Telecom fraud. Photo: VCG

A recent investigation conducted by the China Central Television (CCTV) became a trending topic on Sina Weibo on Wednesday. The report revealed that many overseas e-fraud accounts have been traced back to rural areas at home, where more than 10,000 elderly residents had been used to transfer money for money laundering.

In recent years, local governments have made efforts to promote e-medical insurance card usage among rural residents, particularly among the elderly. To this end, some of the third-party platforms that have obtained authorization for accessing the e-medical insurance card have conducted promotional activities in rural areas, to help villagers register and activate their cards. However, some criminal gangs are also eyeing these activities, using them as conduits for large-scale data theft.

Since last year, more than 10,000 rural elderly individuals in Central China's Henan Province have had their personal information exploited during the activation of their e-medical insurance cards, said the CCTV report. Fraudsters secretly created Alipay accounts in these elderly's names, which were then sold to criminal syndicates involved in online gambling and money laundering, transforming these accounts into instruments for illegal transactions.

In June 2023, police in Dengzhou, Henan Province received a tip-off, which said that several Alipay accounts in the city were implicated in money laundering for overseas telecom fraud and online gambling gangsters.

Upon investigation, police discovered that holders of these accounts are farmers living in remote rural areas. These accounts were fraudulently opened during the e-medical insurance card activation process, police found.

Further investigations showed that the so-called third-party platform staff who assisted villagers opening accounts were imposters belonging to a sophisticated crime syndicate, which had registered a shell tech company to commit information fraud in villages. The primary suspects, 11 in total, had illegally earned more than 3.8 million yuan ($520,000).

Within one month, nearly 1,500 Alipay accounts were utilized for overseas money to launder transactions in Dengzhou. The volume of transfers to overseas surpassed 10 million yuan, with the largest single transaction exceeding 60,000 yuan, police said.

One of the key factors enabling the perpetrators' success was they have got official recommendation letters from the local medical insurance departments. These letters lent credibility to the scammers, convincing village doctors to facilitate the frauds without suspicion and allowing the group to collect personal information randomly.

The local police then launched an investigation into two staff members who issued the recommendation letters from Dengzhou's medical insurance bureau. The staff admitted that while the bureau was tasked with promoting e-medical insurance cards, they lacked sufficient personnel to do the job. When the fraud gangs approached them with signed guarantees and signed a pledge to help promote the cards for free, they accepted.

The lack of oversight by the medical insurance bureau and management center in Dengzhou enabled criminals to exploit the system and led to widespread data breaches. The police have handed relevant findings to local disciplinary authorities and the two officials responsible for the issue were given a warning within the Party and a major demerit, respectively.

On October 25, the Dengzhou People's Court delivered a verdict on the case. A total of 32 individuals in the ring were given prison sentences and fines for infringing on residents' personal information. 

The Dengzhou People's Procuratorate also issued recommendations to the city's medical insurance bureau, urging the Dengzhou medical insurance bureau to standardize the workflow and confidentiality provisions of e-health insurance authentication, strengthen the qualification audit of commissioned partners, and better protect residents' personal information.

Global Times