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China Embarks on Significant Overhaul of Anti-Money Laundering Legal Framework
As the global financial system faces increasingly complex threats from money laundering and terrorist financing, China has taken a critical step forward in strengthening its anti-money laundering (AML) legal framework. The 2024 draft revisions to the People’s Republic of China Anti-Money Laundering Law, currently under review by the Standing Committee of the National People’s Congress, represent a significant overhaul of the country’s financial vigilance and regulatory oversight.
Key Amendments
The revised draft reflects a strategic commitment to national security and the integrity of the global financial system. Some key amendments include:
- Emphasis on national security: Article 1 states that anti-money laundering work should serve national security.
- Expansion of AML definition: Article 2 expands the scope of legal application to include all types of crimes and terrorist financing.
- Emphasis on risk prevention and management: Article 3 requires relevant institutions to establish a sound risk prevention system.
- Universality of AML obligations: Articles 5 and 36 emphasize the collective responsibility of all social units and individuals in anti-money laundering work.
New Provisions
The revised draft also introduces new provisions, including:
- Jurisdiction over overseas activities: Article 10 expands legal jurisdiction to cover money laundering and terrorist financing activities that occur overseas.
- Clarification of beneficial ownership: Article 61 defines beneficial owner as a natural person who ultimately owns or controls a legal person or unincorporated organization.
Implications
The implications of these changes are far-reaching, with financial institutions, non-financial entities, and individuals expected to adapt to the new legal requirements. The revised draft imposes more stringent compliance requirements on financial institutions, particularly in areas such as:
Financial Institutions
- Customer due diligence
- Risk management
- Internal controls
Institutions will need to review and strengthen their AML policies and procedures to ensure compliance with the new legal standards.
Non-Financial Entities
Non-financial entities, including real estate developers, accounting firms, and law practices, will be newly subject to AML obligations. These entities will need to establish AML compliance frameworks to meet the new legal requirements.
General Entities and Individuals
The draft emphasizes the collective responsibility of all entities and individuals in the AML process, necessitating a heightened awareness and proactive approach to AML across all sectors of society.