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Technology helps Chinese regulators detect suspicious financial activity

Date: 03-08-18

After a trading company launched an online peer-to-peer lending platform with an advertised daily interest rate of 8 percent, it was immediately detected by financial regulators in south China's Shenzhen City.

Within three days, they handed over the suspected fraud case to the police.

Thanks to newly-developed systems empowered by the latest technologies, financial regulators in Shenzhen are now well-equipped to monitor and detect suspicious financial activities, especially those conducted online.

Lingkun, the latest of the systems, was put into operation Monday. It was jointly developed by Shenzhen's municipal government and Internet giant Tencent.

Use technology such as big data, artificial intelligence and knowledge graphs, the system can access government databases and detect financial risks in more than 10 areas, including Internet finance, investment, and foreign exchange trading.

During its trial operation, Lingkun proved to be a powerful tool for regulators. After scanning activities of 11,000 finance companies, it issued more than 60 high-risk alerts to regulators in 10 provincial-level localities.

Financial regulators in Shenzhen said the new systems focused on financial activities that involved exceptionally high profit rates, atypical growth in transactions and overly-complicatedly business relations.

"The higher the profit rate or number of investors a financial product has, the higher the level of alert the system will issue," said He Xiaojun, director of the finance service office of the Shenzhen government.

He added that the system could also help regulators find out the inter-relations between participants in financial activities, enabling them to track capital flow and pinpoint the key figures in question.

"Some financial activities can be as complicated as involving 70 business relations, but the system can still swiftly figure out their relationship and identify the key players," He said.

In recent years, as more Chinese companies embark on online financial innovation, cases of illegal financial activities have been on the rise.

"Technology can play a big part in fending off financial risks, which is the priority for local financial regulators," said Zeng Guang, head of Shenzhen's Internet finance association.

Chinese authorities have taken stricter measures to regulate the financial sector, as the country lists preventing risks as one of the "three tough battles" it aims to win in the next three years.

In a prominent move, regulators ordered a ban last September on Initial Coin Offerings, calling the activity "unauthorized and illegal public fundraising." Later, they shut down all virtual currency exchanges in the country.