U Business Must-Read: Risk Identification and Compliance Guide for Illegal Operations

Written by: Mankiw

Introduction

“Flowing over a billion, earning millions monthly,” the U Business sounds promising, but its legal risks are often overlooked. A small mistake could not only wipe out profits but also lead to criminal liability.

When your “OTC Acceptance” business is deemed “illegal operation” or “money laundering,” a crisis has already arrived. Are you aware of:

Which behaviors in daily operations are touching legal red lines?

How to distinguish normal business from illegal activities?

This article aims to dissect the crimes and penalties associated with U Business and provide a feasible compliance plan to protect your wealth and safety.

Two Major Pitfalls Most U Business Operators Fall Into

Many U Business operators believe that as long as they don’t directly scam people, they’re safe. However, there is a catch-all crime in criminal law—Illegal Business Operation. Simply put, if you’re doing activities that require licensing according to national regulations and you’re thriving, you’re seriously disrupting the market.

For ordinary businesses, exceeding the scope of operation may result in administrative penalties. But if you’re involved in state-controlled sectors like foreign exchange or payment settlements, once criminal standards are met, the issue shifts from “violation” to “crime.”

Specifically, for U Business, two high-risk behaviors are:

1. Currency Exchange for Fiat and U

If you exchange fiat currency and U with unspecified individuals frequently and publicly without permission, it essentially becomes a payment channel. Legally, this is considered “Illegal Fund Payment and Settlement Business.”

2. Subtle Forex Trading

Using the tie between U and USD, collecting RMB domestically and paying equivalent foreign currencies abroad (or vice versa), perfectly circumventing national foreign exchange controls, enabling cross-border RMB and foreign currency exchanges. Legally, this is “Subtle Forex Trading.”

According to the 2025 Shenzhen Public Security Bureau’s standards for prosecuting illegal operations, engaging in fund payment and settlement activities with amounts exceeding five million yuan, or illegal gains over ten thousand yuan, should be prosecuted; engaging in illegal forex buying, selling, or disguised forex transactions that disturb financial market order with amounts over five million yuan or illegal gains over ten thousand yuan should also be prosecuted.

A typical case in Chongqing involved an “OTC” operation where Mr. He profited from buying low and selling high USDT, with a bank account transaction volume reaching 14 billion yuan and personal profit of 4.77 million yuan. The first and second instance courts held that his large-scale, continuous fiat-to-crypto exchange activities essentially amounted to illegal fund payment and settlement business, resulting in a three-year imprisonment and a fine of 5 million yuan.

Are Ordinary Players Actually Criminals?

In court, judges primarily assess whether a U Business operator is an ordinary player or a criminal based on several core actions.

1. Are you “Pretending Not to Know”?

Even if you claim “I don’t know,” the judiciary can infer your subjective awareness based on your objective conduct. The following situations can serve as evidence of “knowing knowingly”:

Using encrypted communication tools like Telegram, Bat, etc., for business communication

Concealed transaction locations (e.g., parking lots, in-car offline trades)

Profit significantly above normal levels or with obvious abnormal transaction patterns

Communication includes black jargon like “locking orders,” “going through procedures,” “building bridges”

2. What Crime Are Your Behaviors Actually Committing?

If you only provide U exchange channels but genuinely do not know the funds are problematic → you might be considered “Assisting in Crime.”

If you knowingly handle illicit funds and help transfer U through cash → the nature shifts to “Concealment Crime.”

Even if you did not directly handle dirty money but your business scale resembles Mr. He’s case, forming a business operation → you could face charges of “Illegal Business Operation.”

Future Survival Guide for U Business Compliance

Legal risks are increasing, and compliance is no longer optional but essential for survival. To continue operating, you must abandon the old “wild west” approach and bring your business into the open.

1. Obtain Licenses and Embrace Regulation

Virtual Asset Service Provider (VASP) licenses are the internationally recognized compliance “passport.” Depending on your target market, consider:

Hong Kong, Singapore licenses: relatively clear regulatory frameworks, currently popular compliance choices.

EU MiCA license: high value, once approved, provides seamless access to the entire EU market (though the requirements are high).

2. Build Internal Control and Risk Management Systems

Strict KYC: verify customer identities and clarify fund sources.

Robust AML System: monitor and report suspicious transactions, utilize blockchain analysis tools (like Chainalysis) to trace fund flows.

Blacklist Mechanism: dynamically update risk addresses and proactively intercept high-risk transactions.

3. Clarify Business Compliance Red Lines

Absolutely avoid handling illicit funds: stay clear of funds from gambling, scams, etc.

Refrain from cross-border currency exchange: recognize that RMB and foreign exchange conversions via U are illegal and high-risk.

Maintain Transaction Transparency: avoid discussing core business through encrypted software to prevent covert offline cash transactions.

From Risk Avoidance to Value Creation

U Business is shifting from wild growth to a regulated “clear card” stage. There are two paths ahead: either passively stumble into trouble and wait for regulatory intervention or proactively don “bulletproof armor” by establishing compliance as a safety shield. Your choice will determine how far your business can go.

If you encounter the following situations, don’t hesitate—it’s time to consult a professional lawyer:

Feeling your business is bouncing in the “gray area,” unsure when you might trigger legal issues

Regularly receiving “dirty money,” having your accounts frozen, or already receiving “police summons”

Planning to transition to a licensed, legitimate institution but unsure where to start with risk control and compliance

Being officially classified as involved in a case and needing someone to protect your rights and provide strong defense

We are not just lawyers, but also practitioners familiar with Web3—offering business compliance checks, compliance system construction, asset unfreezing and response, and full criminal defense.

In the world of Web3, technology can be cutting-edge, but law must never be neglected.