Police in China recently revealed an elaborate scheme where gambling operators used fraudulent online fronts and delivery tracking numbers bought from courier companies to create e-commerce records and disguise illegal money flows.
The scheme, reported by state broadcaster China Central Television (CCTV) last month, did not name any particular e-commerce platform but said police had interviewed nine courier companies involved in the scheme.
“The e-commerce platforms are the victims in this case,” said one long-time e-commerce industry analyst. “This shows that criminals will attack the weakest link of any ecosystem. Fighting these gambling syndicates requires the cooperation of all parties involved.”
In a typical online shopping transaction, a consumer buys from a merchant who receives payment held in trust by the e-commerce platform until the consumer confirms receipt of the delivery.
In this ruse, gamblers posed as regular consumers to “buy” from online merchants who were fronts for gambling operators. These merchants then sent empty packages to the gamblers using tracking numbers bought from courier companies to create records of deliveries. The aim was to trick e-commerce platforms into thinking that they were legitimate sales and release the funds.
The CCTV report said police have met with nine courier companies involved in selling tracking numbers used to create false delivery records and directed them to strengthen internal controls. The courier companies pledged to revamp their internal processes and suspend related operations, according to the report.
China’s online retail sales grew 16.5% to 10.6 trillion yuan (US$1.55 trillion) in 2019, or more than the next 10 largest markets in the world combined. The scale of buying has made e-commerce platforms vibrant emporiums but also targets for criminals hoping to offer illegal products and services to hundreds of millions of users.
Gambling syndicates in China have long collected illegal bets through various channels such as Alipay and WeChat Pay and distributed winnings through the mobile payment channels. In 2016, Reuters reported the existence of betting rings on Tencent and Alibaba during the UEFA European Football Championship. Both companies acknowledged the issue and said they were doing more to stamp out gambling on their platforms.
A search of public court records showed online gambling cases involving different e-commerce platforms and short-video apps.
One case in Anhui province involved three people using online stores on QQ, Taobao and WeChat to receive top-up funds from members of gambling websites in return for commissions of between 1% to 4%. In another case in Shenzhen, four men pled guilty to helping an overseas gambling operator receive funds from gamblers through a store on Taobao.
Pinduoduo, China’s second largest e-commerce platform with close to 700 million users, recently helped police in Lianyungang, Jiangsu province, to crack an online gambling case that involved 670 million yuan in illegal cross-border money transfers, according to a report in the Legal Daily.
Online gambling has moved in on popular social media apps like Kuaishou.
Prosecutors in Hebei province charged two suspects last April for operating a livestreaming gambling ring on Kuaishou, where people could bet in real time on the outcome of Honor of Kings, a multiplayer online battle arena game, through transfers via Alipay or WeChat Pay.