual from the following aspects:

1. Is the transaction amount beyond the daily income and expenditure range of the account.

2. Has the trading frequency sharply increased in the short term.

3. Is the flow of funds clear, and is it related to the normal business activities of the account?

4. The high frequency of virtual money transactions and the complexity of capital pathways.

5. Are the sources and uses of funds matched.

Measures taken by banks to respond to risky transactions

When banks identify that a transaction carries risks, they may take the following measures:

1. Enhance risk levels and strengthen reviews.

2. Adjust the approval hierarchy.

3. Restrict business relationships.

4. Restrict non-face-to-face business.

5. In extreme cases, accounts may be frozen or fund transfers may be restricted.

Suggestions to Avoid Account Freezing

To avoid account freezing, traders should:

1. Ensure that the transaction is legal and compliant.

2. Provide a clear and reasonable explanation of the trading background and relevant evidence.

3. Actively cooperate with the bank's investigation.

Handling After Account Freezing

If the account is frozen due to foreign exchange risk trading, it is recommended:

1. Proactively explain the transaction background and purpose to the bank.

2. Provide legal, compliant, and complete transaction certificates and other materials.

3. Actively cooperate with the bank's investigation.

Impact on Participants in Virtual Money Trading

The new regulations may have the following impacts on participants in virtual money trading:

1. Restricted capital flow: Banks may limit or freeze accounts involved in large or high-risk cross-border transactions.

2. Increased transaction costs: Banks may charge additional fees or require more compliance materials.

3. Increased compliance pressure: The platform needs to invest more resources in compliance audits and risk control.

4. Decreased operational efficiency: Compliance requirements may affect trading efficiency, especially for smaller platforms.

These measures may affect the overall operation of virtual money trading platforms, increase capital flow restrictions, raise transaction costs, and impose heavier compliance burdens.